CHARGE'S MEETING WITH SUDANESE BUSINESSMAN OSAMA

UNCLAS KHARTOUM 001402 SIPDIS SENSITIVE SIPDIS DEPARTMENT FOR AF/SPG AND EEB/ESC/ESP (KLEIN) DEPARTMENT PLEASE PASS TREASURY FOR OFAC E.O. 12958: N/A TAGS: ECON ETRD PGOV PREL SU SUBJECT: CHARGE'S MEETING WITH SUDANESE BUSINESSMAN OSAMA DAOUD REF: A. KHARTOUM 1288 ¶B. KHARTOUM 1333 ¶1. (SBU) Summary: Sudanese entrepreneur Osama Daoud asserted to the Charge that U.S. economic sanctions are having an effect on Sudan,s economy, but contended that the burden is being borne by private sector and its employees, rather than by the regime. He contended that his sanctioned company, Al-Sunut Development, has no ties to the regime and should never have been listed. End summary. ¶2. (U) CDA Fernandez paid an introductory call on leading Sudanese businessman Osama Daoud Abdel Latif, at Daoud,s lavish corporate headquarters in Khartoum North on September ¶3. Daoud heads a commercial conglomerate that includes food processing (DAL Foods Industries),construction (DAL Engineering),real estate (AL-Sunut Development Corp.),and the Sudanese Tractor Company (SUTRAC). He also holds the Sudan franchise for Coca-Cola distribution in Sudan, while SUTRAC is sole agent for the Caterpillar Co. in Sudan. Al-Sunut Development was among the 30 Sudanese entities targeted for sanctions as Specially Designated Nationals (SDNs) on May 29, 2007. ¶3. (SBU) Asked about business conditions, Daoud immediately cited U.S. sanctions as a serious impediment to his commercial activities. For example, although Coca-Cola is able to operate in Sudan under an OFAC license, its activities are extremely circumscribed. While it is able to supply cola concentrate for bottling, it is unable to carryout any marketing activities. ¶4. (SBU) Daoud added that under public pressure stemming from the Darfur conflict, Coke has decided to donate all of its Sudan profits to NGOs carrying out humanitarian activities in Sudan. Daoud expressed a degree of cynicism about foreign humanitarian operations in Sudan. For example, he remarked that the World Food Program goes to great effort to import wheat into Sudan in bulk, bag it, then ships it for consumption to Darfur, where the traditional diet consists of sorghum, rather than wheat. WFP wheat ends up for sale in the markets of Khartoum. ¶5. (SBU) In passing, Daoud commented on difficulties in shipping goods, including humanitarian supplies, to Darfur, saying that shipments are seriously impeded by the SAF's monopolization of the railroads for its use. Daoud contended that the SAF uses the railroads more for the shipment of contraband goods to be sold on the black market in Darfur for the profit of SAF commanders, than it is for military supplies and equipment. ¶6. (SBU) Returning to the cost imposed by U.S. sanctions, Daoud cited Al-Sunut Development's designation as an SND in May. This blocked Al-Sunut,s financial transfers in third countries and caused the Company to close accounts in foreign banks. (Note: Sanctioned telecoms company SUDATEL Commercial Officer related similar difficulties in his meeting with Emboffs (ref (b)). End note.) As a result, Al-Sunut has been forced to halt its ambitious plans for a commercial development on Al-Morgran point in Khartoum. Daoud expressed puzzlement at how companies were chosen for the SDN list, asserting that Al-Sunut has no connections to the regime. He stated that the DAL group of companies always has been strictly apolitical. He said that after he lobbied President Bashir for compliance on Darfur, Bashir noted sarcastically, "You asked for us to comply to avoid sanctions then you yourself are sanctioned." ¶7. (SBU) CDA Fernandez explained that the Administration is under tremendous pressure within the U.S. to take action in response to the Darfur conflict. Economic sanctions appear to offer an attractive middle course between the unacceptable alternatives of doing nothing and military force. The Charge said he sees a limited, but real chance for improvement in bilateral relations in the near term, and that easing economic sanctions will probably be one of the most difficult steps to take. In the shorter term, he thought that Khartoum,s acceptance of UNSCR 1769 at least offers an opportunity to keep relations from getting even worse. Without making any commitments, Charge offered to transmit to Washington any points Daoud might want to offer as to why Al-Sunut should be delisted. ¶8. (SBU) Daoud noted that some aspects of sanctions had been helpful. Sudanese business had moved to Arab banks after 9/11 (he uses the national bank of Abu Dhabi),which are very competent and don not care about politics. he will be making his first trip to China to use $100 million allocated to his company as part of a $3 billion, 20 year soft the Chinese are using to hook Sudanese on to Chinese goods and services. Many Sudanese prefer to deal with America, but they will get used to the Chinese over time. ¶9. (SBU) Daoud complained that U.S. sanctions most directly hurt its natural friends in Sudan, without significantly inconveniencing the regime. The government, he said, can always find substitutes for U.S. goods and services denied by sanctions. He noted that when blanket U.S. sanctions first were imposed in 1997, Sudan was forced to drop plans to purchase Caterpillar equipment for the Nile oil pipeline pumping stations. Instead, Rolls Royce equipment was substituted, at a 25% higher cost. Even though wheat imports are not part of sanctions, DAL preferred to "avoid problems" and switched from American to Canadian and Australian grain. ¶10. (SBU) When the Charge noted that the regime complains that the sanctions do hurt, Daoud asserted that the government likes to cite USG actions such as the May 29 SDN listings as proof that it is helpless in the face of U.S. hostility and that there is no sense in even trying to meet U.S. concerns. CDA commented that this highly tendentious argument assumes that relations cannot deteriorate even further. ¶11. (U) Comment: Al-Sunut is the third Sudanese SDN about which Post has had discussions (Reftels). FERNANDEZ