Wednesday, July 18, 2012

Qatar Minimizes Impact of US Economic Sanctions on Sudan

In Victory is Ours, Part 3 we looked at the conflict between Sudan and South Sudan, considering how, to a certain extent, the conflict was becoming a proxy war between Iran, supporting Khartoum in the North, and Israel, supporting Juba in the South. We also considered the possibility that the Iran/Israel proxy fight could itself be, to some small extent, a proxy fight between China and the US.

In this post, we will consider support that Bashir's government in Khartoum is receiving from Qatar.

First, we consider excerpts of an article that appeared in Sudan Now Magazine, issued by the Sudan News Agency, entitled A report: Sudan and Qatar bonds of strong relations, by Amal Mohamed Al Hassan, dated August 30, 2010. It is worth keeping in mind that the author's command of English shows a few peculiarities; for example, towards the end of the article, he writes "militants" when he clearly has in mind military personnel and officials with a military background. The article begins by providing a brief history of Sudan-Qatar relations, including major state visits, then goes into the impact of these relations.

The Sudanese – Qatari relations are characterized by depth and firmness as the leadership in the two countries are linked to each other with deeply rooted ties that appeared clearly in the exchanged political support at all the regional and international forums, and the coordination in the stances on the issues of mutual concern to the two countries.

The State of Qatar provided a considerable support to Sudan, especially with regard to issues pending before the Security Council when it assumed the world body non-permanent seat in early 2006. Qatar also extended material supports to Sudan in various fields, such as the implementation of Merowe Dam and the institute for qualification of Islamic preachers _etc.

The joint Sudanese – Qatari ministerial committee was established in Doha on March 16, 1998 and held three sessions which witnessed the signing of a number of agreements, memos of understanding and adopted a number of joint action plans in different fields, top of them were the agreements on avoiding double-taxation, encouragement of investment, education, scientific research, health, air transport as well as the cooperation in the youth, cultural, arts and media spheres.

The article then proceeds to address some of the economics of the situation and its impact, especially concerning large numbers of Sudanese who emigrated to Qatar to work in the petroleum industry. Then, the emigration of officials from Sudan's state security apparatus is introduced:

Qatar decided to seek the experience of Sudanese nationals, thus it brought consultants and experts to help establishing its ministries and important organs. At that time, Sudan managed to dispatch numbers of senior Armed Forces and Police officers, like Field Marshal Abdul-Rahman Suwaral-Dahab, the senior diplomat Mahjoub Makkawi, Al-Fatih Awooda from the Ministry of Justice and other experts from different institutions. These personalities played a great role and in an excellent manner and were appreciated by the Qatari people due to their distinguished efforts, performance, competence, skills, honesty and good deeds.

The article then gives statistics regarding the numbers of Sudanese working in Qatar, and what fields they work in:

The first Sudanese community in Qatar was formed in the year 1985. The statistics of the Qatari Ministry of Interior revealed that the number of the Sudanese nationals in Qatar reached 31,000 persons. The Sudanese community in Qatar includes labors, which is the biggest category; most of them are camel herders at Al-Shahaniya area, employees, militants, engineers, doctors, pharmacists, veterinary doctors, agronomists, lawyers, economists, media men, university lecturers. There are a considerable number of Sudanese nationals assuming leading positions at the areas of their work. Members of the Sudanese community are linked to each others with professional and geographical links.

With that background established, we look more recent and specific developments between the two nations. From Sudan, Qatar sign six co-op agreements, December 5, 2011:

KHARTOUM - Sudan and Qatar have signed six cooperation agreements and memorandum at the conclusion of the Sudanese-Qatari Economic Forum, Khartoum's Al Ray Al A'm daily reported Monday.

The agreements included the establishment of the joint Sudanese- Qatari Business Council, a memorandum of understanding in the field of mining between the Sudanese Ministry of Minerals and Qatar Mining Company, a banking cooperation agreement, an agreement between the Sudanese Ministry of Agriculture and Hasad Company of Qatar, a cooperation agreement between Ajial Medical Company of Sudan and Qatari Company for Medical solutions, and a memorandum of understanding between the Sudanese committee entrusted with public utilities and Hasad Agricultural Company of Qatar.

After addressing other details and areas for further cooperation, the article concludes:

The Qatari Crown Prince Sheikh Tamim bin Hamad Al Thani visited Khartoum on Sunday where he participated in the Sudanese-Qatari economic forum and inaugurated a number of Qatari projects in Sudan.

According to official Sudanese statistics, the approved Qatari investments in Sudan amounted to 23 projects in different sectors, totaling $1.7 billion.

Sudan is the target of ongoing US economic sanctions, which appear to having an impact from the US perspective. From GAO-10-742 "SUDAN DIVESTMENT: U.S. Investors Sold Assets but Could Benefit from Increased Disclosure Regarding Companies' Ties to Sudan", dated June, 2010:

U.S. state fund managers reported that, since 2006, they have divested or frozen16 about $3.5 billion in assets primarily related to Sudan in response to their state laws and policies; U.S. investment companies, which also sold Sudan-related assets, most commonly cited normal business reasons for changes in their holdings. We found that, from 2006 to 2010, 23 states divested their assets from a total of 67 operating companies, with New Jersey’s divestment of almost $2.2 billion representing about 62 percent of the total.


Specifically, we determined that, from March 2007 to December 2009, the total value of U.S. shares invested in six key foreign companies with Sudan-related business operations declined by almost 60 percent. This decline cannot be accounted for solely by a reduction in stock prices for these companies, indicating that U.S. investors, on net, decided to sell shares in these companies.

With about $3.5 billion in US investments gone from Sudan, Qatar has been stepping up to the plate to help Khartoum. From Qatar loans Sudan $2 billion amid slipping currency, February 6, 2012:

February 6, 2012 (KHARTOUM) – The government of Qatar is set to loan Sudan USD $2 billion as the country enters a phase of deep economic crisis that was compounded by the secession of the oil rich South less than a year ago.

According to local media in Khartoum, the Emir of Qatar Hamad Bin Khalifa al-Thani will arrive in the country on Wednesday to witness the inauguration of the Darfur Regional Authority (DRA).


Last Friday, the Sudanese president said that his government is expecting help from friendly nations at a time when the Sudanese pound reached record lows against other major currencies.

As the government lost access to 75% of oil reserves in the south, the influx of hard currency has been severely curtailed forcing the Central Bank to be extra prudent with its available foreign exchange reserves.

For more than a year Khartoum has imposed a wide range of restrictions on individuals and corporations in relation to purchasing and transferring hard currency. Many imports were placed on a black list to cut outflow of forex.

Black market traders told Reuters that the Sudanese pound on Monday hit its lowest point against the dollar since the currency was launched in 2007.

A dollar bought 5.2 Sudanese pounds on Monday, compared to 3.3 in July, dealers said. The official rate is around 3.

Demand for the dollar, and controls on the official exchange rate, have turned the black market rate into a benchmark. Even large companies have started trading money there, meeting dealers in derelict shops to dodge security.

It should be noted that, more recently, Khartoum has changed its policy, now allowing foreign currencies to be bought and sold at market prices. From Sudan central bank allows Forex bureaus to determine own exchange rate, May 17, 2012:

May 17, 2012 (KHARTOUM) – Foreign exchange (Forex) bureaus in Sudan will be able to buy and sell currencies using their own exchange rate away from the official one, it was announced today.


The move was taken in order to curb the flourishing black market for hard currency and also to attract transfers by Sudanese expatriates abroad, [Deputy Secretary General of Forex Bureaus Union Abdel-Moniem Nur al-Deen] added.

Sources told Al-Shorooq TV that the central bank will soon allow commercial banks to do the same.

Since the secession of oil-rich South Sudan, Sudan has struggled to contain the deteriorating value of its own currency as the flow of hard currency was sharply curtailed.

The US dollar traded for twice the official rate of 2.7 Sudanese pounds despite multiple interventions by the central bank to inject hard currency into the market.

But because of the depleting Forex reserves, the ability of the Central Bank of Sudan to influence the exchange rate on the market has been limited.

Khartoum dispatched several delegations to friendly nations, particularly Arab Gulf states, seeking help but so far only Qatar has made a commitment of $2 billion, which will be used to buy government bonds.

And, with Qatar's help making up over half the value of the investments lost from the US due to the sanctions, the economic situation seems less dire than it could be, though Sudan is still having significant difficulties.

From Qatar to complete purchase of Sudan government bonds by end of April, April 10, 2012:

April 10, 2012 (KHARTOUM) – The Qatari government informed Sudan that it will complete its promised purchase of government issued bonds as part of the deal struck by the leaders of the two countries last month.


The report did not mention how much in Sudanese treasury bills Qatar said it will buy except to say that it is "significant". In March, the rich Arab Gulf state pledged a total of $2 billion investments in Sudan including "the purchase of government bonds issued by the Sudanese government and investments in different sectors particularly mining, oil, agriculture and services".


In a related issue the Sudanese finance minister Ali Mahmood Abdel-Rasool urged Islamic scholars in his country to issue a 'Fatwa' (religious decree) allowing the country to borrow using loans with interest.


Lacking other immediate ways to finance its deficit, economists say the government may resort to printing money, causing more inflation and further weakening the Sudanese Pound.

Roughly $38 billion in foreign debt, along with US economic sanctions, limits Sudan's access to external financing.

Meanwhile, back in the US, there is a debate about expanding the sanctions. From US congressional committee votes to cut aid from states hosting Sudanese president, from May 17, 2012

May 17, 2012 (WASHINGTON) – A congressional committee in the United States House of Representatives voted to cut off aid to any state that hosts Sudanese president Omer Hassan al-Bashir who is wanted by the International Criminal Court (ICC) for his alleged role in Darfur war crimes.

The amendment to the fiscal year 2013 State and Foreign Operations Appropriations bill was pushed for by Frank Wolf who is one of Bashir's most vocal critics.


The issue has already drawn concern by some of Wolf's peers in light of its implications on US foreign policy.

"We all agree that the situation in Sudan is deplorable, that President Bashir must be held accountable for his crimes," Democratic Representative Nita Lowey said.

She noted that Bashir has visited many countries including Ethiopia, China, Egypt, Chad, Malawi, Qatar, Libya, Saudi Arabia and Iraq.

Qatar has significant US military facilities associated with CENTCOM and with our deployment to Afghanistan; additionally, Qatar has the third largest reserves of natural gas in the world, and is the world's largest exporter of natural gas.

In the last passage quoted, Congresswoman Lowey (D - NY 18 CD) brings up a good point; punishing this list of countries may be overzealous, and perhaps not in America's best interests.

Meanwhile, H.R. 4169: Sudan Peace, Security, and Accountability Act of 2012 is, as I write this, in committee in the House.

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