KHARTOUM, Sudan — It has been almost nine months since economic sanctions were lifted, and the ATMs in Sudan’s capital have run out of money. During Ramadan, under intense heat, the city’s fasting residents spent their time waiting in line for cash. Since early March, it has been taking an average of six hours for the few ATMs that are randomly restocked to be emptied. The financial ecosystem has, quite simply, seized up.
After 20 years of comprehensive sanctions against Sudan, the U.S. government revoked most punitive measures on October 12, 2017. It was a time of great hope. Sudan’s citizens thought they were shaking off the yoke of decades of economic isolation and looked forward to reintegrating into the global community. But nine months later, thanks to a toxic mix of state profligacy, corruption, and lack of foreign investment or aid, Sudan is on the verge of collapse.
The oil boom years, from 2005 to 2010, ended with the loss of oil revenue when the south of the country seceded in 2011. That loss was then compounded when plans for revenue-sharing with the South Sudanese government were dashed as the fledgling nation plunged into civil war. There was no plan B, and there is no sign of the income that Khartoum should have received during that time. Consequently, there is a serious lack of foreign reserves. Making matters worse, the inability of the Sudanese banking system to trade in U.S. dollars has created a black market so large that it has sucked liquidity out of the formal banking system.
Price rises are so dramatic that they are changing by the hour. The Sudanese pound, after a brief rally following the lifting of sanctions, began to fall sharply and has been volatile ever since, boosted by temporary measures, then falling when their effects wear off. In January, the government lifted subsidies for basic commodities, leading to protests in which several people died.
The economic suffering that has transpired since October is the fault of a corrupt and extractive government and a myopic policy process in Western capitals
The economic suffering that has transpired since October is the fault of a corrupt and extractive government and a myopic policy process in Western capitalsthat did not foresee how sanctions might hurt Sudan’s people more than its politicians, or anticipate the economic challenges of the post-sanctions era.
The concerted efforts that go into enforcing sanctions are seldom matched by similar efforts to dismantle them. In the international human rights business model, it seems, there are no incentives — only deterrents. The good intentions behind such sanctions generally work in one direction, toward the punishment or weakening of a rogue regime, and are rarely repurposed toward the rehabilitation of that same regime in order to alleviate the suffering of those it governs once sanctions are lifted. The result is a blunt policy instrument that is indifferent to its long-term unintended consequences.
That can lead to perverse outcomes. Sanctions can end up providing cover for the very governments they are meant to punish, as has been the case in Sudan, while empowering those regimes against the internal opponents and victims whom sanctions were ostensibly meant to protect.
Sudan’s current economic conundrum is the inevitable result of a mutation that occurs after a country’s long period of exile from the global commerce network. Like any organism under pressure to survive, the Sudanese economy evolved; its DNA has changed as a result. The prolonged application of sanctions has not only made it hard for Sudan to do business with the outside world, but it has also twisted its economy so out of shape that it is impossible to reintegrate into global financial networks in its current form. Sudan’s economy is less a mechanism of formal regulation and more a complex, informal structure — unplanned and unreplicable — that has developed over many years. Both citizens and the government have adapted to survive over the past decade. And that sanctions “tail,” the aggregate result of years of economic pressure, is proving to be an insurmountable challenge.
The long-awaited sanctions relief may have, in fact, made things worse. Battling a dramatic rise in inflation, a record 60 percent in May, the Sudanese government has imposed a cap on bank withdrawals after Sudanese citizens rushed to withdraw their rapidly devaluing Sudanese pound deposits. All who do not receive their salaries in cash have been unable to withdraw the full amount paid to them since January.
Arguments are breaking out on bank floors as clients desperate for larger amounts of cash for medical emergencies or other unexpected commitments lose their temper at the helpless staff.
Arguments are breaking out on bank floors as clients desperate for larger amounts of cash for medical emergencies or other unexpected commitments lose their temper at the helpless staff.Under-the-counter favors are done for people who have close relationships with bank officials or who tug at their heart strings. Fatima Mohamed, a government employee in dire need of expensive medication, recounts how she was forced to rely on the mercy of a young bank teller she had mentored earlier in his career. He took her upstairs, away from the prying eyes of others who might demand the same treatment, and handed over the sum of cash she needed. Others are not so lucky. “The best I can do for you,” one bank manager told another client, “is to text you the details of the next ATM that is due to be stocked when I have the information,” the customer recalls.
One of the triggers of the pound’s devaluation was the rise in demand for foreign currency, as Sudanese companies and individuals began to travel abroad to drum up new business. That demand was not met with a proportional supply in terms of influx of investment.
Mustafa Mahmoud, a junior minister in the Youth and Sports Ministry, said that “we have no international commerce, national banks have no relationships with global banks. We have a situation in Sudan that doesn’t exist anywhere else in the world: Foreign currency resides outside the financial system. More than 80 percent of U.S. dollar supplies circulate in the black market. Currency trading has become an industry in its own right.” That scarcity of liquidity is setting off a domino effect. The government is unable to meet its commitments and, in one of the more dramatic manifestations of the mutations triggered by sanctions, has been forced to turn to the black market for foreign currency. “The government itself is a client,” Mahmoud said.
For years, the Sudanese found a way to manage in the face of punitive sanctions that made routine, everyday transactions impossible. Abdelhafiz Abdelmoneim, a construction engineer and contractor, is a testament to the complexity of the adaptation that occurred under sanctions and the difficulties of unwinding it.
In order to source construction materials, provide timely quotes to his clients, pay his workers, and settle transactions in a way that did not impact his cash position, he carefully fostered a sophisticated personal global network through which to do business and pay invoices — all outside the formal banking system. “We all have our own banking channels,” he said. “It is in our mobiles, literally, people on the outside who are able to buy on your behalf, ship on your behalf, pay on your behalf, and then you settle.”
This renders any return to official global banking channels difficult. “Why should I abandon this network which I have created over years, which is run by people I trust, in order to bank with institutions that not only are not flexible, but that might shut me down or any transaction without notice?” Abdelhafiz added. Like him, many businessmen in the country run their own mini-economies. He keeps an eye on exchange rates and is always doing sums in his head in order to stay ahead of the currency volatility. The rest of the country is, too.
A callousness on the part of the international community complicates things further. International financial organizations are not motivated to reach out after years of either doing just fine without accommodating Sudan or being punished for doing so.
International financial organizations are not motivated to reach out after years of either doing just fine without accommodating Sudan or being punished for doing so.“Do you think the sanctions have been lifted?” Mahmoud, the junior minister, asked. “They are just as they are — nothing has changed. Banks are too afraid to deal with Sudan and have not been educated out of their fear or complacency.”
This is a familiar frustration. After the Iran nuclear deal was adopted in October 2015, there was an expectation that the country would be reintegrated into the global finance community. That hope was dashed when it became clear that international banks had no interest in re-engaging. A chill factor had set in due to heavy fines that the United States had imposed on several big banks, including ones incorporated off U.S. soil, for breaching laws forbidding them from doing business with Iran. The largest fine, $9 billion, was paid by BNP Paribas as punishment for dealing with several sanctioned countries, including Iran and Sudan.
Meanwhile, those who have the resources always find a way around such restrictions. An investigation by Bloomberg uncovered that sanctions against Sudan were never observed religiously and that well-connected elites have been able to do business with global corporations for years, further entrenching their power and wealth while the rest of the country was cut off.
Shifting the balance even further to the benefit of the authoritarian regime, the sanctions applied to Sudan lacked certain crucial elements that would have made them truly effective. Being U.S. sanctions, they were not observed widely enough to harm the regime. They could not preclude China, African nations, or the Gulf States from doing business with Sudan. They also were not leveraged against a country where they could empower the local opposition. Such embargoes tend to work best when they can generate some internal pressure, enable democratic civil society, and bolster opposition parties.
But authoritarian governments like Sudan’s are relatively immune to the effects of sanctions, because their critics and opponents have been so weakened. Stephen Hopgood, a professor of international relations at the University of London’s School of Oriental and African Studies and the author of The Endtimes of Human Rights, sees sanctions as an enabler for governing elites. “Sanctions unbalance things by giving the government the edge on opposition — it consolidates power,” he said. “The sovereign will always find a way.”
Yet, strangely, the debate around economic sanctions as an enforcement tool is still dominated by the binary question: Do they work or not? There is very little discussion of the damage they cause or the permanence of their effects long after they are lifted. “The tailwind effect is not addressed,” Hopgood added, “No one asks what the long-term impact will be: not in literature, not in politics. There is a general callousness and a lack of interest in what happens next.”
In the end, when sanctions were finally lifted in Sudan’s case, it was unclear how many of their intended objectives had actually been achieved. The sanctions were eased primarily to reward and motivate the Sudanese government, which has become a key security ally in the region and a bulwark against African migrants on their way to Europe. Or, according to the U.S. State Department, the sanctions were lifted “in recognition of the Government of Sudan’s sustained positive actions to maintain a cessation of hostilities in conflict areas in Sudan.”
Actually, over the past year, while ceasefires have been announced, there have been reports of renewed hostilities in Darfur, an intensified mobilization against the press, and a spate of arbitrary detentions. The meaning of “cessation” appears to be a loose and subjective one.
The truth is that sanctions were never fully aligned with their intended purpose of furthering a human rights agenda; they were simply implemented and then intensified in a global face-saving exercise after evidence of war crimes in Darfur began to emerge in 2005. Rather than halting the Sudanese government’s aggression, sanctions hobbled the country’s economy and skewed it to the benefit of the government while making a pariah of the Sudanese people.
Rather than halting the Sudanese government’s aggression, sanctions hobbled the country’s economy and skewed it to the benefit of the government while making a pariah of the Sudanese people.
A colossal trick has been played on Sudan’s unsuspecting citizens. Confidence in the banking system has collapsed as people choose instead to store their cash at home. Detentions without trial are frequent, and many still languish in political imprisonment. The regime is more powerful than ever thanks to the absence of any viable opposition or alternative.
Pushed to the brink by a global embargo that has inadvertently shored up an oppressive regime and then abandoned by that government to fend for themselves, the Sudanese are a people accustomed to making do with what they have — constantly inventing, reinventing, and coming together to find new ways to make ends meet.
But the residue of years of economic and political isolation is threatening to overpower this determination. Sudan’s people have lived on the precipice for a long time; now they are falling off the edge.