New General Licenses Promote Greater Investment in the Republic of South Sudan

In December 2011, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) issued two new general licenses exempting certain activities from the Sudanese Sanctions Regulations. These two new licenses authorize transactions that involve Sudan but primarily benefit the Republic of South Sudan, which gained independence from Sudan in July of last year. Although OFAC had previously issued guidance exempting the Republic of South Sudan from the Sudanese Sanctions Regulations, the interdependence of the two nations made the additional licenses necessary.

The two new licenses authorize U.S. persons to engage in the following:

• All activities and transactions relating to the petroleum and petrochemical industries in the Republic of South Sudan;
• Transshipment through Sudan of goods, technology and services to or from the Republic of South Sudan;
• All financial transactions ordinarily incident to the activities authorized above, including financial transactions with a depository institution owned or controlled by the Government of Sudan or located in Sudan; and
• Certain transactions incident to the activities authorized above, such as the provision of transportation services to or from Sudan or the distribution or leasing of U.S.-owned cargo containers.

With key ports and financial systems located in Sudan, these authorizations make foreign investment in the Republic of South Sudan possible as a practical matter. However, U.S. persons must still tread carefully. Sudanese parties should be closely screened to ensure that partners, customers and suppliers are located in the Republic of South Sudan and do not appear on OFAC's Specially Designated Nationals List. In addition, U.S. financial institutions are required to use an intermediary to engage in transactions with Sudanese banks – direct financial transactions are prohibited. U.S. investors should expect fund transfers to require additional steps or to move slowly if payments are routed through financial institutions in Sudan.

The purpose of the new licenses is to ensure that the Sudanese Sanctions Regulations do not unduly interfere with U.S. support of the economic and political development of the Republic of South Sudan. Nevertheless, the Sudanese Sanctions Regulations remain in full force, including their strict criminal and civil penalties provisions, and U.S. investors should use caution when operating under these new licenses.