The change happened slowly, over a period of months. Day by day, the stock of green-back American dollars in Sudan’s central bank has decreased. And day by day, the bank’s stock of multi-colored Euros increased. By the opening weeks of 2008, the Bank of Sudan had deliberately and determinedly set a course for a dollar-free economy by switching almost all of its foreign currency reserves into euros and a basket of other currencies. It was the latest and most dramatic manifestation of a growing economic separation between Africa’s largest country and the world’s largest superpower — a split caused by more than ten years of economic sanctions imposed by the US onto Sudan over reports of humanitarian atrocities, first during the country’s north-south civil war, and later during the Darfur conflict.
Euros fill the gap
At first glance, the American exit might look like an economic disaster – particularly since a number of European companies have also shown signs of limiting their involvement in Sudan, citing the risk of getting caught up in American sanctions.
But as every student of economics knows, international trade abhors a vacuum. When one major trading partner leaves the stage, another is bound to be waiting to take its place. In the currency markets, the gap left by the dollar was filled by the euro. In the commercial, financial and investment sectors, say analysts in Sudan, the gap left by American and increasingly European investors and companies is being more than made up for by companies based in China and, increasingly, the Middle East. “Investors are coming in from both China and the Middle East,” said one Khartoum analyst speaking on condition of anonymity. “Part of it is to do with the new flood of oil and part to do with the relative security that followed the end of the civil war in 2005.” But at least part of it is that they are coming in to take up the slack left by the West.” The trend is clear to see in the financial indicators published by the Bank of Sudan. In 2005, $299.2 million worth of Sudanese exports headed out to Saudi Arabia, Yemen, Libya, the United Arab Emirates, Jordan, Syria, Iraq and other states labeled as “Arab countries” by the bank’s statisticians. Just a year later, the figure had jumped to $444.2 million. And in the first three quarters of 2007 — the most up-to-date statistics available — $305.2 million worth of Sudanese exports had already headed out of the country’s ports and airports towards the Middle East.
Exports are only one small indicator. At the same time as a number of Western companies announced they were leaving sanction-hit Sudan — including Rolls Royce, Hilton Hotels, Germany’s Siemens, Switzerland’s ABB and Canada’s CHC Helicopter — a host of Middle Eastern names have been arriving or boosting their existing involvement. Sudan was one of Africa’s top four recipients of Foreign Direct Investment in 2006, according to the UN’s World Investment Report of 2007. The country pulled in more than $3 billion, mainly through its telecoms and petroleum industries and the privatization of state-run companies, hardly any of it from the West. Again, large chunks of that foreign direct investment came directly from the Middle East.
The GCC steps in
The increased Middle Eastern involvement is obvious practically everywhere you look in Khartoum, the country’s economic powerhouse. The most obvious arrivals – thanks largely to their overwhelming marketing budgets – are the mobile telecoms giants of Kuwait-based Zain, which bought the then state-owned operator Mobitel, and Canar, an arm of the UAE’s Etisalat. But beyond the phone system, barely a week goes by without an announcement of another investment and another arrival. In February, the Kuwait Fund for Arab Economic Development said it was going to loan Sudan $59 million for a major dam and hydropower project on the River Nile — its second major investment in the scheme. Sudan’s delighted Minister of State for Transport, Roads and Bridges, Dr. Mabrouk Mubarak Saleem, said the cash injection was only the beginning when it came to Kuwaiti investment in Sudan.
A Kuwait Fund envoy is about to fly in to inspect a range of other potential road and transport projects. This is after the Sudanese minister for Transport and Roads made a visit to Kuwait in which he received audiences from, among others, the emir and ministers from Foreign Affairs, Finance and Electricity. US sanctions enforcers have noticed a strange pattern emerging after they started adding named state-owned companies to their list of black-listed Sudanese enterprises. “Immediately after the sanctions were announced, the Sudanese government took steps to sell off government assets that we had identified,” said Adam J. Szubin, head of the US Treasury’s Office of Foreign Assets Control (OFAC). Sudan was clearly trying to get targeted companies out of state control and as far away as possible from sanctions, Szubin added. And the people to whom Sudan tended to sell those state-owned assets came predominantly from the Middle East. In December, media reports suggested that the Dubai Islamic Bank unit, of the Bank of Khartoum, planned to buy smaller Sudanese rival Emirates and Sudan Bank. A month later, Sudan’s national bank told the Sudan Tribune that it might have to sell its 10% stake in the new merged company to make sure the new corporation was not targeted by the US.
In January 2007, Bahrain’s Al-Salam Bank said it had succeeded in snapping up a controlling stake in Sudan state-owned El-Nilein Industrial Development Bank, one of almost 100 companies specifically blacklisted by the U.S. Months before that Dubai-based Emaar Properties and Amlak Finance had also claimed they were after El Nilen shares. Whether or not OFAC was right in saying the sanctions had pushed Sudan into selling the stake, the sanctions certainly hadn’t made the sale any less attractive, said Shawgi Azmi, then director of the Sudanese National Company for Securities, a unit of government-owned Bank of Khartoum. “This deal proves that Gulf investments in Sudan are still pouring in despite the political situation and the pressure from the international community on the country,” he told reporters.
