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«Human Rights Watch Brussels London New York Washington, D.C. Copyright © 2003 by Human Rights Watch. All rights reserved. Printed in the United ...»

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Hasan Ali al-Tawn, optimistically claimed that Sudan’s oil production would be doubled to 400,000 barrels per day in 2005. Sudan’s share of the oil revenues, then between 40-50 percent, would rise to 65 percent when production was doubled, he proclaimed.1019 This would have to include new production from non-GNPOC concessions such as Block 5A, which was closest to production, and perhaps Blocks 1015 Ibid.

1016 IMF Staff Country Report, No. 03/273, September 2003, p. 6 and Table 3, p. 24.

1017 IMF Staff Country Report, No. 00/70, staff memorandum, January 2001, p. 15.

1018 Talisman Energy, 2002 Annual Report, p. 5.

1019 “Sudan to double oil production by 2005, says official,” SUNA, Khartoum, January 25, 2001, in English, from BBC Monitoring Service, January 26, 2001.

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3 and 7 in Eastern Upper Nile, for which any pipeline would have to be built or extended for several hundred kilometers.

But in 2002, Talisman released data revealing what the government as a GNPOC partner already knew:

production from the GNPOC concession would peak in 2005 at 250,000 b/d and then would drop off yearly, reaching 40,000 b/d in 2020 and continuing to decrease after that.1020 GNPOC would never by itself be the source of 400,000 barrels per day but at most would produce 62.5 percent of that goal.

For the government, the predicted peaking of GNPOC production had to be a strong incentive to expand oil exploration and development into other oil blocks—all in the south. Even to keep up with 2002 revenue, to which it had become accustomed, it would be necessary to locate new sources of oil as the old ones dried up. But as of the date of writing this report, neither Block 5A nor any other block has reached the stage of export production Government Military Spending Almost Doubles in Two Years, Using Up 60 percent of the Oil Revenue Cash military spending increased 45 percent from 1999 to 2001.1021 In 2000, defense expenditures were

64.6 billion dinars (U.S. $ 250.9 million) and in 2001 they were an unprecedented 90.2 billion dinars (U.S.

$ 345 million), 45 percent higher in just one year.1022 1020 PFC Strategic Studies report findings, PowerPoint presentation, August 2002, http://www.csis.org/africa/0208_SudanPFCSum.pdf (accessed August 21, 2003).

1021 Table 1; IMF, January 2001 staff memo, p. 9.

1022 In 1998, military expenditures were 42.8 billion dinars (U.S. $ 166.5 million). “Sudan: Staff Report for the 2000 Article IV Consultation and Fourth Review of the First annual Program Under the Medium-Term Staff-Monitored Program,” IMF Staff Country Report No. 00/70, Washington, D.C., June 2000, p. 11. For 1999-2001, see January 2001staff memo, p. 9 Table 1. In 2001, the military expenditure was planned to be 93.2 billion dinars, which includes the 31.3 billion dinars planned but not expended in 2000, plus 8.1 b dinars (U.S. $ 31.9 million). This might indicate that delivery of or payment for expensive military hardware was not made in 2000 but in 2001. As Russian arms sales disclosures later revealed, in 2001 Russia sold twelve attack helicopters and twenty-two armored vehicles to Sudan. See below.

–  –  –

The military spending in 2001 soaked up 60 percent of the 2001 oil revenue.1023 And that represented an increase in military budget of 39.6 percent in the same year, when total government revenue increased only 13.4 percent.1024 Conversely, increased military spending would not have been possible without the new oil revenue, absent radical cuts in the already strict IMF-negotiated budget. Total government revenue grew from

205.5 billion dinars (U.S. $ 799.9 million) in 1999 to 370.0 billion dinars (U.S. $ 1.415 billion) in 2001, an increase of 80 percent.

The Khartoum government not only laid out 45 percent more cash for military expenses from 1999 to 2001, it also misled financial analysts about its intentions to increase military spending. In November 1999, Abdul Rahim Hamdi,1025 chair of the government committee for the allocation of oil revenue, told a group of oil industry stock analysts, Talisman’s guests in Sudan, that military spending amounted to only 15 to 18 percent of the budget. He promised there would be no increases in defense spending.1026 Relying on this statement, one analyst commented, “The key thing is that there will not be an increase in defense spending by the government.” 1027 1023 See Table 1.

1024 See Table 1.

1025 Abdel Rahim Hamdi, a former finance minister of Sudan (1990-93), has been the chairman of the Khartoum Stock Exchange since 1994, and describes himself as a “leading Islamic Economist.” He was reappointed minister of finance in March 2001, http://www.hamdi.com (accessed June 21, 2001).

1026 Claudia Cattaneo, “Oil and Politics Don’t Mix: Canada’s Talisman Feeling the Heat in Sudan,” National Post (Toronto), Khartoum, November 20, 1999.

1027 Claudia Cattaneo, with Carol Howes, “Analysts upbeat about Talisman’s Sudan role,” Financial Post (Toronto), Heglig, Sudan, November 17, 1999.

–  –  –

The government’s statement was false in two respects: at the time, military spending was more than 27 percent of the budget, not 15 to 18 percent, according to the figures the government later gave the IMF.1028 Secondly, over the period from 1999 to 2001, military expenditures would increase 45 percent.1029 The new military spending in 2001 would be 22.4 percent of the increased budget—not 15 or 18 percent as represented.1030 That military budget was needed to maintain a large army. In June 2001, the military publication Jane’s Intelligence Review estimated that the size of the Sudanese government’s regular army was 100,000 and its PDF about 15,000. In addition there were irregular forces which the government “raises from ‘Arabized’ tribes like the Baggara... which dwell along the border between north and south,” and “various southern groups, such as the Toposa, Mundari, Fertit and Nuer.”1031 All needed arms and ammunition.

In 2002, government military expenses declined slightly in absolute dollar terms and as a percentage of oil revenue. The government, having learned its lesson about over-optimistic forecasts of world oil prices, projected a modest oil price for 2002, and apparently modified its military expenses accordingly.

Government military expenditures were 81.85 billion Sudanese dinars (down 9.25 percent from 2001).

Oil revenue exceeded expectations, however. The result was that the military budget consumed only 38.8 percent of the total oil revenue in 2002. Had oil revenue been as low as predicted, the defense budget 1028 See Table 1, military expenditures of 62.2 billion Sudanese dinars and total government expenditures of 205.5 billion Sudanese dinars, or 27.37 percent. See IMF Staff Country Report No. 00.70, June 2000, p. 11.

1029 IMF, January 2001 staff memo, p. 9.

1030 Although military expenditures dropped from 27.37 percent of the budget in 1999 to 22.3 percent of the budget in 2001, military expenditures were up 45 percent in cash terms in these years. There is another expenditure for “domestic security expenditure”— related to but not included in military expenses—which was 4.267 billion dinars or U.S. $ 16.6 million in 2000 (3.2 billion dinars--U.S.

$ 12.4 million—for the first three quarters, prorated annually). This amount was under the general reserve spending account. See IMF, January 2001 staff memo, p. 9, fn. 6.

1031 Hailes Janney, “Oil reserves transform the Sudanese civil war,” Jane’s Intelligence Review, June 1, 2001, in FOCUS: Vol. 13, no. 6 (Surrey, U.K.).

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would have taken a much larger piece of it: as in 2001, military expenditures would have consumed more than 50 pecent of oil revenue.1032 Government Uses Oil Wealth for Arms Imports and Industry For its money, in 2001 Sudan purchased from Russia twenty-two armored combat vehicles and twelve attack helicopters.1033 In 2002, Sudan bought anothereight amored combat vehicles and four attack helicopters from Russia, plus fourteen large-caliber artillery systems from Belarus.1034 The cost was not revealed, but the sixteen new attack helicopters more than tripled the existing fleet of six.

The new oil revenue also facilitated a brand-new domestic arms industry. On April 30, 1999, Agence France-Presse quoted a statement in the official newspaper Akhbar al Youm by Hassan al Turabi, a senior Islamist ideologue and then leader of the ruling National Congress party, that the government would use earnings on oil exports to finance weapons factories. According to Hassan al Turabi: “We are currently building several factories to produce our needs in weapons, and we plan to manufacture tanks and missiles to defend ourselves against conspirators.”1035 When the information that it would use its new oil wealth to create an arms industry caused a storm, Khartoum immediately denied the assertion. Government ministers as well as Hassan al Turabi himself rushed to claim that the oil revenue would be used for construction and development.1036 But a year later 1032 If oil revenues had been as predicted, roughly 158.5 billion Sudanese dinars (U.S. $ 604 million), the defense expenditures of

81.85 billion Sudanese dinars (U.S. $ 312 million) would have been 51.6 percent of oil revenues for 2002, almost as much a percentage as in 2001. IMF Staff Country Report 02/245, November 2002, p.13, table 3.

1033 "U.N. Register of Conventional Arms, 2001, Addendum 1," (New York: U.N., September 24, 2002), UN document number A/57/221/Add1.

1034 “U. N. Register of Conventional Arms, 2002,” Russia submission, June 23, 2003, http://disarmament.un.org/un_register.nsf.;

Belarus submission, June 3, 2003, http://disarmament.un.org/un_register.nsf (accessed August 6, 2003).

1035 “Sudan to Manufacture Tanks, Missiles: Assembly Speaker,” AFP, Khartoum, April 30, 1999. Also quoted in Linda Slobodian, “Little Stock in Sudan Deal,” Calgary Sun, May 5, 1999.

1036 “Dr. El-Turabi: Oil for War Is a Ridiculous Disinformation,” Al Ra’iAl-a’am, Khartoum, May 6, 1999.

353Human Rights Watch

officialdom confirmed what it had earlier denied, as was so often the case. On July 1, 2000, the Al-Shar Al-Syasi newspaper quoted army spokesman Gen. Mohamed Osman Yassin saying that Sudan “will this year reach self-sufficiency in light, medium and heavy weapons from its local production,” thanks to its “unprecedented economic boom, particularly in the field of oil exploration and exportation....”1037 President Bashir announced on October 27, 2000, that Sudan produced not only rocket-propelled grenades, machine-guns, and mortars, but was also on its way to manufacturing its own tanks and heavy artillery. In a televised speech addressing a group at the inauguration of an industrial complex south of Khartoum, the president declared that Sudan would go on to production of “warplanes and rockets.”1038 Sudan Suspected of Acquiring Polish Tanks Intended for Yemen, August 1999 As Sudan’s export of oil began, the movement of new consignments of heavy weaponry into Sudan reportedly followed. Poland acknowledged in August 1999 that a shipment of twenty Russian-made T-55 tanks it sold to Yemen earlier that year was illegally diverted, and unnamed official sources cited in the Polish press indicated that the tanks were delivered to Sudan.1039 The shipment constituted the first batch of a total of fifty surplus tanks sold by the Polish state arms agency, ostensibly to Yemen, for U.S. $1.2 million.1040 A year earlier Poland had attempted to sell fifty T-55 tanks to Sudan, but the proposed sale was halted under pressure from the U.S.1041 Both incidents threatened to trigger U.S. sanctions against Poland for 1037 “Sudan to achieve self-sufficiency in weapons: spokesman,” AFP, Khartoum, July 1, 2000.

1038 “El-Bashir: Sudan on Way to Producing Own Tanks,” AP, Khartoum, October 27, 2000.

1039 “Polish Premier, Nowak-Jezioranski on Tank Deal,” containing the text of a statement on the matter by the Polish prime minister, Gazeta Wyborcza (Warsaw), as translated in FBIS, Washington, D.C., August 31, 1999; “Poland halts tank sale to Yemen,” AP, August 31, 1999; “Poland admits 20 tanks sold to Yemen were illegally diverted,” Reuters, September 1, 1999.

1040 Ibid.

1041 “Polish premier confirms arms trade control after failed tank sale to Sudan,” PAP news agency (Warsaw), BBC Worldwide Monitoring, January 16, 1998.

–  –  –

violating the unilateral U.S. embargo imposed on military transfers to Sudan on the grounds that Sudan “supports terrorism.”1042 According to a Polish newspaper, Gazeta Wyborcza, which broke the story of the diverted tank shipment in August 1999, Poland had been warned by the U.S. of the danger that the tanks might be diverted to an unauthorized third country, but it went ahead with the sale to Yemen.1043 In response to the ensuing scandal, the Polish government halted delivery of the remaining thirty tanks and announced that it would take “further steps” to verify arms recipients in the future.1044 It also maintained that the Yemeni government had presented credible end user certificates and that Poland did nothing wrong.1045 In its annual report to the U.N. Register of Conventional Arms, Poland indicated that it had exported twenty battle tanks to “Yemen” in 1999, without noting their ultimate destination. The Sudanese government is known to have used the T-55 tank previously in the south, as the SPLA captured many in its 1997 offensive at Yei.1046 The Sudanese government denied allegations made in January 2000 that it had concluded an arms deal with Bulgaria.1047 In April 2002, the Bulgarian government revoked the arms-trading license of a major Bulgarian arms company that was suspected to have been involved in illegal weapons deals with the 1042 Ibid.; “US would consider sanctions on Poland for tank sales,” AFP, Washington, D.C., August 31, 1999; “US May Apply Sanctions Over Tanks,” UPI, Washington, D.C., August 31, 1999; “US Said Angered That Polish Tanks Went To Sudan,” Reuters, Warsaw, August 31, 1999.

1043 Ibid.

1044 “Polish Premier... on Tank Deal,” Gazeta Wyborcza, FBIS,August 31, 1999.

1045 Ibid.

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