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European, Saudi banks cut ties to Sudan over sanctions

KHARTOUM: Major European and Saudi banks have stopped dealing with Sudan, diplomatic and other sources say, adding to the sanctions-hit country’s isolation and further straining its indebted, cash-starved economy.

While Khartoum blames increased “pressure” from a U.S. trade embargo first imposed 17 years ago, a U.S. official insisted there had been no change in policy from Washington.

The move by the banks appears to reflect an increasingly cautious attitude by financial institutions, which do not want to risk being found in violation of U.S. sanctions, a Western diplomat said, adding that risk aversion was “mushrooming.”

Germany’s Commerzbank was the latest to sever its connection with Sudan, according to diplomats. The bank had no comment when reached by AFP.

In 2012, the British banks HSBC and Standard Chartered were fined $1.92 billion and $667 million respectively for violations that included breaching sanctions imposed on Iran and Sudan.

In the same year, Dutch bank ING agreed to pay $619 million to settle U.S. government accusations that it conducted banned transactions involving Sudan and other countries.

In the latest investigation, U.S. authorities are probing the French banks Societe Generale, BNP Paribas and Credit Agricole for alleged embezzlement and violation of sanctions against countries like Iran and Sudan, a source close to the matter said last week.

The European Union has no embargo against Sudan, whose government seized power 25 years ago in an Islamist-backed coup.

But European banks with U.S. branches or business “are closing any Sudanese accounts and won’t even process payments from Sudan,” the diplomat said.

This affects private and government transactions.

A local banker, who asked not to be identified, said that Saudi banks had also stopped dealing with Sudan this month, a move that is economically far more significant for Sudan than the European move.

“Most of the accounts or money going out of Sudan – it’s completely frozen,” the banker said.

Hundreds of thousands of Sudanese nationals work in Saudi Arabia, earning money to send home. The kingdom is also a key exporter to Sudan.

The banker said that although sanctions have long been in place, they are being more strictly implemented now. “They are putting more pressure,” he said.

The U.S. imposed a trade embargo on Sudan in 1997 over accusations that included the violation of human rights.

Sanctions exemptions are possible in some cases such as non-commercial personal remittances or agricultural equipment.

For Saudi Arabia, strained political relations over Iran could be a factor in the banks’ decision, the Western diplomat said. While Riyadh has cool relations with Tehran, Khartoum has tried to balance ties between Saudi Arabia and Iran.

The ending of dealings with Sudanese banks by some European and Saudi financial institutions related to their own “internal procedures,” the Central Bank of Sudan said in a statement carried by the official SUNA news agency.

Information Minister Ahmad Bilal Osman denied any political reason for the Saudi action, but said American pressure “is also toward the banks” now.

“It is actually against the people of Sudan,” he told AFP. “I think this is not at all ethical.”

The banks’ action further complicates Sudan’s economic difficulties, which have mounted since 2011, when South Sudan separated with the bulk of the previously united country’s oil production.

Hard currency is in short supply, the Sudanese pound has weakened and inflation has mounted, creating social tensions that exploded in deadly street protests last September.

Osman insisted that there are still “some countries” that are able to deal with Sudan.

 
A version of this article appeared in the print edition of The Daily Star on March 15, 2014, on page 4.

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Summary

Major European and Saudi banks have stopped dealing with Sudan, diplomatic and other sources say, adding to the sanctions-hit country's isolation and further straining its indebted, cash-starved economy.

In 2012, the British banks HSBC and Standard Chartered were fined $1.92 billion and $667 million respectively for violations that included breaching sanctions imposed on Iran and Sudan.

In the same year, Dutch bank ING agreed to pay $619 million to settle U.S. government accusations that it conducted banned transactions involving Sudan and other countries.

A local banker, who asked not to be identified, said that Saudi banks had also stopped dealing with Sudan this month, a move that is economically far more significant for Sudan than the European move.


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