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Cablegate: Southern Sudan: Letter to Secretary Rice On The

VZCZCXYZ0038
OO RUEHWEB

DE RUEHKH #1473/01 2611507
ZNR UUUUU ZZH
O 181507Z SEP 07
FM AMEMBASSY KHARTOUM
TO SECSTATE WASHDC IMMEDIATE 8562

UNCLAS KHARTOUM 001473

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT PLEASE PASS TREASURY
DEPARTMENT FOR AF A/S FRAZER, SE NATSOIS, AF/SPG AND
EEB/ESC/ESP (KLEIN)
TREASURY FOR OFAC AND OIA
NSC FOR PITTERMAN AND HUDSON

E.O. 12958: N/A
TAGS: EFIN ECON PREL PGOV SU
SUBJECT: SOUTHERN SUDAN: LETTER TO SECRETARY RICE ON THE
IMPACT OF U.S. SANCTIONS

1. (U) Summary: A letter from Government of Southern Sudan
(GoSS) Finance Minister Mawien to Secretary Rice outlines
objectives for the impending GoSS visit to Washington to
explore ways to mitigate the impact of U.S. economic
sanctions on Southern Sudan. End Summary.

2. (U) On the eve of the departure of a high-level GoSS
delegation to Washington to discuss the effect of U.S.
economic sanctions on Southern Sudan and to explore possible
measures to mitigate these effects, the GoSS has delivered a
letter from Minister of Finance and Economic Planning Kuol
Athian Mawien to Secretary Rice (text in para. 4), outlining
GoSS concerns, along with four proposed measures to mitigate
the sanctions impact. The letter contends that U.S.
sanctions on the Khartoum government are having the
unintended consequence of constraining GoSS revenues and of
discouraging U.S. private investment in Southern Sudan. It
also charges that Khartoum uses sanctions as an excuse to
underfund development projects in the South, claiming that
sanctions are reducing revenues. The letter proposes: 1.
that arrangements be made to transfer the GoSS share of
Sudan,s oil revenues through a U.S. bank, 2. that similar
arrangements be made for the transfer of grants to the GoSS,
3 &legal and other necessary arrangements8 be made for
correspondent banking between U.S. and Southern Sudanese
banks, and 4. exempting U.S. firms investing in Southern
Sudan from U.S. sanctions.

3. (SBU) Receipt of the letter follows a September 13
meeting in Juba between Acting Consul General Juba and Acting
Embassy PolEcon Chief, and members of the delegation going to
Washington, including Finance Minister Mawien and GoSS
Minister of the Presidential Affairs Luka Biong Deng. At
this meeting, Minister Mawien explained that GoSS oil
revenues under the Comprehensive Peace Agreement are
transferred to Juba from the Central Bank of Sudan via a GoSS
account with a commercial bank in Bahrain. Mawien said that
the Bahraini bank is under pressure for handling dollar
transactions involving Sudan and the GoSS fears that the bank
may soon close the account. Mawien did not elaborate on the
source or nature of the pressure on the Bahraini bank.
Emboffs suggested that the delegation might explore with
Treasury the possibility of an OFAC license for the bank to
specifically transfer oil revenues to the GoSS. Deng
suggested that a U.S. bank might be more comfortable in
dealing with OFAC than would a foreign bank. Mawien and Deng
also asserted more generally that the perception that all of
Sudan is under U.S. sanctions discourages U.S. private
investment in Southern Sudan, as well as interest by foreign
banks in setting up operations there.

4. (U) Begin text:

17 SEPTEMBER 2007
GOVERNMENT OF SOUTHERN SUDAN
MINISTRY OF FINANCE and ECONOMIC PLANNING
OFFICE OF THE MINISTER

HE Dr Condoleezza Rice,
Secretary of State,

SIPDIS
U.S. Department of State
2201 C Street NW
Washington, DC 20520,
United States of America


Dear Secretary Rice,

Re: The Impact of Sanctions and US-Sudan Economic Relations

I am profoundly delighted to write to you and share some
thoughts on these pertinent and pressing issues of our time
in relation to how best to manage, deepen and broaden
US-Sudan economic relations while ensuring the desired social
transformation of Sudan through the effective implementation
of the Comprehensive Peace Agreement (CPA).

I also believe that we need to think and plan ahead on how
best we shall lay solid and sustainable foundations that
shall not only ensure the realisation of lasting peace in
Sudan and our region but also the sustainability of
successful US-Sudan economic relations as inspired and shaped
by our shared sentiments, strategic visions and interests.

To achieve this we need to get the analysis right as, we
formulate policies and strategies on such sound

evidence-based and knowledge-based approaches through our
instruments of government and the best scientific tools
available to us.

US Sanctions on Sudan

Without a doubt the deep wisdom and rationale of US sanctions
on Sudan remain admirable in as much as they effectively
served their intended purposes in bringing about change in
Sudan until the successful conclusion of the CPA. The people
of Southern Sudan and other marginalized areas of Sudan
remain grateful for the principled stance of the people and
Government of the United States of America.

Certainly, there are well founded and plausible reasons for
targeted sanctions to remain in force against Sudan
especially as responses to the appalling humanitarian
tragedies in Darfur and other failures concerned with
implementing the CPA, DPA and ESPA.

As a matter of principle, the people and Government of
Southern Sudan uphold and very much welcome such principled
stance and strategies. However, given the latest changing
circumstances, new ways are to be found for such principled
objectives not to stand on the way of the Government of
Southern Sudan to deliver its mandate and services to its
people and also on the other hand on its historical role and
responsibilities towards the social and political
transformation of the Sudan as provided for under the CPA.

The people and Government of Southern Sudan strongly believe
that there are innovative and imaginative solutions that can
be explored and adopted by us all in order to strike the best
possible balance between these competing and at times
seemingly contradictory policy concerns and the requisite
strategies to realising them.

The continuation of US sanctions on Sudan as they stand at
present shall seriously harm the people and Government of
Southern Sudan even more than it would the NCP-led Government
of National Unity. This shall have serious implications at
every level.

The NCP and its networks have options and sources which are
not available to the people and Government of Southern Sudan.
Therefore the NCP shall have all the excuses for not meeting
with its moral and political commitments to implementing the
CPA, apart from the other negative ramifications on peace and
security throughout the country.

The NCP led Government of National Unity is deliberately not
making any development projects in Southern Sudan under the
pretext that there are no resources owing to the US
sanctions, while at the same time concentrating development
activities in selected areas of northern Sudan where it deems
its political support to be greatest.

On the immediate, medium and long term, US sanctions as they
stand at present may potentially provide the basis for the
NCP to pursue its project of not honouring the CPA and also
considerably undermine or even reversing national, regional
and international efforts for finding sustainable peaceful
solutions for Sudan's intractable difficulties.

GoSS Proposals on the Way Forward

It is all a matter of political will and how far imaginative,
innovative and proactive we choose to be from our respective
positions while working within existing international
legitimacy and legality as well as the legitimacy and
legality of our respective countries.

GoSS proposals are therefore made within the framework of
international and Sudan existing legitimacy and legality as
provided for by the CPA and interim national and Southern
Sudan constitutions.

In view of the above, GoSS therefore proposes the following
and urgent immediately needed specific requirements:

1. The share of GoSS of oil revenue is being channelled
through banks in the Middle East, which are subjected to US
sanctions. GoSS seeks to have its share of oil revenue to be
paid through a US based commercial Bank, which shall in due
course under these proposals have branches in Southern Sudan.

2. There are grants made to Southern Sudan which under
existing sanction regimes are difficult to transfer, it would
be better to make such transfers through the proposed
solution of having GoSS accounts with a US based commercial
bank with a branch in Southern Sudan.

3. Creating legal and other necessary arrangements for South
Sudanese banks to have close working relations with
corresponding bank's within the US.

4. There are many companies, especially US based companies,
which are willing and ready to invest in Southern Sudan and
are unable to do so due to US sanctions against Sudan from
which they are to be exempt.

The immediate, medium and long term objectives and strategies
are as follows:

1. Working out clear political, policy, institutional and
operational frameworks and structures for exempting Southern
Sudan from US sanctions, with agreed sets of measures to
safeguard against possible infringements.

2. Working out clear legal frameworks and strategies for
targeted sanctions against the negative elements in Sudan in
ways that shall further strengthen the prospects for
implementing the CPA and at the same time enable the positive
elements of social and political change in Sudan to
successfully deliver their respective mandates.

3. Exploring areas for closer engagements on deepening
economic and bilateral relations that shall further enhance,
deepen and enable GoSS and others in Sudan to pursue their
mission of transforming Sudan in line with established
principles.

4. Accelerating existing and explore new areas for enhancing
the capabilities of GoSS on public expenditure management,
fiscal discipline and economic management.

5. Providing for major US Banks to serve in Southern Sudan
under US laws, Bank of Southern Sudan regulations and the
agreed bilateral agreements on these regards.

6. Creating political, legal and financial incentives for
greater and deeper relations between US companies and
Southern Sudanese companies, especially in agriculture and
agro-business industries that can immediately impact on
peoples' lives.

7. Creating most favoured trading relations with the US for
Southern Sudanese suppliers to conduct closer business
relations with the United States of America as provided for
within the African Growth and Opportunity Act (AGOA) and
other related frameworks.

8. Creating synergies for local, national and regional
safeguards for growing economic relations and investments
between the US and Southern Sudan.

9. Resolving existing problems and bottlenecks with how GoSS
financial affairs are being managed at present especially in
respect of the World Bank and MTDF etc.

10. Developing bilateral research and policy analysis
activities on economic and financial relations as well as
associated areas.

11. Exploring other areas of mutual strategic and other
interests.

The people and Government of Southern Sudan remain touched
and moved by the depth and commitment of the people and
Government of the United States of America and indeed their
moral, intellectual, political and material capital being
invested in furtherance of the values of liberty, democracy,
human rights, justice and the rule of law.

On their part the people and Government of Southern Sudan
remain committed to honouring such consistent and principled
commitments in this and future generations to come. Hence
these proposals on how we can think and plan together on the
way forward.

Once the policy decisions are made, we look forward for us to
engage our respective technical and operational teams at the

earliest opportunities to proceed with the agreed policies,
strategies and solutions as shall be determined in due course.

Given the urgency of these matters raised, we look forward to
your learned responses at your earliest possible opportunity.

Yours sincerely,


Kuol Athian Mawien
Minister of Finance and Economic Planning,


Government of Southern Sudan
FERNANDEZ

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