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After decades of violent conflict, South Sudan is the world’s newest nation.  Some of the credit for that outcome goes to pressure from the United States, including economic sanctions. How to approach the sanctions now is a tricky question.

The new nation of South Sudan is one of the world’s poorest and most fragile states. Continued or revived conflicts along the new border and in Darfur  threaten people in those regions and could destabilize the new state in the south. U.S. policy faces a balancing act—trying to ensure that sanctions do not interfere with support for development in the new nation, while also using them to prod the regime in Khartoum to respect human rights, move towards democracy, and peacefully resolve the conflicts in Darfur and along the new border.

Adapting U.S. policy to the new reality will not be easy because the sanctions against Sudan evolved over decades, growing into a tangle of overlapping objectives, multiple congressionally-imposed restrictions, and various executive orders.

The Sudan sanctions saga began in 1988 when non-humanitarian aid was suspended because the government was in arrears on debts owed to the U.S. government. That aid was cut off entirely in 1990 following a military coup in Khartoum. Over the years, other sanctions, or new conditions for lifting old ones, were added to the mix through executive orders and congressional actions. The legal maze that now governs relations with Sudan is shown here.

One sanction that affects many others is Sudan’s 1993 designation as a state sponsor of terrorism, which added restrictions on dual-use exports and arms and munitions sales, as well as new conditions for restoring aid. In 1996, in response to pressure from Congress, President Clinton issued a broad executive order under the International Emergency Economic Powers Act banning trade and financial transactions with Sudan because of terrorism, threats to regional stability, and human rights concerns, including slavery and suppression of religious freedom.

With strong backing from human rights and evangelical Christian groups, Congress passed additional legislation affecting Sudan, including laws to address human trafficking and violations of religious freedom around the world. The legislation was generic but could have been used to impose sanctions against Sudan if similar measures were not already in place under other legal provisions. In 2002, 2004, and 2006, Congress also passed Sudan-specific legislation aimed at first encouraging and then supporting implementation of the peace agreement signed in 2005, as well as addressing the conflict in Darfur. These acts added conditions for lifting sanctions, while providing exceptions for assistance to support the peace process and capacity-building and to promote development in southern Sudan. In annual appropriations bills, Congress also specifically prohibited most economic and military aid to Sudan and restricted its eligibility for debt relief, until the president certifies that a democratically-elected government is in place and that Sudan is cooperating with conflict resolution and humanitarian relief in Darfur.  This brief chronology summarizes key events in the evolution of U.S. policy.

The bottom line is that sanctions today prohibit private trade and financial transactions with Sudan, block the assets of designated government officials, and limit non-humanitarian economic aid. But the exemptions for humanitarian aid and to support the peace process between north and south were broad enough that the United States is still a leading donor in Sudan, providing billions of dollars for humanitarian, peacekeeping, and reconstruction assistance. In addition, the regional government and designated areas of southern Sudan were exempted from most sanctions after the Comprehensive Peace Agreement was signed in 2005.

There are two sanctions, however, that could create problems for South Sudan. One is a congressional restriction on using foreign aid funds for debt relief in Sudan, which could complicate final resolution of a deal between Sudan and South Sudan on dividing up post-independence assets and liabilities.

The second sanction derives from restrictions on the oil sector, which the Treasury Department’s Office of Foreign Assets Control announced in April would continue to apply to any U.S. person engaging in any transaction in the oil sector, including in South Sudan, if it would benefit the regime in Khartoum. Since the only way to export oil from South Sudan is via pipelines that run through the north, it is inevitable that the Government of Sudan would benefit:  even if Sudan and South Sudan reach an agreement on dividing oil revenues that allows South Sudan to keep all the revenues generated by oil produced in its territory, it would still have to pay transit fees to Sudan.

The Obama administration is trying to figure out how to get around these restrictions so that U.S. oil companies can invest in South Sudan, as the government there reportedly wants, but the tangle of legal provisions appears to be complicating the task.

Finally, influencing Khartoum to take the steps needed to promote peace and stability in the region might mean lifting some of the broad array of other sanctions in place against Sudan. Since U.S. sanctions are so comprehensive, the Obama administration has no hammers left in the toolkit. Recognizing the limits to negative leverage, the announcement of the administration’s new Sudan strategy in 2009 included promises of improvements in the bilateral relationship in response to improvements in key areas on the ground in Sudan.

After the January referendum that set South Sudan on the path to independence, Secretary of State Clinton announced that the State Department would begin the process to remove Sudan from the list of state supporters of international terrorism, but nothing happened and the prospects for removing the designation seem to have receded further as violence along the border has increased. The administration needs the legal flexibility, the political space, and the will, to ratchet things down as well as up in response to events and not wait for every goal to be achieved.

The question is whether sanctions can be used as a bargaining tool with Khartoum, or whether the desire for punishment will override all other considerations.

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CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.