US easing Zim sanctions seen as bid to counter Chinese influence

OFAC administers a number of different United States sanctions programs. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions to accomplish United States foreign policy and national security goals.
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Diplomats and economic observers say the United States of America (USA)’s recent partial lifting of some embargoes it imposed on Zimbabwe two decades ago is a strategic move to open doors for Western investment to challenge China’s growing economic clout in the Southern African nation.

The US, alongside its western allies mainly Britain and Zimbabwe have had a tense bilateral relationship for several years, marked by punitive sanctions imposed by America over the land reform programme.

In a move that has sparked mixed reactions, the US President Joseph Biden on Tuesday this week took a two-pronged approach towards Zimbabwe by lifting sanctions on individuals and entities while simultaneously imposing fresh restrictive measures on 11 individuals, including President Mnangagwa, under the Global Magnitsky programme.

While the recent easing of some restrictions offers a glimmer of hope, the Zimbabwe Democracy and Economic Recovery Act (ZIDERA) remains in effect. Furthermore, prior to the new measures, the US had withdrawn from Zimbabwe debt resolution negotiations facilitated by the African Development Bank (AfDB) arguing it would not support such efforts as long as ZIDERA remained in force.

Since 2003, the US Presidents effected a series of executive orders, implemented through the Office of Foreign Assets Control (OFAC).

Due to the global reach of the US dollar and the centrality of OFAC in financial transactions, sanctions effectively barred entities from engaging in international trade and individuals from receiving money abroad, effectively crippling their ability to participate in the global economy.

This combined effect went beyond the individuals directly targeted and inflicted broader economic hardship to Zimbabweans.

Analysts view the US’ current move as a strategic manoeuvre to both open doors for Western investment and at the same time maintain political pressure on the country’s top leadership.

They believe the US is hoping to capitalise on Zimbabwe’s investment opportunities and gain a foothold in the country. China has been a major investor in Zimbabwe in recent years, and the US is likely seeking to slow China’s dominance.

Most of the investments are particularly in critical sectors such as lithium mining, energy and manufacturing where Chinese companies have invested billions of dollars and some of the Asian firms are already market leaders when it comes to Electrical Vehicles manufacturing and other latest technologies.

Laurence Socha, Charge ‘Affaires of the US embassy in Zimbabwe, told a press conference in Harare that “it was hard under the previous programme titled the Zimbabwe Sanctions Programme to get away from perceptions that you could not do business in Zimbabwe.

“That’s not true. And . . . we hope that business and financial institutions have a new look at Zimbabwe’s markets and connections with its people.”

A seasoned diplomat specialising in western foreign policy, told Business Weekly in an interview that despite the United States claiming their sanctions were targeted, they have inadvertently pushed Western businesses away from Zimbabwe.

“While US claims targeted sanctions, they seem to have discouraged Western businesses from engaging Harare, opening the door for Chinese investment and influence,” said a veteran diplomat with vast experience in Western foreign policy affairs. It is crucial for the US to engage in a more defined approach to minimise unintended consequences that seem to have benefited strategic competitors like China.”

Economic analyst, Chris Chauraya, said the partial removal of sanctions was intended to pave the way for renewed business engagement between Zimbabwe and the West.

“Laurence Socha’s statement regarding the partial removal of sanctions removes some caution and suggests the US is more open to do business with Zimbabwe,” said Chauraya.

“For me coming of the corresponding banks to party will prove the effectiveness of this US foreign policy on Zimbabwe. The coming in of the corresponding banks would be a positive indicator,” he said also describing the new set of sanctions as “significant”.

While the US hopes its latest approach fosters investment and counters China, critics argue targeting leaders, particularly the President who holds executive power, essentially sanctions all Zimbabweans due to its chilling effect on business.

They questioned relevance of removing mostly non-essential individuals from the sanctions list while keeping the President and ZDERA in place, viewing it as a negative step.

Prominent lawyer and legislator, Itai Ndudzo, told Business Weekly that ZDERA’s continued existence stigmatises Zimbabwe, portraying it as a rogue state reliant on foreign intervention for economic and democratic reforms.

“The mere existence of ZDERA subjects Zimbabwe to the perception of being a rogue state that is in need of foreign assistance in the restoration of its economy and democracy,” he said.

“For as long as ZDERA is (in place), Zimbabwe is stigmatised among the nations of the world. So ZDERA brings a huge negative perception on Zimbabwe and raises risk profile.”

Ndudzo noted even companies not directly owned by Government have crumbled due to capital flight and the limited accessibility of foreign capital on the global market.

“With their Head of State still under sanctions, these entities struggle to compete globally.”

Economist, Brains Muchemwa, argues that as long as the President remains under sanctions, every Zimbabwean is affected by the embargo. Muchemwa also emphasised that removing sanctions on individuals and entities will have no significant impact as long as their President and the country’s top leadership remain on the list.

“In my view, nothing significant has changed to warrant celebration,” Muchemwa stated.

“While the sanctions appear targeted, they disproportionately impact ordinary citizens compared to the intended targets. Even American businesses will likely remain hesitant to engage with a country whose President is under sanctions,” said Muchemwa.

“After all, significant business activities in Zimbabwe often require the President’s knowledge, even if he is not directly involved. Imagine a company willing to gamble with its capital by investing in a country with a sanctioned President.”

Chauraya expressed confusion regarding the reasoning behind simultaneously relaxing sanctions while maintaining them on the President and country’s top leadership.

“Remember, the President is like the chief executive of a country. I am struggling to grasp how such a nation can prosper when its leader is under sanctions,” Chauraya said.

“He is the number one marketer of the country and outside the United Nations business, I don’t see him making any mission to market Zimbabwe to US companies. A leader under sanctions might struggle to maintain legitimacy and navigate international relations and will potentially hinder the country’s progress.”

Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube expressed cautious optimism regarding the relaxation of sanctions, stating that it signalled hope for improved diplomatic relations between Harare and Washington.

“It was a welcome. It opens the window for Zimbabwe to engage further with international community in the way that Zimbabwe can be able to access more resources for its economic agenda.

“It is a step in the right direction,” he told the 56th session of the conference of African ministers of finance, planning and economic development in Victoria falls on Tuesday.”

Zimbabwe maintains that over US$40 billion in potential revenue and opportunities have been lost due to sanctions imposed since 2001.

The Government considers the sanctions to be illegal as they were not approved by the United Nations and on Tuesday said all the embargoes were supposed to removed in their entirety

The country, alongside regional countries has consistently called for their unconditional removal. – Business Weekly