by Hervé Pugi.
BNP Paribas, Commerzbank, HSBC, Crédit agricole, ING, Crédit suisse… What’s the common denominator between these banking institutions? They’ve been “nicked” by the US Justice System for violating economic sanctions, in particular in relation to Sudan. When the leading world power exploits it currency, many are forced to pay out. Not to mention the collateral damage…
Don’t mention the violation of the embargo to the Sudanese Minister of Finance and National Economy, Badreldin Mahmoud Abbas: « it never happened. We never used the dollar to make transactions and we would never have asked our partners to do such a thing. It’s just a strategy. A warning message: don’t do business with Sudan ». The problem is that this version of events has been clearly contradicted during investigations by the New York State Department of Financial Services and the US Federal Reserve. Above all, the institutions implicated have generally come clean about their “practices”. With all due respect to the minister.
Dubious practices? That depends on which side of the Atlantic you stand. Clearly, it may be (morally) reproachable for BNP Paribas, for example, to have « seriously weakened the embargo against Sudan », the French bank (like many others) has fallen down (legally) because the transactions made with this country were in dollars. That’s all. The economic sanctions, due to their unilateral nature, « in theory » only affect US companies and nationals. There’s no ban on European companies doing business with Khartoum, Havana or Tehran. Just make sure it’s not in dollars! Because all transactions in this currency must comply with local regulations, even if made by non-US organisations. The dollar, the main reserve currency, the most commonly used currency in international commerce and king of the exchange market and financial markets. The dollar is (almost) indispensable! That’s one way to give a global dimension to what is initially a unilateral measure…
Aside from any technical consideration, the first of which is that everyone must abide by the law, all experts are in agreement that Washington uses and abuses its currency like a weapon, going beyond simple economic matters. Some images are worth a thousand words and Dominique Seux has his: « It’s as if the Americans have the right to monitor everything spoken in English globally because it’s their language1! » Indeed, there’s something convenient about leaving it up to the Deputy Editorial Director of the French financial newspaper Les Échos to bring up « the imperialism of the dollar ». Through the penalties imposed on certain large banks and private enterprises, the United States is sending out a strong message: « over and above international commerce, the dollar is our currency! »
That’s one way to curb the enthusiasm of the most daring of investors and the strategy of any multinational, inevitably frozen in terror given the scale of some of the fines imposed. The pharmaceutical group GlaxoSmith-Kline (GSK) states that « operating in countries where sanctions have been imposed, like Sudan, represents challenges and risks for our business », while considering « that the people should have access to drugs, despite the regime in charge of their country ». One clear solutions is to « supply international groups such as UNICEF ». Like GSK, economic agents, in fear of being punished for not respecting the sanctions, often prefer not to do business with these countries.
Another way of operating is to obtain a licence from the OFAC. That’s the route taken by most financial institutions. This opens doors but does not guarantee absolute effectiveness. « Wanting to finance a project in Sudan makes lenders nervous, in particular intermediary banks, states a representative of the African Development Bank, even if these are projects relating to health or education. There’s real fear, despite the guarantees provided. The worry is that this will end up affecting the most disadvantaged ». A report in the same vein as the one issued by the International Monetary Fund2, which states that the 8.9 billion dollar fine against BNP Paribas caused a breakdown in trade between the Sudanese banks and their international counterparts, concludes that « these unfavourable developments will impact the poor and most disadvantaged sections of society and very probably increase the poverty rate in Sudan ».
The conclusion is therefore always the same: is the law of the strongest really the best? The British weekly The Economist3 has its own idea and defends the vision of an « America using all its financial weight, threatening to prohibit access to its market and use of its currency, to enforce respect for its own priorities ». In line with the statements of the former US Attorney General Eric Holder for whom « no individual, no entity that harms our economy is above the law ».
Note: the banks affected by the sanctions, US authorities concerned and independent specialist consultancy firms mentioned in this dossier have all declined to be interviewed by us.
1 “BNP interdite de travailler en dollar” (BNP prohibited from using the dollar) – Les Echos.fr, 02/06/2014
2 Staff report for the 2014 article IV consultation and second review under staff-monitored program, 21/12. 2014
3 The Economist – Capital Punishment, 05/07/2014