Hit Sudan Where It Lives
Finally, the right policy?

Mr. Gaffney is president of the Center for Security Policy
March 23, 2001 9:55 a.m.

t looks as if George W. Bush is ready to give the odious government of Sudan the comeuppance it so richly deserves. In sharp contrast with his predecessor, President Bush and others in his administration have begun signaling a determination to oppose a regime in Khartoum responsible for genocide, slave trading, terrorism, and the proliferation of weapons of mass destruction.

The question is: As President Bush embarks on this strategically desirable and morally imperative initiative, will he make use of what may be the single most effective tool available to him to undermine the Sudanese government and prevent its further predations? Or will he be dissuaded from limiting the access to the U.S. capital markets to foreign energy firms that are currently providing financial life support to what is, arguably, the quintessential rogue-state regime?

A new report concerning Sudan issued by the highly respected, congressionally chartered United States Commission on International Religious Freedom (USCIRF) underscores just how central foreign investment is to Khartoum's ability to perpetrate crimes against its own people and others:

The connection between oil development (and oil revenues) and the Sudanese government's human rights abuses has become increasingly apparent over the last year. First, the discovery and the drilling of oil reserves in the Upper Nile province has led to a 'scorched earth' policy by the government to remove civilian populations from areas surrounding oil installations. Second, the government reportedly uses the oil facilities themselves (e.g., airstrips and roads) in staging military operations. Third, according to the State Department, oil revenues have allowed the government to increase its investment in military hardware.

Despite growing international awareness of this connection, oil development has attracted significant foreign investment in Sudan. U.S. economic sanctions prohibit U.S. companies from investing or doing business in Sudan. Current sanctions, however, do not prohibit foreign companies from doing so, and the U.S. Department of Energy reports that the [virtually all the big multinational energy companies] are active in Sudan's oil and gas industry.

In light of this appalling situation, the USCIRF vainly recommended to President Clinton last year that "companies active in Sudan's petroleum industry not be allowed further access to U.S. capital markets and that American investors be informed if the proceeds of their investments in foreign corporations will help finance that industry." In doing so, the Commission built upon the path-breaking work by Roger W. Robinson Jr., chairman of the Center for Security Policy's William J. Casey Institute, who has long warned about the growing tendency of "global bad actors" to exploit the lack of transparency and discipline in the American debt and equity markets. In its most recent analysis prepared for the benefit, among others, of a new administration committed — as President Bush put it at the christening of the U.S.S. Ronald Reagan on March 4 — to "stand by those…moving toward freedom" and "stand up to those…who deny freedom and threaten [their] neighbors or our vital interests," the USCIRF declared:

Given the close connection between development of Sudan's oil resources (which would be minimal without foreign investment) and the Sudanese government's human rights abuses, the Commission continues to believe that the U.S. should not grant access to its capital markets to any foreign company involved in Sudan's oil industry, and in general should require greater disclosure by all companies doing business in Sudan so that U.S. investors are apprized of the nature and extent of that business.

Under the leadership of Commission Chairman Elliott Abrams, its members have taken note of "the current debate both internationally and in the U.S. on the effectiveness of economic sanctions generally." In their latest report, they ruefully acknowledge that "Unilateral economic sanctions by the U.S. have not prevented foreign investment in Sudan's oil business, which has, in turn, provided the Sudanese government with significant financial support for its egregious human rights and humanitarian abuses."

The USCIRF nonetheless observed that "It has not been established that U.S. sanctions have been completely ineffective. They can continue, for example, to slow the rate of increase of foreign investment in Sudan and oil revenues to the Sudanese government. In the absence of multilateral economic sanctions, however, preventing access to U.S. capital markets by foreign companies engaged in the oil-development business in Sudan targets a specific weakness in the current U.S. sanctions regime."

The Commission concludes by recommending that "Foreign corporations doing business with Sudan's petroleum industry be prohibited from issuing or listing [their] securities on U.S. capital markets…. Expanding U.S. sanctions in the area of capital markets' access specifically targets what is likely the most significant resource that the Sudanese government has to prosecute the war."

President Bush appears poised to do the right thing on Sudan. We can only hope that he will maximize the effectiveness of his initiative by ensuring that U.S. investors are not unwittingly underwriting and enabling those who are doing the wrong thing there.