U.S. sanctions that have strangulated Sudan’s economy for the past 23-years are likely to soon be lifted, after the impoverished northeastern African country grudgingly acceded to paying $30 million as compensation to 17 American sailors who died in 2000 when their ship, the USS Cole, was attacked by suicide bombers while refueling in the port of Aden in Yemen. The attack also wounded 39 sailors.
The bombing, attributed to the al Qaeda terrorist group foreshadowed the devastating September 11, 2001 attacks on the United States, with a US court in 2014 concluding that Sudan had provided Qaeda with aid leading to the attack and awarding the families $35 million in compensation. Sudan finally paid the compensation on February 7.

Sudan’s Current Situation

Sudan’s announcement of a compensation deal comes as the African nation undergoes a fragile transition after the fall last year of president Omar al-Bashir, who ruled with an iron fist for nearly three decades. Sudan’s interim ruling council led by Prime Minister Abdalla Hamdok is now seeking to shake off decades of diplomatic and economic isolation. Being removed from the American list of state sponsors of terrorism would be a significant step.

“It was the former regime that supported terrorism and the Sudanese people revolted against it. These sanctions have caused tremendous suffering to our people,” Hamdok — who was appointed prime minister in August — said during an address at the UN General Assembly (UNGA) this past September.
“Therefore we call on the United States to remove Sudan from the list of state sponsors of terrorism and to stop punishing the people of Sudan for crimes committed by the former regime,” he added.

‘It is Time to Remove Sudan from the List of State Supporters of Terrorism’

UN Secretary-General Antonio Guterres has called for Sudan, which is Africa’s third biggest producer of gold to be removed from the US list of state sponsors of terrorism, as Khartoum slowly returns to the international fold.

“It is time to remove Sudan from the list of state supporters of terrorism, and to mobilize massive international support to enable Sudan to overcome its challenges,” the UN chief said Feb. 10 during an address at the annual African Union summit in Addis Ababa, Ethiopia.

The US government added Sudan to its list of state sponsors of terrorism in 1993 over allegations that then-President Bashir’s government was supporting “terrorist” groups.

The designation made Sudan technically ineligible for debt relief and financing from the IMF and World Bank. Washington began a formal process to de-list Sudan in January 2017, but this was put on hold when Sudan’s mass protests erupted a year ago. The uprising toppled Bashir and eventually forced the military into a power-sharing agreement with civilians.

Pompeo: ‘Sudan is a Cooperative Partner of the United States on Counter-Terrorism’

According to the United States’ most recent Annual Terrorism Report — written while Bashir was still in office — Sudan is no longer a sponsor of international terrorism.

“Notwithstanding its history, countering terrorism is today a national security priority for Sudan, and Sudan is a cooperative partner of the United States on counter-terrorism, despite its continued presence on the State Sponsors of Terrorism List,” US Secretary of State Mike Pompeo said recently that the Trump administration had considered lifting the terrorism designation for Sudan “for quite some time.”

“The Sudanese reminded me that they would love to get off that list and we always measure twice and cut once before we remove someone from a list like that,” Pompeo remarked.

The $300 Million 2012 Judgment Against Sudan

In 2012, a Washington judge ordered Sudan to pay more than $300 million to the victims’ families of the attack on the USS Cole. Other judges went on to order certain banks to make Sudanese assets available to start paying the sum.

However in March, 2019, the US Supreme Court overturned on procedural grounds a lower court’s ruling ordering Sudan to pay damages to the families of the victims.
Pompeo said that the USS Cole issue was one element in the terror designation but said that no decision has been made.

“We’ve been looking at whether to lift the designation of state-sponsored terror on Sudan for quite some time,” Pompeo told reporters as he flew to the Munich Security Conference this Feb. 13.

Sudan: Former Home of Osama bin Laden

In 1993, Washington listed Sudan on its terrorism blacklist for its alleged support of Islamist groups. Bin Laden used to reside in Sudan from 1992 to 1996. Sudan’s new authorities have made it a key priority to get the country removed from the blacklist.
Officials in Khartoum say the country’s economic revival has been stunted primarily due to its blacklisting, which deters global investors. In October of 2017, the US lifted its decades old trade embargo imposed on Sudan, but kept the country on the terrorism blacklist.

Sudanese officials and business people argue that the blacklisting has restrained international banking and transfer of funds, in turn severely impacting the country’s economy. Sudan’s chronic economic trouble — led by high inflation as well as shortages of fuel and foreign currency — was the main trigger for nationwide protests against now ousted leader Bashir. Bashir was removed by the army in a palace coup last April, but the country’s economic woes persist as the new authorities battle to rein in inflation and unemployment.

IMF Predictions on Sudanese Economic Prospects

The IMF predicts Sudanese economy will contract by 2.3% this year, with the country’s current external debt standing at about $60 billion, on which the debt payments are reportedly about $3 billion. Hamdok says the country urgently needs $8 billion to turn the economy around and an additional $2 billion to halt the falling Sudanese pound.

“Public external debt is around $51 billion,” said Stuart Culverhouse, head of sovereign & fixed income research at Exotix, citing 2016 IMF data. “(This) is 88 percent of GDP. The ratio is likely to be higher now because of a weaker currency.”
The IMF stated in its December 2017 report that Sudan was eligible for debt relief under the Heavily Indebted Poor Countries (HIPC) plan – an IMF and World Bank initiative launched in 1996 to help poor countries struggling with external debt obtain debt relief.

“Economic conditions in Sudan have been challenging since the secession of South Sudan in 2011 and the loss of the bulk of oil production and exports, which have compounded the difficult external environment,” the IMF report said.
Once a country has overhauled its debt burden with bilateral and multilateral lenders, it must come to an agreement with private sector lenders before being able to access international capital markets again.

Sudan’s Plan to Come Back From Financial Ruin

Last October Sudan agreed to a roadmap to “rehabilitate” the country with the Bretton Woods institutions including with the African Development Bank, Ibrahim Elbadawi its finance said.

The plan involved structural reforms and as part of the deal Sudan would not have to pay its lenders debt arrears. There could also be non-financial support.
Sudan’s inclusion on a list of countries deemed sponsors of terrorism by the United States makes it ineligible for debt relief and financing from lenders like the International Monetary Fund and World Bank, cutting off a crucial source of finance.
According to Elbadwi negotiations with other creditors would begin in March.

“Based on that, Sudan’s debt relief program will start by the end of 2020,” he said, without giving further details.

Elbadawi says “friends of Sudan” will fund its 2020 budget, and said the ministry has submitted financing requests for 20 projects to donors, without identifying who those donors were.

A “friends of Sudan” meeting will be held in Khartoum in early December, he said. Another meeting for donors will be held in April. Saudi Arabia and the United Arab Emirates have given Sudan $3 billion in aid, agreed soon after Bashir was ousted in April, throwing a lifeline to Sudan’s new military leaders at the time.

Sudan’s new transitional government, formed as part of a three-year deal agreed by military and civilian leaders in August, has been working to remove Sudan from the U.S. sponsors of terrorism list, to potentially open the door for foreign investment and it is clear that this could make a big difference in terms of sanction relief.

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