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OFAC Permits New Petroleum and Petrochemical Business in Southern Sudan

Date: Dec 08, 2011

Today the U.S. Treasury Department's Office of Foreign Assets Control eased prohibitions under the broad U.S. sanctions against Sudan that limited the activities of U.S. companies in Southern Sudan's petroleum and petrochemicals industries. Southern Sudan became a new state this past July, and, therefore, also became exempt from the Sudanese sanctions. The continued connections between the two economies, however, caused several sanctions against Sudan to apply to Southern Sudan as well.     

Under the preexisting U.S. sanctions against Sudan, U.S. companies were prohibited from engaging in activities relating to Sudan's petroleum or petrochemical industries. The prohibitions also extended to U.S. companies facilitating a subsidiary's efforts in those industries, making payments to or through Sudan and making shipments through Sudan to or from Southern Sudan. In addition, U.S. companies were prohibited from performing services where the benefit was received in Sudan. Southern Sudan's independence removed the new country from these sanctions in theory, but its economy remained closely tied to Sudan. Consequently, it has been very difficult for U.S. companies to engage in business in Southern Sudan and comply with the sanctions against Sudan.

The amended sanctions, however, now permit U.S. companies to engage in transactions relating to Southern Sudan's petroleum and petrochemical industries, regardless of possible Sudanese involvement. In addition, shipments through Sudan to or from Southern Sudan are now permitted regardless of their connection to the petroleum or petrochemical industries. Certain payments for business in Southern Sudan can now also be made to or through Sudan.         

These new rules should make it much easier for U.S. petroleum and petrochemical companies to do business in Southern Sudan. Such companies, however, should still be very cautious about compliance with remaining sanctions against Sudan that could arise, such as the broad prohibition on U.S. companies exporting and reexporting goods or technologies to Sudan itself and otherwise dealing with the government of Sudan.