The United States Sanctions on Zimbabwe

Eddie Cross

At the end of the war, it was the USA that put Germany and Japan back on their feet and it was the US that led the way in creating the IMF and World Bank and even the United Nations. No one else could have done that and the world should recognise this.

In the following half century, it was the US that led the way on globalisation and free trade. They allowed their huge domestic market to absorb the products of the newly emerging economies of the East. The US almost single handedly created the conditions which were used by China, after 1975, to lift two thirds of their population out of poverty and in the process creating the second largest economy in the world – repeating what they did with the Marshal Plan for Europe and the post war changes in Japan.

In doing so the US has created a world that is more equal and to some extent democratic. That is true in Europe and Japan, not quite so true in China although the social and political changes in China far exceed the changes elicited from the ideological wars fought under Mau after 1949. Having done so by pursuing free trade policies, elements in the US now appreciate that they have created competition for their number 1 slot in the world and want to backtrack. In contrast, China has taken over the lead in the cause of globalisation and free trade – mainly because this is what drives their economy.

Looking back on these massive success stories, it is a puzzle that today their main focus on trying to remain influential and to secure changes, are sanctions. The US once again leads the world in the application of sanctions in their efforts to change the world into their image. Today 62 countries – that is 32 per cent of all the countries in the world operate under sanctions imposed by the USA. In this group – Zimbabwe stands out as the only country under a US sponsored sanctions regime imposed by an Act of Congress. The rest are all administrative imposed by Presidential dictate.

There was a flurry of interest yesterday when the State Department issued a notice that the ordinary sanctions on Zimbabwe were being scrapped and the list of the individuals and companies to remain under US sanctions was being adjusted. It caused some excitement but the reality is that they changed very little, kept the worst elements of the sanctions in place and even reinforced their policy of isolation and coercion for change.

It is clear that the ZDERA Act has been kept in place for the 22^nd year, as such it must be one of the longest running sanctions programs ever. I was surprised when the State Department described the ZDERA restrictions as not being “sanctions”. Strange definition when this piece of legislation was passed by Congress in recognition of the violations of property rights and human rights violations that characterised the 2000/2005 “fast Track Land Reform Program”.

Under this Act, the United States explicitly denies Zimbabwe access to all Multilateral lending and imposes financial penalties on banks which trade with Zimbabweans under sanction. In consequence Zimbabwe banks do not have significant relations with international banks described in the industry as “Correspondent Banks”. So, to make a transfer in US dollars we have to use an intermediate Bank that is not so restricted and our Banks have stated that this costs them up to US$1 billion a year. That might not seem a lot of money to the USA but its 12 per cent of our export earnings. It could have fully paid our national debt over the past 20 years.

Locking us out of the global financial system controlled by the Multilaterals has far reaching consequences. These institutions were created after the Second World War to help countries manage their international finances. They were also designed to help developing counties like ours deal with serious problems and to manage debt.

The argument that these sanctions do not affect ordinary Zimbabweans is a complete fallacy. We cannot borrow money from the international system, every investor has to take such restrictions into account when they come here, it automatically increases the cost of all loan finance affected by a thing they call “Country Risk”.

The massive growth in the Chinese economy over the past 50 years has been due to three main elements: –

1. Access to world financial markets without restrictions and this has enabled the Chinese to build up their national debt to 250 per cent of their GDP at very low interest rates.
2. Access to world markets on a basis that has allowed China to become the industrial hub of the world with an infrastructure that is better than most developed countries due to the availability of low interest, long term finance.
3. Access to technology which has allowed the Chinese to match or even better the quality and character of value added products. No country in the world has more students overseas at our Universities, and more Chinese study English than the rest of the world combined.

In addition to largely retaining their sanctions regime on us, the US has announced their formal withdrawal from the negotiations that have been going on over the past two years on debt relief. Our national debt is small by global standards and is less than half our GDP. Our fiscal regime is sound and we have a balance of payments surplus. There is no reason why we cannot manage our debt and even borrow more money for long term investment. The welfare of every Zimbabwean depends on this to a very large extent.

So where does that leave us? Firstly, I would point out that sanctions simply do not work. I was in the Rhodesian economy up to 1980 and for most of my working life nearly every transaction I was involved in was illegal under UN Sanctions imposed by the Security Council after UDI in 1965. It made no difference to our politics or our economy. In fact, some would say we thrived. We can say the same today, has sanctions changed how we manage our affairs – not one iota.

What would change our country would be prosperity and opportunity and building up our middle class, retaining our skilled workers and creating jobs. That would reverse the outpouring of migrants which now threatens all developed countries that offer a better life. That is why half our population now lives abroad. We are a tiny country, one of the smallest in the world, 60 per cent of our population is classified as living in extreme poverty. We struggle to fund even basic education for our children, we cannot give the great majority access to health care.

And instead of helping us meet these most basic of needs, the USA, the most powerful country in the world, isolates us and denies us the very opportunities that have transformed half the world. Does not make any sense to me.