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Cablegate: U.S. Sanctions Hurt Sudan's Economy Say Conference

VZCZCXYZ0000
PP RUEHWEB

DE RUEHKH #1955 3450731
ZNR UUUUU ZZH
P 110731Z DEC 07
FM AMEMBASSY KHARTOUM
TO SECSTATE WASHDC PRIORITY 9492

UNCLAS KHARTOUM 001955

SIPDIS

DEPT FOR AF/SPG, AF/EPS, EB/IFD, AND EB/ESC
DEPT PLS PASS USAID FOR AFR, AND ALSO PASS USAID

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV EFIN ECON EAID SU
SUBJECT: U.S. SANCTIONS HURT SUDAN'S ECONOMY SAY CONFERENCE
PARTICIPANTS

1. (U) SUMMARY: On December 10, 2007 in a conference entitled
"Sudan in a Global Economy," almost all speakers stated that U.S.
sanctions have hurt the Sudanese economy. Presenters claimed that
U.S. sanctions have resulted in a shortage of medical supplies,
prevented the economy from fully liberalizing, and aimed at keeping
Sudan and Africa in the dark ages. END SUMMARY.

2. (U) Mamoun Gamal, the Managing Director of CityPharmp
Pharmaceutical Industries in Khartoum, noted that U.S. sanctions
have significantly affected his business, and claimed that sanctions
caused a shortage of medical supplies in Sudan from May to September
2007. Gamal mentioned that he was unable to obtain surgical
sutures, bandages, and diabetes testing machines, specifically
naming Johnson & Johnson as an example of one American company that
he has not been able to access. Gamal said he is aware that
agricultural commodities and medical supplies are eligible to
receive special exemption licenses from the Office of Foreign Assets
Control (OFAC), U.S. Department of Treasury. However, according to
Gamal, many U.S. firms want his Sudanese company to cover legal fees
associated with the OFAC application process, making these
procedures cost prohibitive. Although Gamal complained of
sanctions, he also said that there are other factors that make him
feel as though he operates "in a business vacuum." Specifically,
Gamal mentioned government service fees and taxes, lack of access to
reliable financing, strict labor laws, and an under skilled
workforce as negative factors affecting his business. Gamal cited
one example of a "computer fee" that he occasionally receives from
the government, noting "I don't understand this - we're being
penalized for using computers?"

3. (U) Setting the tone for the event, Engineer Medab Yacoub
opened the conference strongly criticizing U.S. sanctions, saying
that sanctions have had a negative effect on both public and private
projects. Yacoub stated that "The U.S. and Europe are trying to
eliminate Sudan and Africa from the modern world." Continuing, she
said that the West should not use political excuses to attack
Sudan's economy.

4. (U) Dr. Abdul Gadir Abdul Nur noted that there are a number of
challenges to Sudan's business environment despite positive
developments in Sudan such as the privatization program started in
the 1990's, the peace dividend associated with the Comprehensive
Peace Agreement, and the rise of the oil industry. Nur noted that
U.S. sanctions have created a number of challenges to Sudan's
economy that include: limited access to raw materials; reduced
markets for export; difficulty in importing the latest technology;
and reduced access to advanced training. Nur stated that "one of
the main reasons the economy has not liberalized in Sudan as
expected is because of U.S. sanctions." Nur said that the impact of
sanctions, though impossible to measure, is felt directly and
indirectly, in both the short and long term. Abdul Nur concluded
that though sanctions are a significant challenge, there are many
other factors that confront Sudan's economy. For example, Nur noted
that reverse migration (specifically the return of highly educated
Sudanese returning from the Arab Gulf) has reduced the number of
available professional and highly skilled jobs.

5. (U) COMMENT: U.S. sanctions have had an impact on Sudan,
though the extent of that impact is difficult, if not impossible, to
quantitatively measure. Specific examples from particular
industries (as we have recently reported on agriculture, the oil
industry, and now healthcare) and general observations from
educated, relatively sophisticated, and moderate observers such as
these above may be the best evidence we have of the effect of U.S.
sanctions. Nonetheless, we would caution against over exaggerating
the effect of sanctions, as Sudan's oil boom and turn toward Asia
have mitigated their overall effect. The sanctions also cut both
ways, with American companies missing out on a growth market.

FERNANDEZ

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