Sudan Sanctions Enriched the Powerful

When Awad Alsid was first diagnosed with a cancerous tumor in his throat in 2015, he refused to set foot inside the Radiation and Isotope Center Khartoum (RICK), Sudan’s main cancer hospital. The dilapidated public health care facility had a reputation of killing rather than curing its patients.

A year later, when his pain finally forced him to go, doctors told him they could only alleviate his symptoms. The equipment that could have administered radiation treatment to eradicate the tumor had broken down years ago.

“The treatment here isn’t good, but I have no other choice,” Alsid, a rickshaw driver, told me when I met him at the facility in December 2016. “I don’t have money to travel outside Sudan.”

Alsid’s doctors unequivocally blamed US sanctions for their inability to provide life-saving medical care. Because of the trade embargo, they said, the hospital had been unable to procure spare parts to repair radiation equipment, most of which was made in the US or Europe.

The inability of institutions like RICK to import life-saving medical equipment is just one example of the sanctions’ unintended consequences. But reporting over several weeks in the country has shown how Sudan’s elites managed to evade the embargo, widening inequalities and asserting greater dominance over many sectors of the economy, including health care. Private hospitals owned by members of Sudan’s government flourished and were able to procure Western equipment with the blessing of the US government.

The US first sanctioned Sudan in 1993, designating it a state sponsor of terrorism, followed by a strict trade embargo in 1997. At that time, the East African country served as a safe haven for Osama bin Laden, who lived there for five years before being expelled in 1996. But even long after the country turned its back on extremists, President Omar Al Bashir made sure sanctions remained in place. In 2009, he became the first sitting head of state to be indicted by the International Criminal Court for atrocities committed in Darfur.

Now, after two decades of economic isolation, Sudan is being allowed to rejoin the world economy. On Oct. 6, the Trump administration announced it was ending U.S. sanctions against Sudan, a policy change that the Obama administration recommended in its last days in office. Citing Sudan’s cooperation in combating terrorism and ending internal conflicts, the current administration hopes that a normalization of ties will encourage further reforms. Since then, the State Department has raised the possibility of removing the country from its list of state sponsors of terrorism, although to do so it would have to get past a long-standing, bipartisan caucus in Congress that has advocated a hardline stance toward Khartoum.

The sanctions had mixed results. While they curtailed the regime’s support for terrorism, they largely failed in their other objective: to punish and isolate the country’s elites, who were responsible for human rights abuses, especially in Darfur, where the United Nations says up to 300,000 people may have died and millions been displaced since 2003.

Blanket trade embargoes are often criticized as a crude policy tool that fails to hurt those in power while inflicting hardship on ordinary citizens. That’s certainly what happened in Sudan. Even though the embargo only forbad transactions that involved US currency and products, global banks and companies completely shunned Sudan to protect their US business interests. This over compliance had a sweeping impact on every day life: University students were unable to access fellowships opportunities abroad. A water-treatment plant serving 1.5 million people in Omdurman was at risk of shutdown because the operating company couldn’t transfer funds abroad or procure spare parts. Average Sudanese were excluded from the global banking system and struggled to get basic access to web sites and phone apps.

The sanctions particularly targeted many government-funded agencies that provided essential public services such as Sudan’s Railway Corporation, the National Electricity Corporation, the Posts and Telegraphs Public Corporation, and the Sudan Cotton Company by placing them on the US Treasury’s Specially Designated Nationals and Blocked Persons list (SDN).

But at the same time, members of the ruling party or security apparatus created private companies that found ways to skirt the sanctions. With preferential access to hard currency, tax breaks, and contracts, these companies elbowed small and medium-sized companies to the fringes of the economy, widening income disparities and pushing more Sudanese into poverty.

“The government and the targeted entities were able to maneuver and to go around” the sanctions, says Dr. Sabir Hassan, a Sudanese economist who has served as the governor of Sudan’s central bank. “But the small guys and businesses, they don’t know how to maneuver.”

The health sector, where sanctions perpetuated inherent inequalities between private and public institutions, offers a stark example. Khartoum’s main cancer hospital RICK has crumbled over the past couple of decades amid sanctions, mismanagement and lack of funds. Today, the grey, run-down facility resembles a graveyard for broken-down medical equipment rather than a hospital. In December 2016, the state of the facility was so dire that doctors were only able to administer palliative treatment for patients with advanced stages of cancer, but had no means to offer radical therapy to actually save lives. Machines supplied by American company Huestis Medical and Swedish company Elekta were out of order and in dire need of spare parts.

In an effort to alleviate adverse consequences of sanctions on ordinary citizens, the US government in 2000 began issuing one-year licenses allowing Western companies to export agricultural products and medical devices to countries like Sudan. But managers of public hospitals such as RICK say they’ve struggled to obtain such licenses from the Office of Foreign Assets Control (OFAC) at the U.S. Treasury. This forced them to turn to unofficial agents, who charged hefty fees. “We have to go through a lot of intermediaries,” says El Tayeb Wagiallah, RICK’s deputy director general. “This will cost us not just money but also time. It takes months to bring the spare parts, and in the meantime people are dying.”

Private health care institutions, however, didn’t seem to face the same obstacles. Since the sanctions were imposed, private hospitals, many owned by members of the military, police, the National Intelligence and Security Services (NISS), and the ruling National Congress party, have sprung up across the capital city of Khartoum. According to interviews with dozens of doctors, hospital managers, patients, and suppliers, these institutions provide not only privileged access to health care for Sudan’s elites but also a source of revenue to its owners. As private actors, and thus away from the scrutiny imposed on state-owned enterprises, regime loyalists have been able to import medical equipment from Western companies such as General Electric, Elekta, and Philips.

The deals were approved through licenses granted by OFAC, the entity charged with enforcing sanctions aimed at punishing institutions like NISS, accused of arresting and torturing dissidents and of committing human rights abuses in Darfur.

Brian O’Toole, who until recently worked as an adviser at OFAC, says the office lacks the resources to prevent licenses from benefiting the wrong people. “It’s hard for OFAC to keep up because it’s easy to form these companies,” he says. In 2016, OFAC received 10,000 license applications, but it had only about 30 people available to process them. “There just aren’t enough people there to do this,” says O’Toole, now a senior nonresident fellow at the Atlantic Council.

When considering a license, O’Toole says, OFAC seeks to make sure the license beneficiaries have no links to the Specially Designated Nationals and Blocked Persons list (SDN), a ledger of thousands of individuals and companies owned or controlled by targeted countries. Until sanctions were lifted in October, the list included more than 200 Sudanese entities. But sources familiar with business in Sudan say that many of the companies on the list were no longer active, a sign that OFAC struggled to keep the SDN up to date. Making sure the sanctions are being enforced properly “is a bit of a Whac-a-Mole game,” O’Toole says.

Moreover, Sudan was not a high priority for the U.S. when it came to enforcing sanctions, says Richard Nephew, a senior research scholar at Columbia University. “North Korea and Iran tend to get a bit more attention because they are bigger issues,” he says. “That also directly relates to how many SDN updates you are going to get.”

A spokesperson said the Treasury Dept. has “procedures in place to review and consider license requests before making a determination to authorize otherwise prohibited transactions” but refused to comment on specific licenses.

Publicly available data show that between 2000 and 2011, the U.S. Treasury granted at least 81 OFAC licenses to 14 American and European health-care companies to deliver medical appliances to Sudan. GE Healthcare secured 38 of these licenses, followed by American companies Baxter International and Abbott Laboratories. In response to a January 2017 Freedom of Information Act request for the names of the hospitals that were party to these transactions, the Treasury said such details couldn’t be released without the licensee’s permission because they could cause competitive harm.

Without this data, it’s difficult to determine how many of these licenses benefited institutions linked to Sudan’s ruling elites, but on-the-ground research and documents obtained by Bloomberg indicate it was not uncommon. In 2008, according to one document, GE Healthcare was granted a license to supply Al Amal Hospital, which is owned by Sudan’s spy agency, the National Intelligence and Security Services (NISS), according to media reports and confirmed by two distributors who supply the hospital. The same year, GE Healthcare obtained a license to supply the National Fund for the Promotion of Medical Services, an entity run by the Ministry of Defense. Dutch company Philips provided Al Amal Hospital with radiology equipment. A spokesperson for Philips confirmed the transaction, adding that the deal was executed “under the appropriate license and due diligence process” and that Philips wasn’t “aware of an alleged association of this hospital with Sudan’s National Intelligence and Security Services at the time.”

A striking example of OFAC’s lapses in Sudan is the brand-new Universal Hospital, a gleaming, six-story facility recently completed on the banks of the Nile River in the Khartoum-north neighborhood. Complete with marble floors and private luxury rooms, the hospital is owned by a joint Turkish and Sudanese venture managed by retired members of NISS, according to suppliers and a Khartoum state ministry of health official. A technical review of the bid to supply oncology equipment to the new hospital lists El Rasheed Osman and Abdelgadir Yousuf, both retired NISS officers, as members of the board of directors.

Another document obtained by Bloomberg shows that GE Healthcare made an offer in March 2016 to supply $25 million worth of MRIs, CTs, and other equipment to Universal Hospital. GE didn’t respond when asked whether it was aware of the hospital’s links to Sudan’s ruling elites. A GE spokesperson says the transactions were approved by the U.S. government and reflect “long-standing U.S. policy to support humanitarian exports consistent with the fundamental international principle that all people—including those in countries subject to U.S. sanctions—should have access to health care.”

Elekta, a Swedish manufacturer of medical equipment, also signed a contract to supply radiotherapy equipment for Universal Hospital’s oncology department. In an email, an Elekta spokesperson confirmed that the company had received two OFAC licenses to supply Universal Hospital and said it was unaware of the hospital’s association with NISS.

As private hospitals thrived with help of equipment procured from Western companies, they steadily ate into market share of crumbling public institutions that were no longer able to provide basic medical services.

“The gap between public and private hospitals is getting bigger,” says Dr. Ali Arabi, who runs Jafaar Ibn Ouf, a public children’s hospital in the center of Khartoum. The hospital, which catered to patients who couldn’t afford private health care, was littered with broken down equipment, including blood pressure monitors from General Electric and infant ventilators from German company Stephan.

Unable to repair broken Western equipment and frustrated with cheap and malfunction-prone Chinese alternatives, the hospital subcontracted its diagnostic services to better equipped and more expensive private hospitals, channeling funds into the pockets of owners of these institutions.

One such institution, Al Zeytuna Specialist Hospital, was just a short walk away. Owned by Mamoun Homeida, the state minister of health and a senior member of the ruling National Congress Party, the multistory facility featured modern European and Japanese equipment that stood in stark contrast to the derelict state of public hospitals like Jafaar Ibn Ouf or RICK.

During a visit in December 2016, white-clothed lab technicians scurried around machines bearing logos of Swiss healthcare giant Roche and Stago, a French company specialized in diagnostic equipment. Many of their lab tests, a technician confirmed, came from public hospitals that lacked adequate equipment. Thus, the Minister of Health is effectively benefiting from the decline of public health care. Homeida didn’t reply to requests for comment.

The lack of government funding for public healthcare further deepened the adverse impact of sanctions. Doctors at several public hospitals say they have insufficient funds to pay operating costs and competitive doctor salaries, a common complaint in a country where an estimated 70 percent of the state budget is spent on security. Although their budgets had grown nominally over the years, the increase wasn’t enough to compensate for with skyrocketing inflation and plummeting exchange rates.

Some experts argue that underfunding is the real culprit for the poor state of Sudan’s public hospitals. “Absent sanctions, those hospitals would have been screwed,” said O’Toole. “You’ve got the elites in these countries who are helping themselves out at the expense of the poor.” This would suggest that inequalities are likely to persist well beyond sanctions relief unless the government initiates genuine reforms.

In recognition of their unintended consequences, the U.S. has moved away from blanket trade embargoes in favor of more narrowly targeted sanctions, such as the ones it used in South Sudan, where the U.S. sanctioned three current and former government officials accused of atrocities and corruption. The State department has threatened to deploy such measures against Sudanese entities if the country backtracks on the progress it has made.

Analysts such as O’Toole and Nephew say this would require more effort to monitor targets’ business activities, which is something OFAC can’t do with its current level of resources. “Sanctions are seen as something you can do on the cheap and they require no effort,” said Nephew. “I don’t think there is a sense of the resources need to be right-sized for the actions being undertaken.”

This article was reported in partnership with The Investigative Fund at The Nation Institute, with support from the H.D. Lloyd Fund for Investigative Journalism. A shorter version of this piece appeared at Bloomberg.com.