Time to Take Away Sudan’s Credit Card

Omar al-Bashir’s brutal Sudanese regime certainly has nerve. On Dec. 14, as Bashir’s National Congress Party (NCP) thugs violently suppressed the second peaceful demonstration by opposition groups in seven days, the Sudanese minister of finance met with the U.S. Special Envoy to Sudan Scott Gration and urged the United States to lift sanctions on Khartoum and cancel Sudan’s foreign debt — in other words, bailing out the government that brought you such atrocities as Darfur and the decades-long civil war with South Sudan that now ominously threatens to reignite.

While no Western country is rushing to hand out money to Bashir, the international community has disagreed over how to persuade Sudan to end its genocidal ways, and the United States is still the only country to impose sanctions. One unlooked-for upside of the global financial crisis may be that it offers new economic leverage with Khartoum. Following the crash, Sudan now holds roughly $36 billion in external sovereign debt that it is struggling to repay. This debt gives the rest of the world a new opportunity to finally affect the course of Sudanese political reform and even end the conflicts in Darfur and South Sudan, if Western countries are willing to act boldly.

For much of the last decade, Bashir and the NCP, who were sitting on Sudan’s rich oil reserves, could afford to ignore their mounting debt. A flood of foreign direct investment and new loans contracted with China, the Gulf Arab states, and India financed a booming resource economy and made Sudan careless about payments to the International Monetary Fund (IMF), Paris Club members, and other debtors. The existence of such a steady stream of income has also enabled Sudan’s hubris toward the international community on issues like Darfur.

But the global recession has rocked Sudan’s fragile economy, and the good times are over. The large drop in oil prices over the last year has sharply lowered government revenues. The Sudanese government compounded the problem by defending the exchange rate of the Sudanese pound in order to prevent a rise in domestic food and import prices. This unsound policy quickly became unsustainable as the Sudanese government began to run out of foreign reserves and found foreign capital more difficult to acquire, because all of its creditors were also affected by the crisis.

The crash subsequently led the Sudanese government to return to the international community with an urgent appeal for debt relief. This summer, it asked the IMF to push forward a debt-relief package provided to other countries in similar financial circumstances and even convinced Japan to write off a small portion of its debt. Securing a debt relief package was at the top of the Sudanese delegation’s agenda at the recent IMF/World Bank annual meetings in Turkey, and now — for the first time publicly — it has raised the issue with Obama’s envoy to Sudan. The Sudanese newspaper Al-Sahafa reported last Tuesday that Sudanese Finance Minister Awad al-Jaz will travel to Washington in January to speak again with Gration.

Sudan’s aggressive international lobbying must be put in its appropriate context. Its debt — the second most in Africa — has subsidized the government’s war and genocide against its own people. Between 2001 and 2008, some of the bloodiest years in Sudan, the regime contracted more than $3.4 billion in new loans from international lenders. Although Khartoum claimed to use these loans to build up the oil sector and public infrastructure, it is impossible — given the scant public information on the government’s budget — to disconnect this financing with the revenues available for war-making. Even from the government’s limited reporting, we know that Sudan imported weapons worth $76.3 million between 2004 and 2006. In addition, it has purchased in the last five years 20 advanced fighter aircraft and 26 attack helicopters, which most experts conservatively estimate carry a price tag of hundreds of millions of dollars. 

Because of these violent campaigns and the general repression since the regime took power in 1989, the estimated $23 billion accumulated by Bashir and the NCP should be classified as "odious debt." This term, advanced by debt-relief advocates and recognized as an international legal principle, submits that the people of a country cannot be expected to repay debts contracted without their consent and spent against their own best interests by repressive regimes. This legal argument, however, is usually made to defend new governments facing unmanageable debt conditions created by the malfeasance of past dictatorial regimes. But what — other than attempting to block additional financing — should the international community do with the burgeoning debt load of an odious regime that continues to terrorize its people?

In the case of Sudan, the United States and other countries should seize Khartoum’s request as a potentially effective and multilateral tool, at a time when few other options present themselves. Given Sudan’s earnest desire for debt relief, U.S. insistence on regular debt payments should be regarded as a stick that — with changed behavior from the Sudanese government — could become a carrot.

With Sudan at a dangerous crossroads in 2010, the Obama administration and the global community should not stop there. As the Save Darfur Coalition, an NGO that aims to raise public awareness about human rights abuses throughout Sudan and mobilize a unified international response, has argued, Obama should present Khartoum with a choice between earned incentives or serious consequences, making debt relief a key part of the equation. The Obama administration should lead an international coalition of Sudan’s creditors to condition any consideration of debt relief on concrete and lasting progress toward peace in Darfur; the full implementation of the 2005 Comprehensive Peace Agreement, which brought an end to the 22-year-long civil war between North and South Sudan; credible elections in April 2010; and significant political and judicial reforms that fundamentally change the repressive systems in Sudan.

Gration should start by making it clear to NCP officials that free and fair elections next April are one important benchmark to gain U.S. backing of a debt-relief package. That means Finance Minister al-Jaz should cancel his scheduled trip to Washington in January to further discuss debt relief unless his regime immediately begins opening the political space necessary for a credible election process. For a more prosperous future in Sudan, the international community must rid the Sudanese people of this burdensome and "odious" debt created by the regime in Khartoum. However, Sudan’s leaders should know that the first step must finally be to commit themselves to extinguishing the smoldering embers of decades of war.