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Sudan prospering despite a decade of US sanctions

China investment, oil exports have eased the pain

KHARTOUM, Sudan -- Sinking back in a poolside lounge chair at Khartoum's first five-star hotel, Sitona Abdalla mused recently about whether US sanctions were hurting Sudan.

"I guess they must be," said Abdalla, one of Sudan's new elite, who can afford to bring her nephews to Al Salam Rotana Hotel's $42-a-plate weekend brunch. "But I would have to say," she added, smiling at the children splashing in the pool, "life here is better."

Ten years after the United States imposed an economic boycott against what is territorially Africa's largest country, it's hard to see much effect on the streets of Khartoum, the capital.

Unlike Iraq, which was crippled by United Nations sanctions in the 1990s, Sudan has blossomed economically since the sanctions were put in place in 1997 because of its alleged support of terrorism and attacks against southern rebels.

President Bush tightened sanctions in May, citing the military regime's failure to resolve the crisis in the violence-plagued western region of Darfur, where an estimated 200,000 people have died, mostly from disease and hunger in the early days of an ethnic conflict. An additional 2.2 million people have been displaced.

But by most measures, Sudan's economy is booming, expected to grow 13 percent this year, far faster than those of most other African nations. Oil exports are generating more than $4 billion a year, and heavy investment by China and other Asian nations has allowed the country to escape crippling economic pain.

"We are not afraid of sanctions," Interior Minister Zubair Bashir Taha said. "Not at all. We have been able to develop our oil industry, our communications. No country has leapfrogged the way we have."

Foreign investment in Sudan has quadrupled since 1996 to about $2.3 billion last year, according to figures from the Investment Ministry. China, which buys about two-thirds of Sudan's oil, has invested $7 billion, mostly in oil projects, roads, bridges, dams, and other infrastructure projects, officials said.

Such growth has transformed Khartoum. Three years ago, the Nile River city resembled Baghdad before the war, with dusty roads, dilapidated government offices, and moldy hotels.

Today, construction cranes are busy all over town, promising to give Khartoum a skyline.

"The sanctions haven't made much of a difference," said Safwat Fanous, head of the University of Khartoum's political science department. "The government has learned how to evade them."

In imposing new sanctions against 30 Sudanese companies in May, Bush called upon President Omar al-Bashir "to end the campaign of violence that continues to target innocent men, women, and children" in Darfur. He vowed to tighten enforcement of existing sanctions.

Amid a growing international divestment campaign, some European companies, including Siemens, Rolls-Royce, and Land Rover, recently announced that they were pulling out of Sudan. But no other countries have yet joined the US boycott.

Sanctions also have been partly undermined by numerous loopholes and exemptions that permit some US companies to continue working with Sudanese partners.

Coca-Cola Co. and PepsiCo Inc. have licenses to sell their syrup to Sudanese factories. Gum arabic, a gooey tree sap used in scores of consumer products as an emulsifier, was left out of sanctions by Congress because Sudan controls most of the worldwide market. Some oil companies and financial institutions are able to operate here by funneling business through foreign-based subsidiaries of US companies.

At least 16 Americans have invested in small to midsize business ventures in Khartoum during the past four years, according to the Investment Ministry. Asked how the Americans avoided US sanctions, a Sudanese official said, "We don't ask. That's not our headache."

For the most part, large US companies have steered clear of Sudan, including Chevron Corp., which helped discover Sudan's oil but left the country before being able to profit from it. Investors from China, Malaysia, and India have rushed to fill the gap, offering financing, technology, and construction services.

Sudan's rising oil production lured public and private investors from China, but now the Asian nation is finding Sudan to be a thriving outlet for Chinese goods, from soccer shirts to coffee tables. Economists estimate that for every dollar China pays for Sudanese oil, it earns back 50 cents through sales of products and services.

"Turning to China was the best thing this government ever did," said El Khider Mohammed Nour, who runs an investment consulting company in Khartoum.

Best of all for Sudan's Muslim government, China rarely puts political strings on its financial partnerships. It was only after intense international pressure and the specter of a boycott campaign against the 2008 Olympics in Beijing that China recently agreed to use its clout to nudge Sudan to accept UN peacekeepers in Darfur.

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