VZCZCXYZ0015
PP RUEHWEB

DE RUEHKH #1402/01 2481522
ZNR UUUUU ZZH
P 051522Z SEP 07
FM AMEMBASSY KHARTOUM
TO SECSTATE WASHDC PRIORITY 8418

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