Getting Around Economic Sanctions in Sudan, by David Henderson

July 20, 2017
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Getting Around Economic Sanctions in Sudan, by David Henderson

When I started the Ph.D. economics program at UCLA in September 1972, one of the first things we graduate students heard that we should be doing different in our daily lives was to subscribe to the Wall Street Journal. If I recall correctly, Ben Klein recommended it in a class he taught (that I wasn’t taking at the time) and the recommendation filtered back to me.

Gulp. I was from a small town, population under 2,000, in rural Manitoba, and the largest city I had lived in was Winnipeg. The term “Wall Street” was intimidating. Would I be able to understand it? Harry Watson, my roommate who had come down from Canada with me to go to graduate school, and I split the cost of the subscription and found ourselves reading and enjoying it daily. I laughed at my earlier fear that I wouldn’t understand it.

My favorite kind of Wall Street Journal article was not on the op/ed page but in the economic news section. It was typically a well-researched story by a careful journalist who managed, without hitting you over the head, to lay out the economics–the incentives, the unintended consequences, the ways of adjusting to various laws and regulations, etc.

I don’t see many of those kinds of articles in the news section of the Journal any more. But today I saw one. It’s by Matina Stevis and it’s titled “Sudan Gets Down to Business in the Face of Sanctions and Strife.” Stevis does a great job of laying out how people get around various restrictions on trade that the U.S. government has been instrumental in imposing.

One of the opening paragraphs:

The financial isolation–along with the strategically important country’s designation as a terror sponsor and the International Criminal Court’s pursuit of longtime President Omar al-Bashir for war crimes–has fostered a special kind of business acumen in executive suites and sand-caked streets: forcing businesses in this former colonial outpost to snare alternative sources of finance, sidestep trade barriers and find creative ways to import consumer goods.

Here’s why it’s hard to finance trade:

A $8.9 billion fine against French lender BNP Paribas in 2015 after it admitted violating sanctions, sent a chilling message to major financial institutions. Correspondent banks, financial institutions that were intermediaries between Sudan and the rest of the world, pulled out soon after, rendering trade finance virtually impossible, according to the IMF.

This leads to the problem and the incentive to find a way around:

There are no international automated-teller machines and debit-card payments are impossible, but that hasn’t deterred would-be entrepreneurs.

What’s one workaround?

Ahmed Abdalla, a cybersecurity expert by day at African mobile giant MTN, is working on a mobile-payments platform, SIM Pay, which uses prepaid mobile-phone airtime to allow people to transact across the country.

(Why?)

Category: International Trade

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