U.S. Foreign Policy Sanctions:  Sudan

The extensive U.S. sanctions program in Sudan put into place in the 1990s reflected the difficulties of reconciling the twin policy goals of targeting the central government while assisting, or at least not harming, southern Sudan prior to and following its independence in July 2011. The Sudan program is also a significant example of the shift in U.S. sanctions policy from comprehensive trade embargos to measures targeting individuals and organizations. In addition, the program reflected the need to reconcile cooperation with Sudan in the war on terror following 9/11 with efforts to affect the domestic behavior of a sanctioned regime.

Sudan's default on its foreign debt in 1988, and the military coup in 1989, resulted in denial of U.S. foreign aid. In 1993, the United States put Sudan on the terrorism list requiring U.S. exporters to obtain licenses from Treasury's Office of Foreign Assets Control (OFAC), which denied most licenses for exports of goods and technology. The terrorism designation also denied Sudan access to U.S. preference programs, Ex-Im Bank financing and support for International Monetary Fund and World Bank loans. The passage of the Trade Sanctions Reform Act in 2000 permitted the export of food and medicine. In 1997, President Clinton invoked the International Emergency Economic Powers Act (IEEPA) and issued an Executive Order prohibiting trade with and credits and loans to the government of Sudan and blocking assets held by the government of Sudan in the United States. That same year Congress passed legislation exempting the import of gum Arabic from Sudan because of the country's virtual monopoly of the product. In 2003, President Bush issued an Executive Order denying Sudan educational and cultural exchange programs due to human trafficking. On two subsequent occasions, in 2000 and 2005, Congress authorized the President to override the application of sanctions to southern Sudan.

Responding to the escalation of the violence in Darfur, Congress enacted the Sudan Peace Act in 2002. The law sought to facilitate an end to the Sudanese civil war and required the President to certify that the Sudanese government and the Sudan People's Liberation Movement (SPLM) were negotiating in good faith. The Comprehensive Peace in Sudan Act of 2004 mandated the imposition of financial and oil sanctions subject to a presidential waiver. The 2005 Comprehensive Peace Agreement between the Sudanese government and the SPLM was meant to end the civil war, provide semi-autonomous status the SPLM government in the south and set the date for a referendum on independence. In 2007, in response to continued violence in Darfur President Bush issued an Executive Order barring an additional group of Sudanese citizens and companies owned or controlled by the government of Sudan from trading with or banking in the United States. In October 2007, OFAC issued a new rule revising the areas of Sudan covered by the sanctions and recognizing South Sudan as a separate state. However, the new rule upheld all sanctions relating to Sudan's oil and petrochemical industries even in South Sudan. The rule exempted financial transactions and shipment of goods and services as long as they do not transit non-exempt areas of Sudan. The rule provided an exception for shipments with prior OFAC approval.

Following South Sudan's independence in 2011, the United States adapted sanctions to continue pressure on the Khartoum government while exempting South Sudan. OFAC issued a statement in April 2011 stating that following independence sanctions "will continue to apply only to Sudan and the government of Sudan, and that such a new state and its government will not be subject to them." In December 2011, OFAC authorized "all activities and transactions" by U.S. companies in South Sudan's oil industry as well as related financial transactions and shipment of goods, technology and services. This action is complicated by the fact that, while most of the oil fields are in South Sudan, the refineries and pipelines are in Sudan, making the industry deeply interconnected. In July 2011, OFAC ruled that the central bank of South Sudan, having severed its ties to Sudan's central bank, was no longer sanctioned, allowing U.S. financial institutions to conduct transactions with the central bank.

Although the United States took small initial steps to relax export controls on Sudan for agricultural machinery, in November 2011 President Obama extended sanctions on Sudan for another year because its policy and behavior in Darfur and the border states of Blue Nile, Abyei and South Kordofan had not sufficiently improved. Some analysts warned that extending sanctions could backfire by convincing the Sudanese government that they will never be lifted and pushing them closer to China.

Public pressure led numerous state governments to enact divestment and government procurement sanctions on companies with business ties to Sudan. In 2007, President Bush signed legislation allowing states, local governments and public pension funds to divest from investments in "scrutinized" companies deemed to have commercial ties to Sudan. In 2005, the state of Illinois enacted a divestment law, which sought to pressure the government of Sudan by requiring public pension funds to divest holdings of scrutinized companies and forbidding the deposit of state funds in banks that could not prove that they had no connection to Sudan. The NFTC challenged the statute on grounds that it conflicted with the Supreme Court's 2000 decision in Crosby v. NFTC. In 2007, the Federal District Court for the Northern District of Illinois ruled in NFTC v. Giannoulias that the law was unconstitutional because it conflicted with the Foreign Commerce Clause. Because the Comprehensive Iran Sanctions Accountability and Divestment Act of 2010 contains language similar to the 2007 law, the scope for state and local governments to impose foreign policy sanctions remains unsettled.