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As U.S. presses ahead on Darfur, some view sanctions' effect as weak

Business leaders managing Sudan's economic boom predict the new U.S. sanctions imposed because of Darfur will have little impact on this country's oil-based economy, mostly because they avoid targeting key Chinese interests here.

The U.S. measures and the violence in Darfur are likely to be topics when the Group of Eight industrialized countries meet this week at a summit in Germany. U.S. President George W. Bush has directed American officials to meet with allies to try to draft a new U.N. Security Council resolution that would impose multilateral pressure on Sudan, in addition to the unilateral actions by the U.S.

But China has urged negotiations rather than sanctions as the best way to elicit cooperation from Sudan, and holds veto power in the Security Council.

That has again highlighted China's central role in the Darfur issue.

The U.S. sanctions announced last week target 31 Sudanese companies and three individuals - the military intelligence chief, a Cabinet minister and a rebel leader linked to the Darfur violence that has killed 200,000 people and forced 2.5 million from their homes. The newly sanctioned companies join 132 other Sudanese firms already banned from doing business with any U.S. company or bank.

But Abdul Rahim Hamdi, a former Sudanese finance minister who advises the Sudanese government on economic matters, said the U.S. sanctions mostly avoid the most critical parts of Sudan's economy - oil and the oil sector's Chinese customers.

Last year, Sudan's economy grew by 12 percent, according to the International Monetary Fund. That growth was propelled by the estimated 500,000 barrels of oil produced each day - two-thirds of them bought by China.

Hamdi noted that only Sudanese oil-drilling companies are on the new U.S. sanctions list, not Chinese or other foreign corporations - some of which pay huge royalties to the Sudanese government.

"The Chinese companies are the only big players, but the Americans have carefully avoided targeting them," Hamdi said.

U.S. authorities have defended the new measures, saying they not only broaden the target list but also provide better methods to track down embargo evaders.

"Tougher new enforcement techniques," including "forensic accounting" have been used to select the newly targeted companies and to make sure all 163 now on the sanctions list are truly barred from the dollar economy, U.S. embassy spokesman Joel Maybury said.

U.S. officials also dispute the idea that they are leery of disrupting Chinese relations over Darfur.

"We can very definitely say that the issue of Sudan is on the United States-China bilateral agenda," U.S. under Secretary of State John Negroponte told reporters last week.

However, some Sudanese officials say privately that they believe the White House is unwilling to drive up world oil prices by targeting the shipping companies that export the country's oil production.

For now, the only Sudanese company that truly risks being affected by the U.S. measures, Hamdi contends, is Sudatel, Sudan's largest cell phone provider, because it is listed on the stock exchange in the United Arab Emirates and is largely owned by foreign investors.

After a decade of American sanctions, Sudan has few commercial ties to the United States at this point, meaning the effect of U.S. sanctions is fairly limited, both Hamdi and outside analysts say.

Nearly three-quarters of Sudan's trade is with Arab and Asian nations, Hamdi said.

"We have learned years ago to avoid the American banking system. I don't think anybody will be hurt by this," he said.

A prominent Khartoum financier, who asked not be identified because of the sensitivity of the issue, said Sudanese firms know how to steer clear of dollar transactions by using the euro currency instead.

Sudanese firms operate through foreign holding companies or joint ventures to evade restrictions, the financier said.

Analysts like Alex Vines, the head of the Africa program at the British think tank Chatham House, also predicted the U.S. sanctions will have little actual effect on Sudan's economy.

"It's more of a political signal," Vines said.