David R. Henderson  

Getting Around Economic Sanctions in Sudan

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When I started the Ph.D. economics program at UCLA in September 1972, one of the first things we graduate students heard that we should be doing different in our daily lives was to subscribe to the Wall Street Journal. If I recall correctly, Ben Klein recommended it in a class he taught (that I wasn't taking at the time) and the recommendation filtered back to me.

Gulp. I was from a small town, population under 2,000, in rural Manitoba, and the largest city I had lived in was Winnipeg. The term "Wall Street" was intimidating. Would I be able to understand it? Harry Watson, my roommate who had come down from Canada with me to go to graduate school, and I split the cost of the subscription and found ourselves reading and enjoying it daily. I laughed at my earlier fear that I wouldn't understand it.

My favorite kind of Wall Street Journal article was not on the op/ed page but in the economic news section. It was typically a well-researched story by a careful journalist who managed, without hitting you over the head, to lay out the economics--the incentives, the unintended consequences, the ways of adjusting to various laws and regulations, etc.

I don't see many of those kinds of articles in the news section of the Journal any more. But today I saw one. It's by Matina Stevis and it's titled "Sudan Gets Down to Business in the Face of Sanctions and Strife." Stevis does a great job of laying out how people get around various restrictions on trade that the U.S. government has been instrumental in imposing.

One of the opening paragraphs:

The financial isolation--along with the strategically important country's designation as a terror sponsor and the International Criminal Court's pursuit of longtime President Omar al-Bashir for war crimes--has fostered a special kind of business acumen in executive suites and sand-caked streets: forcing businesses in this former colonial outpost to snare alternative sources of finance, sidestep trade barriers and find creative ways to import consumer goods.

Here's why it's hard to finance trade:
A $8.9 billion fine against French lender BNP Paribas in 2015 after it admitted violating sanctions, sent a chilling message to major financial institutions. Correspondent banks, financial institutions that were intermediaries between Sudan and the rest of the world, pulled out soon after, rendering trade finance virtually impossible, according to the IMF.

This leads to the problem and the incentive to find a way around:
There are no international automated-teller machines and debit-card payments are impossible, but that hasn't deterred would-be entrepreneurs.

What's one workaround?
Ahmed Abdalla, a cybersecurity expert by day at African mobile giant MTN, is working on a mobile-payments platform, SIM Pay, which uses prepaid mobile-phone airtime to allow people to transact across the country.

Comments and Sharing

COMMENTS (4 to date)
Jon Murphy writes:

One of the things economics has taught me is that, no matter what put in their way, people will find a way to survive.

I'll have to read this article. It may have implications/uses for some of my research

David R. Henderson writes:

@Jon Murphy,
One of the things economics has taught me is that, no matter what put in their way, people will find a way to survive.
Or at least they will try very hard and get very creative. Don’t forget the millions that died under Mao or the parable of the pebbles in the stream. Add one pebble--no big deal. Add another one--again no big deal. But add a million--trouble.

Jon Murphy writes:

@Prof. Henderson

Don’t forget the millions that died under Mao or the parable of the pebbles in the stream.

Yes, you're right.

John Thacker writes:

When I was an undergraduate at Duke in the late 1990s, the introductory economics class had a similar requirement. Students were required not only to get the Wall Street Journal, but students in turn were given assignments to find one such well-researched article in the economic news section and explain what principles of economics were demonstrated in the article.

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