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Sudan’s new refinery a golden goose?

September 26, 2012

Times have been tough for Sudan ever since it played host to Osama bin Laden in the early 1990s.  That hospitality brought Sudan a U.S. designation as a state sponsor of terror.  Sanctions against the Islamist regime have been ratcheted up since then, except that humanitarian assistance has been authorized, and the sanctions don’t apply to the newly formed South Sudan which broke away from Sudan proper.

Three-quarters of Sudan’s oil resources are now located in South Sudan, and U.S. sanctions against doing business with Sudan’s oil sector are tough.  For those reasons, Khartoum has pursued other sources of revenue, and is hoping that a brand new refinery will enable the country to sell $3 billion of gold next year.

From Reuters on Sept. 19:

Sudan opens first gold refinery to boost exports

Sudan opened its first gold refinery on Wednesday as it seeks to improve the quality of its rising gold exports and offset the economic damage inflicted by the loss of most of its oil revenues.

The country is increasing its gold production after losing three quarters of its oil output when South Sudan became independent in July last year.

The government hopes the new refinery in the capital Khartoum will help it to produce gold to international standards and reduce the amount of gold smuggling to overseas markets such as Dubai. Producers would receive more money for the higher-quality gold, thereby reducing the incentive to smuggle.

The refinery will have a daily production capacity of 900kg of gold and 200kg of silver, its head Mohamed Osman al-Zubeir said at the opening ceremony. This more than doubles the previous forecast for the refinery’s annual gold capacity, to 328 tonnes from 150 tonnes Sudan hopes to sell gold worth up to $3 billion this year, double last year’s gold revenue. Central bank governor Mohamed Kheir al-Zubeir told said on Wednesday that had sold 58 tonnes of gold worth $2.6 billion over the past 16 months.

There are several obstacles to Sudan’s goal:  first, gold smuggling to Beirut, Abu Dhabi, and Dubai is apparently commonplace.  Second, gold industry standards and trade associations probably prohibit the importation of gold from designated conflict zones such as Sudan (think “Blood Diamonds”) even in cases where particular governments may allow it.  Third, maintaining a facility of this complexity may periodically require high-tech replacement parts that are difficult to ship given the sanctions.

And before you decide that it would be a great bargain to online to buy Sudanese bullion, you might want to check with some of the following individuals and companies to see how well doing business with Sudan worked out for them:  lobbyist Robert Cabelly and money launderer Yonas Fikre have both been indicted for violating the sanctions regime against Sudan, the private security firm Blackwater narrowly averted similar charges, Texas-based Willbros USA, Inc. settled with the feds in 2009 over an allegation of bidding on a Sudanese oil contract, Hilton International settled after acquiring two hotels in Sudan, KLM paid a fine for improper cargo shipments to Khartoum, the Texas-based Flowserve Corporation for exporting products like pumps, valves and seals to Sudan, and Parkdale Mills was penalized in 2007 for attempting to import cotton from Sudan into the U.S.

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