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Cablegate: Charge's Meeting with Sudanese Businessman Osama

VZCZCXYZ0015
PP RUEHWEB

DE RUEHKH #1402/01 2481522
ZNR UUUUU ZZH
P 051522Z SEP 07
FM AMEMBASSY KHARTOUM
TO SECSTATE WASHDC PRIORITY 8418

UNCLAS KHARTOUM 001402

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/SPG AND EEB/ESC/ESP (KLEIN)
DEPARTMENT PLEASE PASS TREASURY FOR OFAC

E.O. 12958: N/A
TAGS: ECON ETRD PGOV PREL SU
SUBJECT: CHARGE'S MEETING WITH SUDANESE BUSINESSMAN OSAMA
DAOUD

REF: A. KHARTOUM 1288
B. KHARTOUM 1333

1. (SBU) Summary: Sudanese entrepreneur Osama Daoud
asserted to the Charge that U.S. economic sanctions are
having an effect on Sudan,s economy, but contended that the
burden is being borne by private sector and its employees,
rather than by the regime. He contended that his sanctioned
company, Al-Sunut Development, has no ties to the regime and
should never have been listed. End summary.

2. (U) CDA Fernandez paid an introductory call on leading
Sudanese businessman Osama Daoud Abdel Latif, at Daoud,s
lavish corporate headquarters in Khartoum North on September
3. Daoud heads a commercial conglomerate that includes food
processing (DAL Foods Industries), construction (DAL
Engineering), real estate (AL-Sunut Development Corp.), and
the Sudanese Tractor Company (SUTRAC). He also holds the
Sudan franchise for Coca-Cola distribution in Sudan, while
SUTRAC is sole agent for the Caterpillar Co. in Sudan.
Al-Sunut Development was among the 30 Sudanese entities
targeted for sanctions as Specially Designated Nationals
(SDNs) on May 29, 2007.

3. (SBU) Asked about business conditions, Daoud immediately
cited U.S. sanctions as a serious impediment to his
commercial activities. For example, although Coca-Cola is
able to operate in Sudan under an OFAC license, its
activities are extremely circumscribed. While it is able to
supply cola concentrate for bottling, it is unable to
carryout any marketing activities.

4. (SBU) Daoud added that under public pressure stemming
from the Darfur conflict, Coke has decided to donate all of
its Sudan profits to NGOs carrying out humanitarian
activities in Sudan. Daoud expressed a degree of cynicism
about foreign humanitarian operations in Sudan. For example,
he remarked that the World Food Program goes to great effort
to import wheat into Sudan in bulk, bag it, then ships it for
consumption to Darfur, where the traditional diet consists of
sorghum, rather than wheat. WFP wheat ends up for sale in
the markets of Khartoum.

5. (SBU) In passing, Daoud commented on difficulties in
shipping goods, including humanitarian supplies, to Darfur,
saying that shipments are seriously impeded by the SAF's
monopolization of the railroads for its use. Daoud contended
that the SAF uses the railroads more for the shipment of
contraband goods to be sold on the black market in Darfur for
the profit of SAF commanders, than it is for military
supplies and equipment.

6. (SBU) Returning to the cost imposed by U.S. sanctions,
Daoud cited Al-Sunut Development's designation as an SND in
May. This blocked Al-Sunut,s financial transfers in third
countries and caused the Company to close accounts in foreign
banks. (Note: Sanctioned telecoms company SUDATEL
Commercial Officer related similar difficulties in his
meeting with Emboffs (ref (b)). End note.) As a result,
Al-Sunut has been forced to halt its ambitious plans for a
commercial development on Al-Morgran point in Khartoum.
Daoud expressed puzzlement at how companies were chosen for
the SDN list, asserting that Al-Sunut has no connections to
the regime. He stated that the DAL group of companies always
has been strictly apolitical. He said that after he lobbied
President Bashir for compliance on Darfur, Bashir noted
sarcastically, "You asked for us to comply to avoid sanctions
then you yourself are sanctioned."

7. (SBU) CDA Fernandez explained that the Administration is
under tremendous pressure within the U.S. to take action in
response to the Darfur conflict. Economic sanctions appear
to offer an attractive middle course between the unacceptable
alternatives of doing nothing and military force. The Charge
said he sees a limited, but real chance for improvement in
bilateral relations in the near term, and that easing
economic sanctions will probably be one of the most difficult
steps to take. In the shorter term, he thought that
Khartoum,s acceptance of UNSCR 1769 at least offers an
opportunity to keep relations from getting even worse.
Without making any commitments, Charge offered to transmit to
Washington any points Daoud might want to offer as to why
Al-Sunut should be delisted.

8. (SBU) Daoud noted that some aspects of sanctions had been
helpful. Sudanese business had moved to Arab banks after
9/11 (he uses the national bank of Abu Dhabi), which are very
competent and don not care about politics. he will be making
his first trip to China to use $100 million allocated to his

company as part of a $3 billion, 20 year soft the Chinese are
using to hook Sudanese on to Chinese goods and services.
Many Sudanese prefer to deal with America, but they will get
used to the Chinese over time.

9. (SBU) Daoud complained that U.S. sanctions most directly
hurt its natural friends in Sudan, without significantly
inconveniencing the regime. The government, he said, can
always find substitutes for U.S. goods and services denied by
sanctions. He noted that when blanket U.S. sanctions first
were imposed in 1997, Sudan was forced to drop plans to
purchase Caterpillar equipment for the Nile oil pipeline
pumping stations. Instead, Rolls Royce equipment was
substituted, at a 25% higher cost. Even though wheat imports
are not part of sanctions, DAL preferred to "avoid problems"
and switched from American to Canadian and Australian grain.

10. (SBU) When the Charge noted that the regime complains
that the sanctions do hurt, Daoud asserted that the
government likes to cite USG actions such as the May 29 SDN
listings as proof that it is helpless in the face of U.S.
hostility and that there is no sense in even trying to meet
U.S. concerns. CDA commented that this highly tendentious
argument assumes that relations cannot deteriorate even
further.

11. (U) Comment: Al-Sunut is the third Sudanese SDN about
which Post has had discussions (Reftels).
FERNANDEZ

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