Did BNP Sanctions Violations Harm Development in Sudan?

Written by Anna B. Wroblewska

Much has been said about the BNP Paribas scandal, in which the bank broke American restrictions on Sudan, Iran, and Cuba in order to carry out billions of dollars in transactions for the governments and residents of those countries.

But little has been said about how these violations affected the countries themselves. How did BNP’s conduct affect progress and development in the volatile and violent Sudan?

According to the consent order issued by the New York Department of Financial Services, BNP’s deception allowed for transactions worth over $20 billion to be carried out for sanctioned Sudanese parties. Dollars not only went out of Sudan: Billions of dollars worth of letters of credit were financed or managed by BNP, allowing a significant amount of capital back in.

BNP established internal processes that stripped these transactions of any information that would be flagged by U.S. officials, meaning that references to Sudan or Sudanese individuals were systematically erased. And despite several warnings from worried compliance officials, the bank continued the operation.

“It isn’t something that a modern institution – especially one located in a democratic country – should ever do, because it sends a message to the government of Sudan that they can oppress their own people and get away with it,” said John Mbaku, professor of economics at Webster State University and a specialist in African development. “To the extent that the bank allowed the Sudanese government to perpetuate its tyranny, the activities of the bank actually retarded progress in the country.”

If sanctions are designed to impose economic pressure on a nation, according to Mbaku, forcing it to move towards reform, progress, and human rights, then BNP’s conduct was a significant contributor to the instability of the state.

The unfortunate limitations of sanctions

According to Mbaku, this gives an indication of how much the relationship was worth. “The fact that the bank, which had a lot to lose, went into this arrangement means that it had alot to gain.”

What is probably the most unsavory aspect of the whole thing are the internal communications among BNP executives. As noted in the consent order, officials discussed the “humanitarian catastrophe” in Darfur and the “pivotal part” that some Sudanese banks played in supporting the government, which “has hosted Osama Bin Laden and refuses the United Nations intervention in Darfur.”

Put it all together, and it seems evident that BNP executives knew what they were doing, but they did it anyway. It’s impossible to calculate the costs of BNP’s conduct, but Mbaku is certain that it was significant.

While not all businesses are willing to engage with such corruption, this situation begs the question of whether sanctions are really a credible tool for bringing despotic governments to heel. Considering the apparently immense financial benefits that accrued to BNP, would it have mattered in the end if it, as an individual bank, hadn’t gotten involved?

It’s obviously possible, and even likely, that another bank would have stepped in to service Sudanese clients. These types of activities are highly enriching to the parties involved, and the nature of corrupt, opaque, and non-democratic governments makes it easy for them to engage in such behaviors, Mbaku says.

However, he points out that this doesn’t change the fact that BNP’s activities weakened the effectiveness of the sanctions and thus contributed to the government’s ability to stay in power and oppress its people.

“By evading sanctions, the government of Sudan was able to perpetuate revenues that kept them in power… and the transactions also personally enriched those who were involved.”

In other words, giving these individuals access to the resources required to keep doing what they wanted not only harmed the Sudanese people, it hindered progress and the potential for a move towards democracy and human rights.

Even if another bank had taken on the work that BNP performed, it doesn’t in any way mitigate the bank’s contributions to the violence and tyranny experienced by the people of Sudan.

What sanctions really do

Despite the potential economic benefits of breaking sanctions (both for financial institutions and for elites with the resources to skirt the rules) and their disproportionate effect on the poor (who don’t have the resources to break them), Mbaku argues that sanctions still serve an important purpose.

“Sometimes as a country it’s important for you to make a statement,” he says. “It sends a message that you’re not going to stand and watch them continue to kill their own people.”

He notes that, oftentimes, the oppressed welcome sanctions more willingly than you might expect. “When you talk to black South Africans today,” he notes, “Many would tell you that they suffered under the sanctions (on the apartheid government), many significantly so. But they would rather have suffered under those sanctions than under apartheid.”

And so, as one ex-patriot from Darfur who Mbaku spoke with said, the United States is on the right side of history by sending this message to the government of Sudan.

Which would thus put BNP Paribas firmly in the wrong.