Archive for the ‘Sudan’ Category

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Some Things Change; Some Things Don’t

Tuesday, March 9th, 2010

Twitter Keeps Iran AfloatHere’s what has changed at OFAC. Yesterday OFAC announced a general license for Iran and Sudan that would permit export of

certain services and software incident to the exchange of personal communications over the Internet, such as instant messaging, chat and email, social networking, sharing of photos and movies, web browsing, and blogging.

To be eligible the services must be offered free of charge and any software must be EAR99, not subject to the EAR, or mass market software classified under ECCN 5D992. Also, the exporter must not have any reason to believe that the services or software is destined to be used by the government of Sudan or Iran. A similar license was announced for Cuba but it only covered services since BIS controls exports of software to Cuba. Any bets on how long it will take for BIS to act to permit these software exports to Cuba? BIS action will also be necessary for similar exports to Syria.

And here is what hasn’t changed at OFAC. Today OFAC announced that it spent untold tens of thousands of taxpayer dollars to fine some poor schlub $575 for buying Cuban cigars over the Internet. I have to assume that this single cigar purchase will provide funds to the current Cuban government that will keep it in power for about five minutes longer than otherwise would have been the case thereby justifying all the government expense involved in imposing the fine.

Posted in Cuba Sanctions, Iran Sanctions, Sudan, Syria, Technology Exports | 5 Comments »

Lobbyist for Sudan Indicted

Tuesday, October 27th, 2009

Khartoum, the movieRobert J. Cabelly, a D.C.-based lobbyist, has been indicted for violations, among other things, of the International Emergency Economic Powers Act in connection with lobbying and other activities he was alleged to have engaged in on behalf of the Government of Sudan. A copy of the indictment can be read by clicking here.

Under the Sudanese Sanctions Regulations, lobbying services can only be provided to the Government of Sudan under a license granted by the Office of Foreign Assets Control. The odd thing about this case is that Cabelly had applied for and obtained a license to provide such lobbying services. The violations alleged by the indictment related to services performed before and after the period of validity of the license as well as services performed during the validity of the license that allegedly exceeded the scope of the license.

In May 2005, Cabelly applied for an OFAC license seeking permission to provide “strategic counsel, public relations and government relations” services to Sudan. The application specifically noted that Cabelly would not be providing advice on trade and investment promotion “which is not appropriate at this time.” On July 11, 2005, OFAC issued the license which specifically stated that it did not authorize activities which involve “commercial projects in Sudan or any other activities which would benefit Sudan or persons located therein.”

The indictment’s allegation of pre-license activities seems to find its sole support in an email sent by Cabelly to Sudan two days after the license was issued. That email asked Sudan for a payment of $70,000 to compensate him for the past four months of work provided to the Government It seems reasonable to assume that Cabelly may have erroneously believed that a license was necessary only to cover payment for his services. This would explain why Cabelly waited until after the license was granted to discuss the compensation issue.

The activities during the validity of the license appear to involve, among other things, Cabelly’s assistance to various investors and companies interested in investing in oil exploration and production in Sudan. One of these companies, identified in the indictment only as “French Oil Company — Soudan” is thought to be, and likely was, French oil giant Total SA.

Once Cabelly’s activities in Sudan became known, he came under pressure to stop providing services to Sudan. A 2006 Washington Post article details leaflets that were stapled to trees in Cabelly’s Capitol Hill neighborhood taking him to task for his representation. Representative Frank Wolf got out his pitchfork and torch and joined the crowd of protestors, going so far as to write Condi Rice to complain about Cabelly being given the license to represent Sudan. Wolf was apparently unaware that the license came from OFAC, which is part of the Treasury Department, and not from the State Department. (Just because someone makes laws doesn’t mean that he actually has to understand them.)

In February 2007, Cabelly informed OFAC that his contract with Sudan was over and requested that his OFAC license be terminated. Even so, the indictment alleges that Cabelly continued to provide services to the Government of Sudan and to companies doing business in Sudan, including activities to assist Sudan Airways to acquire an aircraft from a “Bahrain aircraft acquisition company.”

Posted in Sudan | 10 Comments »

U.S. Envoy to Sudan Criticizes Sanctions

Thursday, July 30th, 2009

Sudan"The day after Susan Rice, the U.S. Ambassador to the U.N., threatened new sanctions on Eritrea, Jonathan S. Gration, the U.S. Special Envoy to Sudan, in testimony given today before the Senate Foreign Relations Committee, called for the sanctions against Sudan to be lifted. According to this report in the Christian Science Monitor, Gration questioned whether genocide is ongoing in Sudan and stated that there was no evidence to support Sudan’s continued designation as a “state sponsor of terrorism.” Instead, that designation and the sanctions only hindered efforts, he claimed, to rebuild the country and to help dislocated Sudanese living in camps.

Interestingly, not one word of this was in Gration’s prepared remarks which had been submitted in advance to the Committee. The remarks about genocide in Sudan and the call for lifting the current sanctions appeared to have been delivered off-the-cuff. This probably reflects the internal debate at the White House about the Sudan Sanctions. Ambassador Rice was said, according to the same story in the Monitor, to have become furious over Gration’s remarks earlier this month about the “remnants of genocide” in Sudan.

Posted in Sudan | 1 Comment »

OFAC Action Keeps Sudan’s Embassy From Having Its Lights Shut Off

Wednesday, June 10th, 2009
Sudanese Embassy in DC
ABOVE: Google Street View of
Protesters at Sudanese Embassy

The Department of Treasury’s Office of Foreign Assets Control (“OFAC”) published today in the Federal Register a Final Rule amending the Sudanese Sanctions Regulations. The amendment permits U.S. persons to provide services in the United States to Sudanese embassies and diplomatic missions.

Today, OFAC is amending section 538.515 of the SSR. Before its amendment, section 538.515 authorized all transactions ordinarily incident to the importation of any goods or services into the United States destined for official or personal use by the diplomatic missions of the Government of Sudan to the United States and to international organizations located in the United States, subject to certain conditions. OFAC is amending this section to expand the scope of the authorization to include the provision of goods or services in the United States to the diplomatic missions of the Government of Sudan to the United States and the United Nations, and to the employees of the diplomatic missions of the Government of Sudan to the United States and the United Nations, subject to certain conditions.

To fully understand the impact of this amendment, you need to read section 538.406 of the Sudanese Sanctions Regulations which states that the prohibition on providing services to the Government of Sudan under section 538.206 applies when “such services are performed … [i]n the United States.” As a result, before today’s amendment, the provision of electricity, water, trash removal, Internet service to, or even selling office supplies to, the Sudanese Embassy in the United States would have required a license. How many people want to bet that these services were being provided without any licenses?

The lesson here is that although companies engaged in exports from the United States may have in place OFAC compliance procedures, those engaged in basically domestic businesses — like power companies and trash haulers — are often blissfully unaware that OFAC’s regulations may affect their domestic activities. In this instance, some vendor must have called the OFAC hotline and asked about selling things to the Sudanese Embassy, which led to an “oops” moment and a hasty amendment given that OFAC probably never intended to prevent the operation of the Sudanese Embassy on U.S. soil.

Posted in Sudan | 3 Comments »

Microsoft Shuts Off IM Service in Sudan and Other Sanctioned Countries

Tuesday, May 26th, 2009

Live Messenger in SudanEconomic sanctions continue to spread into cyberspace as Microsoft announced last Friday that customers in sanctioned countries would receive an error message if they tried to log into their Windows Live Messenger accounts and would no longer be able to use the service.

When you try to sign in to Windows Live Messenger, you receive the following error message:

810003c1: We were unable to sign you in to the .NET Messenger Service.

Microsoft has discontinued providing Instant Messenger services in certain countries subject to United States sanctions. Details of these sanctions are available from the United States Office of Foreign Assets Control ["OFAC"].

Why it took Windows so long to get with the program when arch-rival Google had disabled downloads to Sudan and other sanctioned countries ages ago is not clear.

Although the shutoff applies to Cuba, North Korea, Iran, Sudan and Syria, Sudan seems to have taken it most to heart, judging from this report on the shutoff in the Sudan Tribune, a Paris-based on-line newspaper covering Sudan:

The software, Microsoft’s Windows Live Messenger, allows users to chat directly with one another, send photos, play games or send messages to mobile phones. The Messenger is widely used by the Sudanese diaspora to contact their families and until last week had been available for free downloading in the countries targeted by US sanctions.

Of course, Microsoft’s action is incredibly easy for users to circumvent. First, users can log back into their accounts and change their country to a non-sanctioned country. (Oddly, Microsoft’s drop-down list for countries on its Live Messenger sign up page- still includes Sudan — not to mention Cuba, North Korea, Iran and Syria!) Second, if Microsoft is also using geolocation filters on the IP addresses, the user can always connect through a proxy server located in a non-sanctioned country. Et voilà, the Sudanese (or Syrian, Cuban, Iranian or North Korean) resident can IM to his or her hearts content, Microsoft is in full compliance with the law, and OFAC is none the wiser and can still believe that it has hastened the downfall of these governments by keeping their citizens from communicating with their family and friends.

Posted in Sanctions, Sudan | 1 Comment »

How Often Do You Get To Root For The Pirates?

Tuesday, September 30th, 2008

Ukrainian MV FainaNo, not the Pittsburgh Pirates. Real pirates, as in the Somali pirates that seized the Ukrainian merchant vessel Faina off the coast of Somalia. But before you get all excited, don pirate gear, break out a bottle of rum and start talking like a pirate, you only get to root for the pirates here because it appears that — accidentally, of course — the seizure of the Ukrainian ship might have been in the best interests of the United States, not that the pirates knew that or cared when they seized the arms-laden vessel.

According to Lt. Nathan Christensen, a deputy spokesman for the U.S. Navy’s Bahrain-based 5th Fleet, the ship’s cargo, consisting of tanks, grenade launchers, and ammunition, was ultimately destined for Sudan not for Kenya. For what it’s worth, the pirates also say the arms are headed for Sudan. Of course, they also say that the $20 million that they are demanding is not a ransom, but a “fine for unlawfully transporting weapons on Somali waters.”

Sudan is subject to both U.S. and U.N. arms embargoes. Some sources have suggested that the arms are more specifically destined to Southern Sudan. The U.S. arms embargo, which doesn’t strictly apply to this shipment, has been lifted for non-lethal military assistance and equipment for Southern Sudan, although the Ukrainian cargo can hardly be described as non-lethal. The semi-autonomous region of Southern Sudan is not subject to the U.N.arms embargo which covers only Darfur.

Even so, Kenya is still claiming that the arms are not destined for Sudan, north, south, east or west.

On Monday, a government spokesman, Alfred Mutua, said: “We buy weapons all the time. I don’t see what the big deal is.” …

Ukrainian tanks, though, are a relative anomaly in Kenya, which has been a close ally of the United States and Britain for decades and has been equipped with Western-made weapons. Mr. Mutua acknowledged this, saying most of Kenya’s tanks were “old British tanks.”

But, he added, the Ukrainian tanks were cheaper.

Cheaper, of course, if you don’t include the cost of retraining Kenyan troops to use the new tanks. Or cheaper if they were headed to Sudan, including Darfur

Posted in Sudan, U.N. Sanctions | 1 Comment »

I’d Like to Teach Iran to Sing

Friday, May 30th, 2008

Iranian Coca-ColaThis article in the International Herald Tribune explores the prevalence of American brand name products in Iran and Sudan notwithstanding sanctions that prohibit most exports to the two countries. As we’ve noted before, much of these products are re-exported from other countries, with large quantities of American products being exported from Dubai to Iran.

Two products that are ubiquitous in both countries make it through another route:

Leaving the airport at Khartoum, one of the first things you see is the ultimate symbol of American capitalism: the classic form of a Coca-Cola bottle printed on multicolored banners, next to a huge billboard for its rival, Pepsi.

…

Coca-Cola and PepsiCo have both secured export licenses from the Office of Foreign Assets Control of the U.S. Treasury, using legislation that allows blacklisted states to buy U.S agricultural commodities, medicines and medical equipment.

Coca-Cola said the syrup on which the company’s beverages are based qualified as an agricultural product. Pepsi said that its brands were produced in Sudan under “an OFAC license,” but declined to comment on the Iranian arrangement.

Although Coke syrup doesn’t immediately seem to be an “agricultural product,” the list of eligible products is quite broad and includes a broad number of prepared food products, including coffee and tea extracts. Although soft-drink extracts aren’t explicitly mentioned, they probably fall under USHTS classification 2106.90 — “food preparations not elsewhere specified” — which is included on the list of agricultural products covered under the Trade Sanctions Reform Act which permits agricultural exports to sanctioned countries.

Interestingly Coca-Cola relies on an OFAC license for agricultural products rather than the exemption under OFAC regulations for Iran and Sudan which would permit activities in Iran and Sudan by foreign subsidiaries of Coca-Cola as long as no U.S. persons aren’t involved in the foreign subsidiaries activities in the sanctioned country. That is, I think, a smart move given the difficulty of proving that foreign subsidiaries of U.S. companies act without any involvement by U.S. persons.

Pepsi’s refusal to comment on how it dispenses Coke its soft drinks in Iran, suggests that it may be relying on the foreign subsidiary exception. As long as cola syrup is seen by OFAC as an agricultural product, it’s hard to see why Pepsi relies on the foreign subsidiary exception rather than simply getting an OFAC license to export the syrup to Iran for bottling.

Even if activities in Sudan and Iran might be legal under OFAC licenses, these activities might be magnets for public criticism, particularly in Sudan. Coke seems to have cleverly sidestepped even this issue:

A Coca-Cola spokesman, Dana Bolden, said the primary motive for operating in Sudan and Iran was “to ensure quality control and protect our trademarks with the independent bottler.”
… Bolden also said the company was reinvesting all the proceeds from its sales in Sudan into programs that benefit the country. “We have committed more than $5 million over the next three years for programs aimed at building communities in Sudan.”

This, of course, doesn’t respond to the issue that Coke products in Iran might provide just the caffeine boost that its nuclear scientists need to build the bomb. Word is, however, that the average Iranian nuclear scientist prefers Austria’s Red Bull energy drink to Coca-Cola.

Posted in Iran Sanctions, Sudan | 3 Comments »

Weatherford in Cuba

Wednesday, May 14th, 2008

Weatherford SignAn article in today’s CNN Money contains some interesting tidbits about Weatherford’s operations in sanctioned countries, which we first reported here, and which have been the subject of a governmental investigation.

First, the article notes that Weatherford’s divestment of its operations in Sudan allowed it to donate its many assets in Sudan to Thirst No More, an organization seeking to drill water wells in Sudan.

Among the most valuable items it received was Weatherford’s Nissan truck, which hauled oil-drilling equipment in Sudan, and which will now pull water rigs and pipes in parched Darfur. And most of the furniture and office equipment from Weatherford’s Khartoum villa will be shipped to the Thirst No More base in North Darfur’s capital El Fasher.

All though such a donation is not a traditional basis for mitigation of penalties owing as a result of doing business in sanctioned countries, I certainly hope that it might be so considered here, assuming that there is any basis for penalizing Weatherford’s operations in Sudan through a foreign subsidiary.

Second, the article points to a SEC Form 8-K, filed last September, where Weatherford said it was discontinuing its business through its foreign subsidiaries in “Cuba, Iran, Sudan and Syria.” The reference to Cuba more or less jumps off the page of Weatherford’s 8-K and certainly explains the most serious problem Weatherford may have with respect to the governmental investigation of its operations in sanctioned countries.

The reporter who wrote the CNN article missed the significance of this revelation, apparently under the mistaken impression that there’s a loophole that permits U.S. companies to operate in embargoed countries through their foreign subsidiaries:

The company used a loophole in U.S. sanctions laws – used also until recently by Halliburton … in Iran – which allows U.S. companies to operate in embargoed countries, so long as no U.S. citizens are involved, and it operates under a foreign subsidiary.

This exception applies only to operations in countries sanctioned under the International Economic Emergency Powers Act, like Iran and Sudan, for example, but not to operations in countries sanctioned under the Trading With The Enemy Act, like Cuba and North Korea. Operations by foreign subsidiaries of U.S. companies in those two countries is a violation of the Trading with the Enemy Act and can give rise to civil and criminal penalties. Once Weatherford admitted it was doing business in Cuba, it had, as they say, a situation on its hands.

Posted in Cuba Sanctions, Sudan | No Comments »

Szubin Says Sudanese Sanctions Suits Starting Soon

Monday, February 11th, 2008
U.S. Embassy in Khartoum
US Embassy in Khartoum

Late last week Reuters reported that Adam Szubin, head of the Office of Foreign Assets Control (“OFAC”), announced that OFAC was stepping up its enforcement actions for violations of the U.S. sanctions on Sudan. According to Szubin, agents have built up a “queue” of enforcement actions against violators that will be rolled out in as early as a month’s time.

And Szubin is hoping to go for the big bucks:

Violating companies now face fines of up to $250,000 a breach or a charge of twice the offending transaction — a penalty that in some cases could run into millions, said Szubin. …

The recent increase in penalties for sanctions violators had strengthened OFAC’s hand, he added. …

Before the penalty increase, the company would have only had to pay up to $50,000 for each illegal sale — a charge that many organisations could write off.

“We’re now able to say, if your transactions totalled $40 million, and those were violative transactions, you could be facing a maximum penalty of $80 million. And that is no longer something that people will shrug off.”

This prospective uptick in enforcement actions, corresponds with increasing diplomatic parries between the U.S. and Sudan over the sanctions. According to a story in the Sudan Tribune, last year the government of Sudan had blocked 400 containers bound for the U.S. Embassy in Khartoum for failure to pay customs fees. The U.S. premised this non-payment on the Sudan sanctions and it was not until Sudanese president Omar Hassan Al-Bashir issued a decree granting an exception to the containers from custom fees that the containers were released. The Sudanese government later reversed its position and recently blocked entry of containers bound for the U.S. Embassy for non-payment of customs fees. In response, the U.S. has threatened to halt construction of a new U.S. Embassy in Khartoum. That construction has been underway for the past two years.

Posted in OFAC, Sudan | 1 Comment »

A Cotton-Pickin’ Shame

Tuesday, September 11th, 2007

CottonThe Office of Foreign Assets Control (“OFAC”) released today its monthly report of penalties imposed by the agency. Of course, that report reveals that OFAC continues to protect our national security by chasing hapless cigarficianados who buy their Cuban Cohibas over the Internet. More interesting, however, was a Penalty Notice posted by OFAC in conjunction with the report and which imposed a penalty of $8,250 on Parkdale Mills, the largest independent yarn spinner in the United States.

According to the Penalty Notice, Parkdale attempted to import, in October 2003, 1.65 million pounds of cotton from Sudan. Upon learning that such a transaction would violate the Sudanese Sanctions Regulations, Parkdale cancelled the transaction and the cotton was never imported from Sudan to the United States. In April 2007, OFAC sent a Prepenalty Notice to Parkdale alleging that the attempted import of cotton from Sudan violated section 538.204 and section 538.210 of the Sudanese Sanctions Regulations.

In a written submission to OFAC, Parkdale raised a number of arguments in its defense. The first argument was the Parkdale was unaware of the embargo of Sudan. I suspect that had Parkdale made that argument to Judge Judy, it would have elicited her trademark riposte: “Don’t pee on my leg and tell me it’s raining.” Cotton is the main cash crop of Sudan and constitutes 45 percent of its exports. There is no way on earth that Parkdale didn’t know that Sudanese cotton was embargoed.

Second, Parkdale claimed that First Atlantic Commodities told it that there were no licensing requirements. This argument is pretty much the equivalent of saying that your Uncle George thought the transaction was okay, given that First Atlantic Commodities is a small North Carolina company that appears to be principally involved in the real estate business and not international trade.

Saving its best argument for last, Parkdale also noted that it had in fact cancelled the order when it discovered that it violated the embargo. More likely, it cancelled the order when a freight forwarder or shipper said it wouldn’t handle the transaction because it seems inconceivable that Parkdale “discovered’ the prohibition only after it ordered the cotton.

OFAC, not surprisingly, wasn’t impressed by the first two arguments made by Parkdale. It provided a 25% mitigation of the originally proposed $11,000 penalty and based that mitigation on Parkdale’s previously clean record, its cancellation of the order and its timely provision of a response to the Prepenalty Notice.

Parkdale should really consider itself lucky here. For the life of me, I don’t understand why it would try to mitigate an $11,000 fine from OFAC by telling a story which, even on the off chance that it were true, sounds like a whopper. A company like Parkdale is going to be assumed to be a sophisticated company that buys large amounts of cotton on the world market and would therefore be quite aware of the embargo on Sudanese cotton — unless the entire purchasing staff of the company had been conducting their trading operations from space ships in some distant galaxy. Moreover, no agency likes to hear companies assert that the agency’s regulatory activities were so unimportant that the company just couldn’t bother to keep abreast of agency regulations. If OFAC had been more aggressive, it might well have launched an investigation into whether the response to the Prepenalty Notice was a misrepresentation that warranted further civil and/or criminal penalties.

Posted in OFAC, Sudan | 3 Comments »

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