Rising US Stakes in Africa

Rising U.S. Stakes in Africa RISING U.S. STAKES IN AFRICA Seven Proposals to Strengthen U.S.-Africa Policy Kansteiner/Morrison A Report of the Africa Policy Advisory Panel CSIS PANEL REPORT PANEL CSIS

Chairman Walter H. Kansteiner III

Executive Secretary J. Stephen Morrison

ISBN 0-89206-446-3

THE CENTER FOR STRATEGIC & INTERNATIONAL STUDIES 1800 K Street, NW • Washington, DC 20006 Telephone: (202) 887-0200 Fax: (202) 775-3199 E-mail: [email protected] • Web site: http://www.csis.org/ Ë|xHSKITCy064465zv*:+:!:+:! May 2004 RISING U.S. STAKES IN AFRICA Seven Proposals to Strengthen U.S.-Africa Policy

A Report of the Africa Policy Advisory Panel

Chairman Walter H. Kansteiner III

Executive Secretary J. Stephen Morrison

May 2004 About CSIS

For four decades, the Center for Strategic and International Studies (CSIS) has been dedicated to providing world leaders with strategic insights on—and policy solutions to—current and emerging global issues. CSIS is led by John J. Hamre, former U.S. deputy secretary of defense. It is guided by a board of trustees chaired by former U.S. senator Sam Nunn and consisting of prominent individuals from both the public and private sectors. The CSIS staff of 190 researchers and support staff focus primarily on three subject areas. First, CSIS addresses the full spectrum of new challenges to national and international security. Second, it maintains resident experts on all of the world’s major geographical regions. Third, it is committed to helping to develop new methods of governance for the global age; to this end, CSIS has programs on technology and public policy, international trade and finance, and energy. Headquartered in Washington, D.C., CSIS is private, bipartisan, and tax-exempt. CSIS does not take specific policy positions; accordingly, all views expressed herein should be understood to be solely those of the author(s).

Cover Photo Credit The GeoSphere Project—Africa © Tom Van Sant/CORBIS

© 2004 by the Center for Strategic and International Studies. All rights reserved. Library of Congress Cataloging-in-Publication Data Africa Policy Advisory Panel. Rising U.S. stakes in Africa : seven proposals to strengthen U.S.-Africa policy /Walter H. Kansteiner III, J. Stephen Morrison. p. cm. Includes bibliographical references. ISBN 0-89206-446-3 1. United States—Foreign relations—Africa. 2. Africa—Foreign relations—United States. I. Kansteiner, Walter H. II. Morrison, J. Stephen. III. Title. DT38.7.A373 2004 327.7306—dc22 2004007540

The CSIS Press Center for Strategic and International Studies 1800 K Street, N.W., Washington, D.C. 20006 Telephone: (202) 887-0200 Fax: (202) 775-3199 E-mail: [email protected] Web site: http://www.csis.org/ Contents

Letter of Transmittal to Secretary Colin L. Powell v Africa Policy Advisory Panel vii Preface ix Walter H. Kansteiner III and J. Stephen Morrison Overview 1 J. Stephen Morrison 1. Crafting a U.S. Energy Policy for Africa 6 David L. Goldwyn and Robert E. Ebel 2. Capital Market and Financial Sector Development in Sub-Saharan Africa 23 Paul V. Applegarth 3. To Guarantee the Peace: An Action Strategy for a Post-Conflict Sudan 50 Dina Esposito and Bathsheba N. Crocker 4. A Natural Resource Conservation Initiative for Africa 88 Nicholas P. Lapham 5. Countering the Terrorist Threat in Africa 104 J. Stephen Morrison and Princeton N. Lyman 6. Crisis Diplomacy and Peace Operations 119 Jeffrey Herbst and Princeton N. Lyman 7. Continuing U.S. Leadership to Combat HIV/AIDS in Africa and Globally 136 Todd Summers Appendix A West Africa Petroleum Sector: Oil Value Forecast and Distribution 151 Appendix B Legislative Language 162 About the Panel Members, Working Group Chairs, and Expert Authors 164

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Center for Strategic & International Studies Washington, DC

February 2, 2004

Secretary of State Colin L. Powell U.S. Department of State 2201 C Street, NW Washington, DC 20520 Dear Secretary Powell: We are pleased to deliver for your review the results of the Africa Policy Advisory Panel that was authorized by Congress in early 2003. We are grateful that you generously agreed to oversee and support this effort. The Panel members and expert authors have proposed several high quality policy initiatives, tied to evolving core U.S. national interests in Africa, that should attract strong interest within this administration, Congress, and the next administration. Each product has been subjected to multiple reviews. Each is attached with an executive summary. In brief, they cover: 1. Postwar Sudan—the urgent security and other challenges it will present (we provided you an early copy in mid-January); 2. Strengthening African capital markets—Paul Applegarth’s work, which has considerable promise to help jump start the Millennium Challenge Account; 3. An elevated U.S. energy approach to Africa—this could help inform the G-8 summit later this year, and is supplemented by a detailed projection by PFC Energy of massive future earnings by Nigeria and Angola, among other key West African oil producers; 4. An Africa conservation initiative—congressional interest is burgeoning in this area. The initiative calls for a focus upon transboundary ecosystems, community- based management, and strengthening Africa’s parks and protected areas; 5. Strengthening U.S. counter-terrorism efforts—the moment may be propitious for a Muslim outreach initiative, enhanced attention to West Africa, and a push to solidify gains in Sudan and test a new approach to Somalia; 6. Strengthening crisis diplomacy and peace operations—the proposal argues for stepping up U.S. diplomatic readiness, while strengthening African peace intervention capacities; 7. Sustaining U.S. leadership on HIV/AIDS—contains a pragmatic menu of steps to build systematically on the momentous gains borne of the President’s Emergency Plan for AIDS Relief.

v Across these diverse proposals, three common binding themes emerge. a. First, Africa has assumed a new strategic place in U.S. foreign policy. This shift is reflective of how 9/11 altered the overall strategic U.S. conception of global security. It is also reflective of how five factors over the past decade have forced a reap- praisal of Africa’s significance: HIV/AIDS; terror; oil; armed conflicts; and global trade. b. Second, sustained senior level U.S. leadership—yours and President Bush’s among the foremost—has changed opinion on Africa, reshaped the boundaries of expectations, eroded old barriers in American thinking, and raised demands for policy innovation matched by demonstrable results. That leadership has emerged in interaction with the intensified mobilization of new American constituencies, including Congress. c. Third, the conceptual shift to a strategic view of Africa brings in its wake demand for new implementing policies, programs, human skills, and finances. A strategic approach cannot be done ad hoc or on the cheap. It requires articulating a coherent new vision that makes the case for new institutional approaches to Africa, backed by serious new funding of choice initiatives. When a peace agreement is signed in 2004 in Sudan, U.S. leadership will be essential to meeting security threats and peace consolidation challenges that will follow. A strategic approach will require long-term attention in Africa to education and building health infrastructure. It will require a priority focus upon building Africa’s private financial sector, engaging more systematically and effectively with Africa’s 300 million Muslims, coming to terms with enduring terrorist threats in broken parts of Africa, and ensuring effective peace operations that are indeed within reach, if there is sufficient political will. Again, in closing, we are proud and honored to have been part of this process and grateful to you for your support of it. After you have had time to review the attached documents, we wish to request the opportunity to meet briefly with you in mid-Febru- ary to hear your thoughts on the results and to discuss possible next steps, including vetting the results both before an interagency audience and in a public conference with input from Congress. With warmest personal regards,

Walter H. Kansteiner III J. Stephen Morrison Principal, Scowcroft Group Director, CSIS Africa Program Chair of the Africa Policy Executive Secretary of the Advisory Panel Africa Policy Advisory Panel

vi Africa Policy Advisory Panel

Chair Executive Secretary Walter H. Kansteiner III J. Stephen Morrison Former Assistant Secretary of State for Director Africa Affairs CSIS Africa Program Principal, Scowcroft Group

Panel Members Kofi Adjepong-Boateng Tom R. Gibian Group Managing Director Managing Director and CEO First Africa Group AIG Africa Infrastructure Fund

Paul V. Applegarth Ambassador Richard T. McCormack CEO, Value Enhancement International Senior Adviser, CSIS Former Under Secretary of State for Pamela E. Bridgewater Economic Affairs Deputy Assistant Secretary, Bureau of U.S. Department of State African Affairs, U.S. Department of State Constance Berry Newman Chester A. Crocker Assistant Administrator for Africa Schlesinger Professor of Strategic Studies U.S. Agency for International Georgetown University Development

Anthony S. Fauci Professor Robert I. Rotberg Director, National Institute of Allergy President, World Peace Foundation, and Infectious Diseases Harvard University National Institutes of Health Director, Program on Intrastate Conflict and Conflict Prevention, and General Carlton W. Fulford Jr. (USMC ret.) Adjunct Professor, John F. Kennedy School Director, Africa Center for Strategic Studies of Government, Harvard University Former Deputy Commander-in-chief U.S. European Command Representative Edward Royce (R-Calif.) Senator Russell W. Feingold (D-Wis.) Peter Seligmann Chairman of the Board and CEO Helene D. Gayle Conservation International Director, HIV, TB, and Reproductive Health Program Bill and Melinda Gates Foundation

vii viii Rising U.S. Stakes in Africa

Working Group Chairs/Expert Authors Paul V. Applegarth, CEO Nicholas P. Lapham President, Value Enhancement Vice President for Policy, Conservation International International Chair, Working Group on a Natural Bathsheba N. Crocker Resource Conservation Initiative Codirector, CSIS Post-Conflict Reconstruction Project Princeton N. Lyman Ralph Bunche Senior Fellow for Africa Robert E. Ebel Policy Studies, Council on Foreign Chair, CSIS Energy Program Relations Cochair, Working Group on Crafting a Cochair, Working Group on Crisis U.S. Energy Policy for Africa Diplomacy and Peace Operations

Dina Esposito J. Stephen Morrison Consultant, CSIS Post-Conflict Director, CSIS Africa Program Reconstruction Project Chair, Working Group on Countering the Terrorist Threat in Africa David L. Goldwyn President, Goldwyn International Michael Rodgers Strategies, LLC Senior Director, Upstream Services, Cochair, Working Group on Crafting a PFC Energy U.S. Energy Policy for Africa Todd Summers Jeffrey Herbst President, Progressive Health Partners Chair, Political Science Department, Chair, Working Group on U.S. Princeton University Leadership to Combat HIV/AIDS Cochair, Working Group on Crisis Diplomacy and Peace Operations Preface

We would like to express our gratitude to the participants and contributors who made possible the successful work of the Africa Policy Advisory Panel. The leadership of Representative Frank Wolf (R-Va.) resulted in the authorization by Congress of the panel, mandated to generate innovative and actionable recommendations on how to strengthen U.S.-Africa policy to Secretary of State Colin L. Powell. Secretary Powell endorsed the panel and empowered it to act expeditiously. The panel further benefited from the active participation and guidance of its members, a diverse group of high-level leaders drawn from Congress, the executive branch, business sector, academies, and foundations. Panel members included Sen- ator Russell Feingold (D-Wis.), Representative Ed Royce (R-Calif.), General Carlton W. Fulford Jr. (ret.), Dr. Helene Gayle, Paul V. Applegarth, Constance Berry New- man, Chester Crocker, Robert Rotberg, Pamela Bridgewater, Peter Seligmann, Thomas Gibian, Kofi Adjepong-Boateng, and Richard McCormack. No less important, our expert authors—Paul V. Applegarth, Princeton N. Lyman, Jeffrey Herbst, David L. Goldwyn, Robert E. Ebel, Nicholas P. Lapham, Todd Summers, Bathsheba N. Crocker, and Dina Esposito—devoted much time and energy in producing the dynamic, pragmatic proposals profiled in the report. We thank Michael Rodgers and Monica Enfield of PFC Energy for a detailed and thorough analysis of past and future oil revenues projected for the oil-producing governments of West and Central Africa. Last, but not least, Nelly Swilla, CSIS Africa Program staff, skillfully oversaw the organization of the panel’s work, including production of the final report. To a significant degree, the panel’s success is attributable to the bipartisan spirit of its deliberations, a testament to the increasing congruence of opinion that Africa is steadily becoming vital to U.S. national interests. Early on in the process, the panel identified seven key issues in Africa that required high-level, sustained U.S. engagement: West and Central Africa’s emergence as key oil suppliers; strengthening Africa’s capital markets and financial sector; a strategy for a post-conflict Sudan; crisis diplomacy and peace operations; countering the terrorist threat; natural resource conservation; and the need to build on U.S. leadership on HIV/AIDS. Last, the panel’s high quality, provocative, analyses and proposals deserve serious consideration by senior leaders in the administration and Congress and by the wider interested public. We welcome the chance to share these results with as broad an audience as possible. Sincerely, Walter H. Kansteiner III J. Stephen Morrison Principal, Scowcroft Group Director, CSIS Africa Program Chair, Africa Policy Advisory Panel Executive Secretary, Africa Policy Former assistant secretary of state for Advisory Panel African Affairs

Overview

J. Stephen Morrison

Introduction

During the Africa Policy Advisory Panel’s opening session on September 12, 2003, panel members advised the panel’s chair, Walter Kansteiner, its executive secretary, J. Stephen Morrison, and its expert authors to be bold and imaginative as they elab- orated their analyses and recommendations for eventual inclusion in the final product to be delivered to Secretary of State Colin Powell in early February 2004. From the advisory panel’s inception, individual panel members worked closely with the secretariat and expert authors throughout the drafting process. At the panel’s second session, December 12, 2003, and its final discussions on January 20, 2004, panel members offered additional suggestions to strengthen the draft papers, sub- stantively and analytically. The panel’s chair, secretariat, and expert authors have taken the panel members’ guidance fully on board and are grateful for their extensive contributions over the past months. The panel commissioned special in-depth studies that were issued in 2004 as free- standing publications: (1) recommendations on the urgent challenges that postwar Sudan in 2004 will present to the United States, the UN, and others, and (2) a proposal to strengthen Africa’s capital markets. Unlike the studies that yielded proposals, the third commissioned study—appendix A, this volume—presents the estimated wealth that oil will bring to five African producing countries in the next six years. Through active working groups, the panel also produced five provocative, detailed proposals for innovations in U.S.-Africa policy: (1) a new U.S. energy policy; (2) measures to strengthen U.S. counterterrorism efforts; (3) a U.S. conservation initiative; (4) a strategy to address chronic crises and instability through strengthened diplomacy and support for priority peace operations; and (5) recommendations for sustaining U.S. global leadership on HIV/AIDS. Together, these products cover several of the most critical challenges before the United States and lay out an ambitious agenda for future action by the Bush administration, Congress, and the next administration. All are central to U.S. policy interests in Africa. Indeed, that was a guiding criterion for their placement on the panel’s agenda. These writings are free of partisan bias, have been subjected to multiple reviews, and have passed through several iterations. Each is accompanied by a brief executive summary. Much effort has been made to coordinate the papers and minimize overlap and duplication.

1 2 Rising U.S. Stakes in Africa

Three Common Themes

Across the different products that the panel has generated, three compelling, crosscutting themes emerge.

Africa’s New Strategic Position First, and arguably most profound, Africa has assumed a new, strategic place in U.S. foreign policy and in the definition of vital U.S. national interests. This shift moves the United States away from the past habit of treating Africa as a humanitarian afterthought and begins to reverse a decade-long decline in the United States’ presence and engagement in Africa. This shift is driven by several powerful factors. Most obvious, September 11 altered the overall strategic U.S. conception of global security and forced a rethink- ing of how Africa fits, taking account of its special humanitarian, security, and developmental needs. The National Security Strategy of the United States of Amer- ica, issued by the president in September 2002, formally argued, in dramatic, unequivocal terms, that Africa had become vitally significant in the quest to combat transnational terror networks and their state sponsors. It made the case, on both moral and security grounds, that a special concerted effort had to be made to save and improve the lives of persons threatened by the HIV/AIDS pandemic. Perhaps less obvious, only after September 11 did the United States begin, ret- rospectively, to appreciate fully how five factors over the previous decade have steadily elevated the significance of Africa to U.S. national interests and, implicitly, stirred a historic challenge to the United States to respond in new, innovative ways. These drivers include HIV/AIDS, terror, oil, armed conflicts, and global trade. HIV/AIDS, terror, and violent war are raw threats. Expanding oil wealth, tied in part to U.S. investment and markets, is an opportunity to diversify U.S. imports from outside the Persian Gulf, but that opportunity could easily go bad and become a threat that worsens instability. The emergence of an African voting block in the WTO is a new factor that can impact U.S. worldwide trading interests, positively or negatively, as the most recent Doha round has demonstrated. The HIV/AIDS pandemic swiftly tore through eastern and southern Africa in the 1990s. Only in recent years has the reality of its destructive power, in Africa and beyond, become manifest, registered among senior officials on the continent, in Washington, D.C., and elsewhere, and begun to generate serious action. Awareness has grown that in many high-prevalence countries the worst is yet to come, as the explosion of new infections in the 1990s translates into mass illness and death in this decade, along with a steep rise in demand for treatment. Further, Nigeria and Ethiopia, with a combined population of more than 200 million, stand at risk of rapidly escalating prevalence rates that, if not effectively stanched, could radically raise the numbers of persons in Africa living with the HIV virus. Also in the 1990s, Africa—and U.S. interests in Africa—came to live under a mounting threat of terror, manifest most tragically in the August 1998 bombings of the U.S. embassies in Dar es Salaam and Nairobi. This threat did not materialize overnight. As in Afghanistan, it took root over several years in Somalia, a forgotten, J. Stephen Morrison 3 broken place left behind for others to exploit. Nor did the threat fade after the 1998 attacks. It endured, and September 11 and the Mombasa attacks in late 2002 forced the United States to reconsider what is truly at stake and how to reduce the threat effectively. U.S. energy stakes in Africa climbed steadily through the 1990s because of the emergence of West Africa as a major supplier, current and future, to world markets. Today, as a historic boom phase of investment and production in Africa’s energy sector unfolds, the United States is challenged to begin reckoning with a future energy relationship with Africa far bigger and more complex than in the past, concentrated among several poorly governed, unsteady states. The center of activity may be offshore, but distance does not insulate the energy sector from dysfunction or debility within Nigeria, Angola, and other energy-rich African states where internal chaos, malgovernance, and external threats abound. Africa in the late 1990s and into this decade came to account for an estimated 75 percent of the world’s most conflict-prone countries and has generated 65 percent of global demand for peacekeeping. African conflicts have placed a persistent and costly claim on the leadership, resources, and time of the UN Security Council, the UN Secretariat, African powers such as South Africa and Nigeria, and Western powers such as Britain and France, which have led military operations into violent African crises, often supported by ad hoc coalitions.

Centrality of High-level Leadership A related, second theme is that Africa’s elevated position grows out of high-level sustained U.S. leadership and choice. Recent years have demonstrated that direct presidential engagement, combined with activism by the secretary of state, the national security adviser, and other high-ranking officials, can move opinion, reshape the boundaries of expectations, erode old barriers in U.S. thinking, and raise pressures for demonstrable results. President Bush, expanding on the precedent set by President Clinton, con- sciously chose to make Africa a higher priority and to mainstream it in U.S. foreign policy. President Bush has been aided by the activism and passion for Africa of Sec- retary of State Colin Powell. At critical moments, National Security Adviser Condoleezza Rice has also boosted U.S. leadership on Africa. It has become clear at many points that the administration understands that heightened engagement in Africa is both sound foreign policy and sound domestic policy: whether it be to seek to end Sudan’s 20-year war through a multilateral, negotiated settlement; to promote expanding trade and investment through the African Growth and Oppor- tunity Act (AGOA); to combat HIV/AIDS; or to strengthen conservation. Important also, the upper levels of the administration have come to recognize that Africa is relatively free of partisan wrangling, that Congress is generally open to White House innovation and leadership on Africa, and that popular opinion in the United States has shifted toward greater support of expanded foreign assistance and new innovative approaches like the President’s Emergency Plan for AIDS Relief (PEPFAR) and the Millennium Challenge Account (MCA). HIV/AIDS and MCA in particular offer rare opportunities for concerted bipartisan action. 4 Rising U.S. Stakes in Africa

White House activism is also indirectly reflective of the intensified mobilization of new domestic constituencies that have acquired an ever-bigger stake and ever more influential voice on matters pertaining to Africa. These include religious con- servatives, nongovernmental groups, environmentalists, the private finance sector, corporate interests, newly formed groups like the International Crisis Group and DATA, and health advocates, among others. Established U.S. foundations have significantly enlarged their investment in African education and health, and in the case of the Soros Foundation, dramatically increased the attention paid to transparency, accountability, and respect for human rights within oil-rich African countries. Since its founding in 2000, the Bill and Melinda Gates Foundation has acquired influence with respect to HIV/AIDS and other infectious diseases that heretofore were chiefly the domain of bilateral donors and international organizations. On Sudan, an exceptional coalition, comprising evangelical Christians, antisla- very activists, human rights advocates, humanitarians, and an array of members of Congress, has sustained pressure on the administration to provide high-level leadership to end Sudan’s war through a just, negotiated settlement. Recent developments attest to the momentous shift that is under way. PEPFAR, the MCA, and increases in development assistance to Africa have more than doubled official bilateral flows to Africa. Washington’s high-level commitment to a negotiated settlement to Sudan’s war has been the single most critical factor in moving the two antagonists to the very edge of a final accord. The president and secretary of state have often, and forthrightly, condemned the tyranny of Robert Mugabe and Charles Taylor.

Elements of a Strategic Approach A third theme is that the shift to a strategic view of Africa requires a commensurate shift in policies, programs, human skills, and finances. At present, there is a gap between our newfound understanding of how vital Africa has become and the sub- stance and action needed to make this realization concrete. The strategic view requires that far more be done, strategically, to invest in capacity building in Africa: in health infrastructure; management of oil wealth; counterterrorism; respect of human rights and rule of law; peacekeeping operations; and conservation. It requires that in these same sectors the United States significantly increase the U.S. presence on the ground in Africa, through expanded recruitment (especially in the intelligence and diplomatic corps), new incentives to pursue career work in Africa, and expanded language training opportunities. Closing the gap will only happen if there is sustained political will, changes in the institutional approaches Washington takes to Africa, and serious new funding for choice initiatives that could add $1 billion or more to annual commitments. Given how much change in U.S. policy is currently under way, and given the risk that security and defense agencies may diverge in their approach from diplomatic and assistance agencies, it is becoming increasingly important that the White House and Department of State articulate, forcefully and clearly, how they intend to integrate diverse, evolving U.S. policy goals into a single coherent strategy. J. Stephen Morrison 5

A strategic approach cannot be undertaken willy nilly, on the cheap, or through adjustments around the edges to established practices. Should a peace agreement in Sudan be signed in early 2004, for example, it will require U.S. leadership to ensure an adequate approach to the security threats and peace consolidation challenges that will follow. A strategic approach will require long-term attention in Africa to education and to building health infrastructure. It will require a newfound priority focus on building Africa’s private financial sector, engaging more systematically with Africa’s 300 million Muslims, coming to terms with the terrorist threat in Somalia and West Africa, and ensuring effective peace operations that combine robust international and Africa-rooted capacities. At home, a strategic approach to Africa will require reinvesting in diplomatic and intelligence capacities, giving special care to ensure that the U.S. global AIDS coordinator’s office succeeds and advancing new policy approaches and initiatives in promoting conservation and managing rising U.S. energy equities in Africa. Finally, a strategic U.S. approach to Africa will require that the United States leverage the resources, leadership, expertise, and political will of partners in Africa, Europe, and the Arab world. All the initiatives proposed in this report require close and persistent dialogue and cooperation with U.S. allies and multilateral institutions. The recent story of heightened U.S. engagement in Africa is laudable and historic. It has put Africa more fully into the global context, it has spurred new enthusiasm and expectations among Americans and Africans alike, and it has created new U.S. institutions matched by significant new leadership and resources. The sustainment and advance of this emergent strategic approach would now benefit from an updated U.S. vision of where Africa stands today, what U.S. interests and goals are, and how the United States intends to carry forward its engagement into the critical next phase. chapter 1

Crafting a U.S. Energy Policy for Africa

David L. Goldwyn and Robert E. Ebel

Executive Summary

Central/West Africa is in the early phases of an extended oil boom that will significantly enhance the global position of Nigeria and Angola and bring greater attention to emergent, unstable producers—Equatorial Guinea, Chad, and São Tomé and Príncipe, most importantly. With proven reserves of more than 60 billion barrels, the region today provides one in four new barrels of oil coming onto world markets from outside the Persian Gulf. In 10 years, if it remains attractive for investment, Central/West Africa could supply up to 20 percent of U.S. imported oil, bolstering vital U.S. energy security and commercial interests. As the region adds 2.5 to 3 million barrels a day to world markets in the next 7 to 10 years, that expansion could bring prosperity or disaster to a fragile region and to complex and expanding U.S. interests there. If these nations achieve greater stability, invest wisely, improve governance, and respect the rule of law, the benefits will be felt throughout the entire region. At the same time, vital U.S. interests in regional stability, counterterrorism, human development, and promotion of democracy and human rights will be advanced. Alternatively, if these nations fall victim to the historical pattern of resource-rich developing nations, corruption will deepen, wealth will be squandered, competition for oil wealth will aggravate internal instability and cross-border violence, and the health, environmental conditions, and life chances of the region’s 200 million citizens will remain stalled. The power of the region’s notorious criminal syndicates will only grow, and U.S. security interests will deteriorate accordingly. The United States should encourage those African leaders who have tolerated the misuse of oil wealth to change. It should give those with the courage to change the capacity to succeed by enabling them to procure skilled management. It should make transparency in governance a benchmark by obliging governments to tell

This chapter refers only to the oil-exporting nations of West/Central Africa that include Nigeria, Angola, Equatorial Guinea, Chad, São Tomé and Príncipe, Cameroon, and Gabon.

6 David L. Goldwyn and Robert E. Ebel 7 their citizens, in a comprehensive, highly visible manner, what revenues the government earns and where it spends them. The United States should use diplomacy as its primary tool for engaging African heads of state, U.S. energy companies, and allies and competitors in Europe and Asia in a common effort. It should coordinate all the programs of the U.S. government in Africa, from military support and training to Department of Commerce and Department of Energy programs, to rule of law and relief programs, to foster better governance. It should use debt relief and aid where appropriate. No wealthy nation should receive charity; no poor country should enjoy financial relief before they have proven their performance through irreversible public steps. Energy policy is a tool by which the United States can promote its own vital interests, rather than an end in itself.

Recommendations The leverage the United States can muster, in coalition with others, is not over- whelming and will diminish by the end of the decade. The following recommendations call for the construction of an effective, new U.S. energy approach to Africa that introduces a new policy structure and selects new bilateral and multilateral policies. ■ Designate a special adviser to the president and secretary of state for African energy diplomacy, with ambassadorial rank, to lead interagency policy. This person should be housed at the State Department but endowed with authority by the National Security Council to lead interagency policy. The special adviser must have a clear mandate with authority to interact with the G-8 process and other multilateral forums and to coordinate policy with the U.S. ambassadors of Central and West African nations. ■ Devise a clear and transparent benchmark for regional behavior, complementary to the standards for the Millennium Challenge Account. The touchstone should be a public commitment to transparency in public finance, signifying verifiable, public disclosure of government revenues and expenditures. ■ Make committed nations eligible for bilateral and multilateral programs. • Bilateral programs could include a U.S.-hosted biannual African Energy Producer Summit, appended to the G-8 meeting or the annual African Growth and Opportunity Act (AGOA) summit, singling out countries that manage their oil wealth well, and increasing peacekeeping training and International Military Education and Training (IMET) support for nations that adhere to transparency and good governance criteria. • Multilateral programs could include conditional long-term rescheduling or forgiveness of sovereign debt through the Heavily Indebted Poor Countries (HIPC) process; financing for national electrification in exchange for transparency and development commitments; long-term capacity-building programs to train national officials in management of public finance and petroleum reserves; provision of conditional trade finance based on a commitment to use resources for national development and to agree to 8 Rising U.S. Stakes in Africa

transparent monitoring and auditing of project income; and ensuring that all national or correspondent banks that have relationships with G-8 banks disclose the beneficial owners of those accounts to prevent government officials from using Western banks to hide misappropriated funds. ■ Implement specific bilateral policies. • Nigeria. The United States should encourage current plans for implementation of a reformist economic plan, reimplementation of an anticorruption commission, and reforms at the natural resource ministry by showcasing these reforms at the 2004 G-8 Summit or the 2004 World Bank/IMF meetings. • Angola. The United States should establish the same consultative mechanism to encourage Angolan reformist efforts. The United States should also push the IMF to establish a shadow agreement with Angola that will ensure transparent spending of oil money, attaching conditions of transparency to its loans, donor assistance, and debt relief. • Equatorial Guinea, Chad, Cameroon, and São Tomé. The United States and the international community should provide these countries with expertise and advice to manage oil funds with strong oversight and accountability, as well as funding to help build this capacity. • São Tomé and Príncipe. The United States and the UK, together with the World Bank and IMF, should offer to swap bilateral and multilateral development assistance for a commitment to transparency.

Conclusion The United States must use its limited leverage in this brief window of opportunity to press governments to become transparent, spend their revenues for the betterment of their people, and respect human rights and the rule of law. U.S. leadership can muster a coalition of other nations, international financial institutions, industry, and nongovernmental organizations (NGOs) behind a common purpose. To be effective, the U.S. government needs to streamline and better coordinate its African energy policy. Although the Department of State is not currently organized, empowered, or resourced to lead a robust and informed U.S. energy policy in Africa, this constraint can be surmounted at relatively low cost and effort. The United States must take advantage of this unique historical opportunity to use the windfall of oil revenues for development in a continent ravaged by war, disease, and endemic poverty. By doing so, the United States will not only do the right thing for Africa, but will also protect its own vital interests in the region.

Introduction

Guinea, Chad, and São Tomé and Príncipe, most importantly. The bulk of new production will come from sizeable offshore finds in deep water. As the region adds approximately 2 to 3 million barrels per day to world markets in the next five years, that expansion could bring prosperity or disaster to a fragile region and to complex and expanding U.S. interests there. If these nations achieve greater stability, invest wisely, improve governance, and respect the rule of law, the benefits will be felt throughout the entire surrounding region. At the same time, vital U.S. interests in regional stability, counterterrorism, human development, and promotion of democracy and human rights will be advanced. Alternatively, if these nations fall victim to the historical pattern of resource- rich developing nations, corruption will deepen, wealth will be squandered, competition for oil wealth will aggravate internal instability and cross-border violence, and the health, environmental conditions, and life chances of the region’s 200 million citizens will remain stalled. The power of the region’s notorious criminal syndicates will only grow, and U.S. security interests will deteriorate accordingly. The United States has vital national security interests in the direction Africa takes on transparency. What is at stake is whether these nations practice democracy or despotism, whether they develop or degrade into hostile or unstable populations, whether they respect human rights or manufacture more armed conflict that breeds crime syndicates or terror, and whether they are a source of diverse energy supply or a source of volatility that impairs global economic growth. Energy policy is a tool by which the United States can promote its own vital interests, rather than an end in itself. It is a certainty that oil will be produced in this region regardless of what the United States or other governments do. But the United States, in concert with other nations that invest in the region, has important leverage that can promote reform. There is leverage in the need of regional leaders to deliver economic benefits to their people now. There is leverage in their need for access to global capital to finance infrastructure and carry their own share of energy exploration costs. There is leverage in the need of energy companies and energy consumers to ensure that these regional producers are politically stable and able to meet their potential as exporters. Together these interests provide a powerful coalition for reform. Mineral-rich African nations can achieve stability and development if their leadership pursues a modernizing vision that drives reforms past powerfully entrenched, recalcitrant forces and builds an enduring, internal consensus around development, accountability, and democratic governance. Such a process will be fraught with risks and can only evolve slowly over many years of sustained effort. Both Nigeria and Angola have made tentative and initial steps toward reform that should be commended, but the challenges facing national leadership are great. The prospects of success can be significantly enhanced if external partners bring to the table a combination of robust incentives to reform and strong counter pressures against corruption and misrule. The United States is best positioned to lead in promoting reform among oil-rich Central and West African states, provided it musters the political will and exercises sufficient diplomatic skill to mobilize other major powers, international institutions, and corporate interests around a common, multilateral approach. Though European nations have greater investments, only the 10 Rising U.S. Stakes in Africa

United Kingdom appears at all inclined to use its leverage to promote reform. With greater influence in the World Bank and IMF, and greater stakes in regional security and a greater commitment to deter terror and crime by fostering economic development, U.S. leadership is indispensable and unparalleled. The United States cannot succeed in delivering reform on its own. European- based oil companies, particularly companies based in the UK, the Netherlands, France, and Spain, have larger investments in Africa than U.S.-based companies. State-owned national oil companies, such as China’s and Malaysia’s, will continue to compete for access to African energy reserves without concern for transparency or human rights. The more nations the United States can engage on common principles for the promotion of transparency, development, and respect for human rights, the more effective U.S. leadership will be. There is a brief window of opportunity, perhaps the next three years, to use diplomacy, the support of the U.S. Congress, global attention to transparency issues, and the support of European governments to advance U.S. interests and to effect lasting and important change in Africa. This window is the gap between today, when regional governments have yet to see the profits from new investments because the major oil investments in the region are in the phase where costs are being recovered, and the day when the government share of oil revenues will be so large that they can act with impunity. The leverage the United States can muster, in coalition with others, is not over- whelming and will diminish by the end of the decade. The strategy of the United States should be to foster the courage of African leaders who have tolerated the misuse of oil wealth to seek change. The United States should give those with the courage to reform the capacity to succeed, by enabling them to procure skilled management. It should make transparency in governance its benchmark, by obliging governments to tell their citizens, in a comprehensive, highly visible manner, what revenues the government has and where it spends them. The United States should encourage those governments to make all payments transparent, whether they come from public or private companies. It should launch a focused effort to get U.S. oil companies to support revenue and expenditure transparency and to make themselves accountable. It should use diplomacy as the primary tool for engaging African heads of state, U.S. energy companies, and allies and competitors in Europe and Asia in a common effort. The United States should coordinate all the programs of the U.S. government in Africa, from military support and training, to Department of Commerce and Department of Energy programs, to rule of law and relief programs, to foster better governance. It should use debt relief and aid where appropriate. The United States should be firm. No wealthy nation should receive charity; no poor country should enjoy financial relief before they have proven their performance through irreversible public steps. The United States should also organize its government for success by appointment of a senior official, a special adviser to the president and the secretary of state, with ambassadorial rank, who can coordinate this policy for the U.S. government and engage foreign governments at the head-of-state level. This spring the United States will have a powerful and visible opportunity to exercise its leadership on this issue, as it hosts the G-8 summit in Sea Isle, Georgia. David L. Goldwyn and Robert E. Ebel 11

Preparations for the summit have just begun; any effort to launch a major new initiative would require an exceptional interagency effort. The G-8 nations account for the vast majority of investment in Africa and dominate decisionmaking in the international financial institutions. The United States can build on the 2003 G-8 Evian Declarations and UK prime minister Tony Blair’s leadership on the Extractive Industries Transparency Initiative (EITI) with a U.S.-led governance initiative. The United States should also use global attention to the summit to announce a new set of U.S. bilateral efforts to work with partner countries, such as South Africa, producing nations, multilateral organizations, and the U.S. energy industry to advance its new agenda. The following analysis examines rising U.S. energy stakes in Africa, Africa’s wealth in the energy sector, concentrated among a few select countries, and the risks and challenges that oil-producing nations face in realizing their potential. It further examines sources of U.S. and multilateral leverage in Central/West Africa and makes specific recommendations to construct an effective, new U.S. energy approach to Africa that calls for a new policy structure and select new bilateral and multilateral policies. It argues that the Department of State is not currently organized, empowered, or resourced to lead a robust and informed U.S. energy policy in Africa but that this constraint can be surmounted at relatively low cost and effort.

Rising U.S. Energy Stakes in Africa

The United States has burgeoning energy interests in Africa. U.S. energy security depends on access to diverse, affordable supplies of oil and gas. Today, Central/West Africa, with proven reserves of more than 60 billion barrels, double the estimates of a decade ago, provides one in four new barrels of oil coming onto world markets from outside the Persian Gulf. The region’s energy-endowed countries supply 13 to 14 percent of U.S. oil imports, positioning the region as the fourth-largest source of imports. To an exceptional degree, these countries are open to direct foreign shares in exploration and production partnerships. Over the past several decades, they have offered competitive commercial terms and a relatively stable investment climate, despite persistent internal turmoil. Nigeria (the fifth-largest supplier to the United States, with proven reserves of 28 billion barrels) and Angola (the ninth- largest supplier, with proven reserves of approximately 17 billion barrels) are the predominant suppliers and are projected to become even more dominant in coming years. According to the Department of Energy’s Energy Information Agency estimates, in 2003, Cameroon, Chad, Equatorial Guinea, and Gabon will export approximately 500,000 barrels per day (b/d) in aggregate, with 221,000 b/d destined for U.S. terminals. The São Tomé and Príncipe micro-state, with a population of just 140,000 and probable reserves of 4.6 billion barrels or more, is just beginning to explore for oil and gas and has recently granted exploration rights for the offshore zone it administers jointly with Nigeria. The signing bonuses alone for these initial concessions, due to arrive in early 2004, will bring the São Tomé government an estimated $100 million to $185 million, several times São Tomé’s current national budget. 12 Rising U.S. Stakes in Africa

The United States has enormous commercial interests in Central and West Africa as well. U.S. companies have invested billions of dollars in Africa’s energy sector and are scheduled to invest billions more. “Super majors” such as ExxonMo- bil and ChevronTexaco and “independents” like Devon, Marathon, and Unocal have major interests in the protection of thousands of U.S. employees and a stake in the promotion of a stable investment climate and respect for the rule of law. It is thought that U.S. energy stakes in Africa account for more than 100,000 U.S.-based jobs, concentrated in Louisiana, Texas, and California. In 10 years, if the region remains attractive for investment, Central/West Africa could supply up to 20 percent of U.S. imported oil, bolstering U.S. energy security. These countries will not replace Middle East oil. But they will provide ample volumes of new non-Gulf barrels that will greatly influence world prices. Furthermore, these mostly non-OPEC countries,1 a short distance from the eastern United States (half the hauling distance of Middle East producers), will raise competitive pressures on OPEC producers.

Africa’s Potential Wealth Energy dominates external investment in Africa. Africa attracts only 1 percent of the world’s trade and investment, but 90 percent of that amount is in the oil sector. This makes effective management of oil revenues the single most strategic factor in Africa’s economic development, bar none. Africa could enjoy enormous wealth this decade. PFC Energy projects that $43 billion of foreign investment is scheduled to be made in Africa’s energy sector in this decade. U.S. companies are projected to contribute $16 billion of this amount. European investment is even greater, estimated to be $27 billion. This investment will generate earnings to government coffers of approximately $43 billion for Angola, $110 billion for Nigeria, $10 billion for Equatorial Guinea, and $2 billion for Chad. São Tomé and Príncipe is projected to see historic, increased oil revenues, while revenues in Cameroon, Gabon, and Congo will be flat or in decline. The impact of this wealth on these nations could be dramatic. On a per capita basis, these flows would produce a benefit of approximately $4,000 per person in Angola, $820 in Nigeria, $230 in Chad, and $1,900 in Equatorial Guinea. The long-term stakes are no less impressive. The International Energy Agency’s World Investment Outlook 2003 projects that investment in Africa’s oil sector from 2001 to 2030 could reach $360 billion, much of which will go to Central/West Africa. Africa is also slated to become a significant source of liquefied natural gas (LNG). As natural gas consumption and global demand for LNG rise dramatically, African countries will be able to significantly increase their revenues by utilizing their abundant natural gas resources.

1. Nigeria is the only Central/West African exporter that is a member of OPEC and thus bound by OPEC quotas. David L. Goldwyn and Robert E. Ebel 13

Key Priorities

Risks and Challenges to African Energy Development It is far from certain that Africa will benefit developmentally from these projected riches. The greatest impediments include internal unrest, corruption, terrorism, oil price volatility, and HIV/AIDS. These risks and challenges are significant because they impact vital U.S. interests including averting the creation of failed states that harbor terrorists, reducing regional conflict that destabilizes allies and partners in Africa, containing the spread of HIV/AIDS, and protecting a major source of energy supply. Poor Governance. Governments that squander national wealth, enrich their leaders while impoverishing their populace, sustain misrule through forced and stolen or fraudulent elections invite civil unrest, coups, strikes, or insurrection. And today, they increasingly scare off external investors who are subjected to new, intensifying pressures. More than ever, shareholders are beginning to hold companies accountable for their investments in nations that behave badly. Major pension funds, for instance, are demanding that companies review the appropriateness of investing in countries that are on the U.S. list of state sponsors of terrorism. Corporate leaders can be expelled from office rapidly for associating too closely with notorious figures who routinely bribe government leaders. Alien Tort Claims Act cases, while still in process, put companies at risk for the bad actions of host governments. U.S. companies are prohibited by law from paying bribes to foreign government officials. NGO scrutiny of foreign government practices makes negotiating with corrupt governments an increasingly risky and unattractive business. Civil Unrest. Companies will only invest where the country and operating risks are tolerable. Of the 45 to 50 percent increase in African oil production this decade, most will come from offshore oil reserves. That distance offers operators only thin insulation from internal turmoil and misrule. In previous periods (e.g., the Angolan war of the 1980s and 1990s), the expansion of offshore production appeared to be minimally affected by protracted onshore instability. Today, however, attitudes, norms, and global competition are changing, such that internal unrest or cross-border violence can seriously slow investment and development. Nigeria and São Tomé are likely to be two important test cases of this proposition. In Nigeria, severe unrest in the Niger Delta persists. Foreign workers have been held hostage for weeks at a time. Sabotage of oil pipelines has killed hundreds of Nigerians. A major strike in March 2003 knocked 800,000 barrels of oil per day off the market, adding pressure to already high oil prices. Production was shut down for months for security reasons; today, more than 200,000 barrels per day remain shut in by violent internal action. Labor unions, accurately foreseeing the reduction in personnel needed to maintain offshore oil operations, are also threatening to shut down operations. No less alarming, armed ethnic militias acting in concert with criminal syndicates steal 100,000 to 200,000 barrels per day in the Niger Delta and are able to defy the power of the dilatory Nigerian military, illicitly supply regional refineries, and thereby undermine regional stability. 14 Rising U.S. Stakes in Africa

São Tomé experienced a coup attempt in mid-July 2003 against President Fradique de Menezes—only weeks after he had followed Secretary of State Colin Powell to the stage of the Corporate Council on Africa Summit in Washington, D.C., espousing the need for transparency in the use of potential oil revenues. Inter- nal disputes over the fairness of oil contracts, military dissatisfaction with housing conditions, and the use of mercenaries against a weak and unhappy civil defense were all factors in the coup attempt. Doubts over São Tomé’s long-term stability now cloud U.S. official calculations of how best to protect that micro-state against regional predatory interests acting in league with internal conspirators. Corporate investors skeptical of São Tomé’s stability could slow or postpone commitments to develop its resources. Recent bidding for blocks in São Tomé’s Joint Development Zone with Nigeria generated a lower level of interest from the super majors than was anticipated. Terrorism. The continued threat of terrorist attacks against oil production installations, tankers or refineries is real: witness the Al Qaeda attack in early 2003 on a French oil tanker off the Yemen coast, and Osama bin Laden’s February 2003 pronouncement that Nigeria is a global target of opportunity. Yet the coastal nations of Central/West Africa have no significant maritime security to protect oil rigs and facilities. Other nations, such as Equatorial Guinea and São Tomé, have no significant military forces whatsoever. Patrolling their borders and seas is utterly beyond their current capacity. Within the past two years, the United States has concluded six new military access agreements in sub-Saharan Africa, of which three are in Central/West Africa: Gabon, Ghana, and Senegal. Oil Price Volatility. Oil prices have been more volatile in the past 5 years than the previous 50. Prices dropped in 1998–1999 to $10 per barrel and thereafter spiked to $35 per barrel. The future is uncertain, but slow economic growth, unabated Russian oil production, or a Saudi Arabian policy of recapturing market share could soften prices and significantly slow the pace of new investment. War, terrorism, or unrest in any single large supplier could also spike prices for a sustained period of time. African nations will need to budget conservatively to avoid overshooting revenue projections. HIV/AIDS. Nigeria reports an HIV-prevalence rate among adults of just below 6 percent. By comparison with southern and eastern Africa, this seems modest. However, when one considers that Nigeria has 130 million citizens and that few experts have much confidence in the official prevalence estimates, and indeed consider the actual rates to be much higher, it is altogether possible that Nigeria already has the highest number of people living with the HIV virus of any country in the world. President Olusegun Obasanjo has shown strong leadership within Nigeria and continentally on HIV/AIDS and has committed his country to ambitious targets to deliver expanded treatment, prevention, and care programs. In recognition of these early gains, President George W. Bush included Nigeria among the 14 focal countries of his $15-billion five-year Emergency Program for AIDS Relief. Far more negatively, however, reports persist of chaotic implementation of antiretroviral treatment programs and gross shortfalls in infrastructural capacity. As Nigeria’s oil wealth expands, two issues will likely become far more salient: intensifying pres- David L. Goldwyn and Robert E. Ebel 15 sures from a large population of people living with HIV for expanded and costly benefits; and greater pressure from external donors for proof that Nigeria’s burgeoning oil earnings are being dedicated to the expansion of health services. Regarding Angola, Chad, Cameroon, Gabon, Equatorial Guinea, São Tomé and Príncipe, none as of today has serious or credible national AIDS programs. External donor and UN programs focused on HIV/AIDS are minimal and weakly funded. In future years, it is projected that the prevalence rates in these countries will escalate steeply.

Sources of Leverage

It is a challenge for the United States or other nations to exercise leverage over countries like Angola, Nigeria, or Equatorial Guinea. In a global market, these nations can choose among investors, borrow against future oil revenues in private capital markets, and use public funds for private use, often with impunity. U.S. leverage varies by country, but there are several options. Reputation. African leaders are frequently caricatured as thieves, thugs, kleptocrats, and worse. Many resent this stereotyping and strongly desire respect- ability. For senior leaders like Nigeria’s Obasanjo, Angola’s dos Santos, and Equatorial Guinea’s Obiang, a meeting or picture with a U.S. president or secretary of state has high value in shoring up their domestic as well as international standing. The United States traditionally offers or denies such access contingent upon progress in the management of national economic affairs and the quality of governance. More systematic use of this access can be a powerful tool. Debt Relief. The greatest source of influence that the West has over Nigeria and Angola is their sovereign debt. However, this leverage is limited and short lived. The United States should consider a G-8 “debt for transparency” initiative to forgive the debt of developing oil producers that make enforceable commitments to publish the aggregate amounts of their tax, royalty, and other resource payments and public expenditures, expedite development plans, and accept IMF monitoring of their commitments. Debt relief should be carefully structured and dependent on the implementation of verifiable reforms in governance, transparency, democratization, and development. Some may question whether it is prudent to offer debt relief to a nation like Nigeria, which has squandered enormous wealth and will soon enjoy billions more in revenue. If there is visible and irreversible progress on government transparency, we believe that debt relief for Nigeria and Angola is prudent, because it is the primary source of leverage the international community has, because much of this debt was incurred by despotic governments that were tolerated by the West, and because the ability of the United States to use debt relief to achieve transparency serves U.S. vital interests. The funds saved by debt relief can be directly translated into infrastructure investment, and health and education. This “dividend” is the essence of the incentive lenders will have to reform. Such an offer of debt relief may offend the sovereign sensibilities of many nations, but it would generate a domestic debate in 16 Rising U.S. Stakes in Africa those nations over the costs and benefits of transparency. This would go well beyond the scope of the IMF’s Heavily Indebted Poor Countries Initiative (HIPC). HIPC itself could also be amended to focus directly on curbing corruption and promoting transparency. Of the Central/West African oil producing countries, only Cameroon, Chad, and São Tomé and Príncipe, and potentially Angola, are currently eligible for debt relief under the HIPC initiative. Electricity Investment. Energy poverty—the lack of access to regular sources of electricity—is widespread in Africa, even in oil-wealthy nations. Only 15 percent of Angolans have access to electricity; Nigerians commonly describe the National Electric Power Authority (NEPA) to mean “no electric power always.” In nations with long-standing access to wealth, like Nigeria or the Democratic Repub- lic of the Congo, the sources of this poverty are numerous: failure to charge a nominal price for electric power; degraded generation and transmission lines; or lack of metering. In traditionally poor nations like Equatorial Guinea, Chad, and São Tomé, the cost of building an entire system far surpasses these nations’ wealth or will at minimum require external financing. The International Energy Agency (IEA) estimates that Africa will need $609 billion for electricity sector investment alone between 2001 and 2030, much of which will be needed in West/Central Africa. It will be impossible for any African government to finance even a fraction of this investment without help from the international financial community. Even wealthy African producers will need serious technical assistance to manage such major development efforts. The World Bank has already had some success in this area. Nigeria was offered financing for renovating its transmission system in 2000, conditioned on power pricing reforms. Nigeria initially failed to make the required reforms, and the loan was withheld. Today Nigeria has returned to the bank, having mustered the political will to make the changes needed. Trade Financing. Given the political uncertainty in the region, nearly all significant investments require sovereign risk insurance or trade financing. The col- lective power of the G-8 nations, including the European Union, to impose conditions on trade finance is a powerful tool that could influence national behavior.

Policy Recommendations

A New U.S. Africa Energy Policy An effective Africa energy policy must have strong leadership, the ability to coordinate policy at an interagency level, resources to create incentives, and power to enforce penalties. An effective policy must be regional in its standards, but particular in its use of leverage to motivate individual country behavior. Organization. The State Department is not well organized to lead and manage a multi-sectoral policy. Bilateral policy is led by the Africa Bureau; human rights and democracy policy by the Democracy, Human Rights, and Labor Bureau; and energy policy itself by Economic and Business Affairs along with the Energy Department and the Commerce Department. The military commands have charge David L. Goldwyn and Robert E. Ebel 17 of bilateral military support programs. Multilateral economic policy is formulated at the White House and Treasury, with input from the under secretary of state for economic affairs. Three separate under secretaries of state share different aspects of U.S. bilateral policy; none is invested in cultivating sustained relationships with African leaders. We propose that a special adviser to the president and secretary of state for Afri- can energy diplomacy (S/AED), with ambassadorial rank, be designated to lead interagency policy. This person should be housed at the State Department but endowed with authority by the National Security Council to lead interagency policy. The ambassador must have a clear mandate, authority to interact with the G-8 process and other multilateral forums and to coordinate policy with the U.S. ambassadors of Central and West African nations. The successful Caspian Basin Energy Diplomacy (CBED) model effectively coordinated political, economic, and governance issues for the nascent Caspian nations for several years. The special adviser would develop relationships with senior African leaders; coordinate political, economic, military, and governance policy for the U.S. government; liaise with like-minded nations; and brief the Congress on U.S. policy. The special adviser might chair a U.S.-Africa Energy Policy Business Advisory Council to work with U.S. industry on a coordinated, consistent, and effective basis to address transparency, governance, human rights, and democracy issues. Regional Policies. The United States should devise a clear and transparent benchmark for regional behavior, complementary to the standards for the Millen- nium Challenge Account. The touchstone should be a public commitment to transparency in public finance, signifying verifiable, public disclosure of government revenues and expenditures. The challenge is to ensure that oil exporters do not enjoy lower standards for governance simply because of their resource wealth. Any leader who makes such a commitment would meet with the secretary of state and be eligible for regional support programs. The level of support for a nation would be calibrated to concrete irreversible actions and the level of development. Bilateral programs that committed nations would be eligible for include: ■ African Energy Producer Summit. The United States should meet once a year with African oil producers. The summit would provide a platform for governance issues and could be appended to the G-8 meeting or the annual AGOA summit. Invitations to hold biannual summits could be restricted to those countries practicing transparency and good governance and would serve to single out countries that manage their oil wealth well. Subcabinet officials could have functional meetings on energy (as well as agriculture, trade, and other issues) to develop relationships and reform programs with committed nations. ■ Peacekeeping and IMET Training. The United States should dramatically increase peacekeeping training and International Military Education and Train- ing (IMET) support for nations that commit to respect human rights norms and adhere to transparency criteria. Increased support should follow positive steps on transparency and governance, not precede it. The United States should 18 Rising U.S. Stakes in Africa

help to establish and train an African maritime force to protect offshore oil rigs, contingent on mandatory human rights training. Multilateral programs for which committed nations would be eligible would include: ■ Debt for Transparency. The burden of debt puts pressure on public budgets, stunting development and giving politicians little space for satisfying public demands. OECD governments could offer a debt-for-transparency swap. If host governments agree to adopt public budgeting, making income and expenditures accessible to the broad public, and negotiating a domestic investment program with the World Bank, creditor governments should agree to conditional long-term rescheduling of sovereign debt or even debt forgiveness through the HIPC process. Debt relief must be structured. Governments should take irreversible public steps on transparency and governance before they earn significant relief. Any rescheduling should be cancelled if the government fails or reneges on its transparency and development commitments. ■ Power for Good. African nations will need multilateral financing support for electric power and other infrastructure. The United States should lead a G-8 effort to fund a fresh, conditional commitment to financing national electrification, based on new contributions by World Bank shareholders, in exchange for transparency and development commitments by the recipient nation. The soon-to-be-tested World Bank investment in the Chad-Cameroon pipeline is an early model of how such an investment can be leveraged. ■ Capacity Building Trust Fund. Most African nations lack the human capital to prepare, audit, and monitor public finance and to manage their petroleum reserves. The United States and other nations must provide a long-term capacity-building program to train national officials in these essential skills and link U.S. and African academic institutions to provide education on an ongoing basis. The program must be based in Africa and tailored to African needs. The United States can work in cooperation with Britain and build on programs that are part of EITI. In addition, programs should include capacity building for civil society and local NGOs that are interested in monitoring government revenue and expenditures. The United States could consider establishing trust funds for capacity building through the G-8, the United Nations, or ad hoc donors group to maximize the effectiveness and quality of these efforts. ■ Conditional Trade Finance. Energy development is capital intensive, and trade financing through the Export-Import (Ex-Im) Bank, the Trade and Development Agency, and international equivalents plays a critical role. The primary role of U.S. trade agencies is of course to promote trade—by making it attractive to buy U.S. goods. Any system that unilaterally adds costs or conditions to U.S. trade finance, without parallel measures by Europe and Asia, is doomed to fail in its objectives and to punish U.S. companies. Yet there is now widespread acceptance of the need for an environmental impact assessment before any project receives Ex-Im or World Bank financing. If it can be univer- sally adopted, it may be worth adding a developmental impact statement for David L. Goldwyn and Robert E. Ebel 19

projects in underdeveloped countries. To obtain financing, countries would need to demonstrate a commitment to using the proceeds of the resources for national development and to agree to transparent monitoring and auditing of project income to obtain finance. ■ Capital Market Access. G-8 nations can ensure that all national or correspondent banks that have relationships with G-8 banks disclose the beneficial owners of those accounts to prevent government officials from using Western banks to hide misappropriated funds. G-8 banking authorities should also consider mandating all G-8 banks to disclose to the IMF any oil-backed private loans made by oil-producing nations. This disclosure would assist the IMF in verifying a country’s entitlement to debt relief. Bilateral Policies. U.S. policy should be flexible. Ideally the United States would support nations in their homegrown programs for increased transparency, avoiding heavy-handed demands. This may result in U.S. support for indigenous efforts, quiet diplomacy directly with nations or through third parties, or support for multilateral efforts. The U.S. focus should be on mustering concrete support for serious commitments to reform, rather than a U.S. stamp on reform efforts. For wealthy nations, or those with adequate resources, the United States may offer technical assistance on a reimbursable basis, to ensure a nation receives quality advice. In other cases, aid may be appropriate to help finance capacity building in nations with no management infrastructure. ■ Nigeria. The State Department should establish a high-level bilateral consultative mechanism to work in conjunction with the proposed special adviser for African energy diplomacy to encourage and assist the Nigerian government in its reform efforts. The United States should encourage President Olusegun Obasanjo’s early steps toward reform in his second and final term in office. The United States should encourage current plans for implementation of a reformist economic plan, reimplementation of an anticorruption commission, and reforms at the natural resource ministry by showcasing these reforms at the 2004 G-8 Summit or the 2004 World Bank/IMF meetings. The United States should send the secretary of the treasury to Nigeria to develop a bilateral debt relief program with Nigeria’s new finance minister to bolster her leadership. The United States should develop and offer G-8 adoption of an oil tagging system, analogous to the Kimberley Process for identifying conflict diamonds, to curb the growing problem of the illicit theft of more than 100,000 barrels of oil per day. Technology exists to trace oil chemically in a fashion that would allow purchasers to distinguish between legitimate and stolen oil and products. Industry supports this effort. If the Nigerian government agrees to this program, it would serve to reduce corruption of government officials involved in oil sales, shipping, and customs. ■ Angola. As with Nigeria, the State Department should establish a high-level bilateral consultative mechanism to work in conjunction with the proposed 20 Rising U.S. Stakes in Africa

special adviser for African energy diplomacy to encourage and assist Angolan efforts for reform. The United States should push the IMF to establish a shadow agreement with Angola that will ensure transparent spending of oil money, attaching conditions of transparency to its loans and debt relief. The U.S. government should offer bilateral support for capacity building, encourage full budget disclosure, and encourage Angola to commit to take part in transparency initiatives such as the British sponsored EITI. The United States should work in coordination with other donors, investors, and debt holders to ensure a common policy and that the Angolan government respects the terms of agreement. The State Department should support an international donor conference contingent on the government’s ability to implement reforms. ■ Equatorial Guinea, Chad, and São Tomé and Príncipe. Each of these nations should be introduced to accountability, transparency, and public oversight in handling oil revenues from the very beginning if economic growth, higher living standards, and a strengthened private sector are to be assured. These small countries face many choices as they await the wealth to be generated by impending oil booms. The United States should provide experts and consultants to counsel these countries on how to build the capacity to manage potentially billions of dollars in revenue conditional on progress in governance and transparency. The United States should engage bilaterally with these countries to counterbal- ance the influence of their powerful neighbors, Nigeria and Angola, to keep the public informed and involved, and to hold leaders accountable for the equitable distribution of wealth. The United States and the international community can provide these countries with expertise and advice on how to manage oil funds with strong oversight and accountability, as well as funding to help build this capacity. An independent citizen’s advisory council offers a workable approach to orga- nizing public oversight of export-derived revenues. The United States should encourage nations to adopt, where applicable, the mechanisms of the Chad/Cameroon pipeline model, such as audited escrow accounts, citizen advisory groups, national development plans, external auditing, and publication of revenues and expenditures. ■ Equatorial Guinea. The United States should upgrade its special embassy post to a full embassy. The United States can use the lengthy process for obtain- ing resources for an embassy to leverage progress from Equatorial Guinea on transparency, development, and human rights issues. A new ambassador should be empowered to approve IMET training and to award capacity-building scholarships contingent on progress on transparency and human rights. Given this government’s relative wealth, much of its assistance should be on a reimbursable basis. David L. Goldwyn and Robert E. Ebel 21

■ São Tomé and Príncipe. São Tomé and Príncipe should be a test case for international collaboration. The country is at a delicate moment in its history, with great oil potential and significant signing bonuses for exploration in the offing. The United States and Britain, together with the World Bank and IMF, should offer to swap bilateral and multilateral development assistance for proof of their commitment to transparency. For example, the IMF should create a 10-year line of credit for São Tomé, in exchange for a secured pledge of the country’s pending signing bonuses and a security interest in future oil revenues. The World Bank should offer long-term credits, based on monetization of São Tomé’s future oil revenues, which could be drawn on if exploration results prove out over time. In exchange, São Tomé should agree: to channel oil revenues through a World Bank–designated account in an internationally accredited offshore bank; to commit to international auditing of oil accounts, with income and expenditures published on the Internet; to create a broad-based committee of São Tomé citizens and officials to work with the World Bank on a national development plan; and to adopt a transparent national budgeting system, consistent with São Tomé’s constitution. By offering São Tomé a line of credit now, the World Bank can help the country get a jump-start on development and smooth its revenues over the next 5 to 10 years. President Menezes can secure São Tomé’s nascent democracy by committing to transparent use and monitoring of funds. The country can continue to attract investment by offering the international community a more stable business climate, respectful of the sanctity of contracts. The United States and UK could have a real test case for transparency and show how nations can gain from transparency. The exchange would be enforceable—if São Tomé failed on its transparency or development commitments, the IMF and World Bank should declare the loan in default and repay themselves from the signing bonuses and collect repayment directly from the offshore account. ■ Chad/Cameroon. The United States should highlight and support progress by Chad on revenue transparency and offer technical assistance to help the revenue college perform its functions. Positive steps should be acknowledged and regressive steps strongly rebuked. The United States should work with Cameroon to encourage more transparency in the use of its revenues and encourage Cameroon in its efforts to diversify its economy. Public Diplomacy. The United States should undertake a public diplomacy program to educate Americans on U.S. energy stakes in Africa, as a way of bolstering support for programs to promote better governance in Africa. Other International Forums. The United States should use the U.S.-EU Transatlantic Dialogue, Asia-Pacific Economic Cooperation (APEC), and the G-8 to agree with other nations on a common approach to energy development and transparency in Africa. 22 Rising U.S. Stakes in Africa

Conclusion

The United States needs to ratchet up its leadership role in Africa and work bilaterally as well as multilaterally to ensure that oil revenues are used for development. The United States must use its leverage to press governments to become transparent, spend their revenues for the betterment of their people, and respect human rights and the rule of law. In cooperation with other nations and by using international institutions, the United States should create a system of carrots and sticks to push for reforms in the resource-rich countries of Western and Central Africa. To be effective, the U.S. government needs to streamline and better coordinate its African energy policy. It needs to appoint an ambassador with the power to lead interagency policy and U.S. multilateral efforts, establish stronger relationships with African leaders, obtain the support of U.S. energy companies for revenue and expenditure transparency, and harmonize economic, political, and military issues. The United States must take advantage of this unique historical opportunity to use the windfall of oil revenues for development in a continent ravaged by war, disease, and endemic poverty. By doing so, the United States will not only do the right thing for Africa, but it will also protect its own vital interests in the region. chapter 2

Capital Market and Financial Sector Development in Sub-Saharan Africa

Paul V. Applegarth

Executive Summary

Capital market and financial sector development can be an important facilitator of economic growth in sub-Saharan Africa. It also supports U.S. strategic interests and is a prerequisite for the success of other U.S. bilateral and multilateral initiatives, including counterterrorism efforts, increased transparency, and improved governance. The U.S. government should recognize this by ■ Establishing capital market and financial sector development as an explicit objective of U.S. development assistance efforts in sub-Saharan Africa; ■ Institutionalizing assistance to capital market and financial sector development within the government; and ■ Providing comprehensive U.S. government support for the essential components of capital markets through increased funding, technical assistance, and coordination with other donors. Establish an explicit objective. Establishing capital market and financial sector development as an objective does not mean that it should be given the highest priority to the exclusion of other development objectives and programs. However, it should not be deliberately excluded either, as it may have been at times in the past. Promoting capital market development in a country should complement other efforts to promote that country’s development. It should be recognized as an important and legitimate component of a country’s development program

Ranjani Sankaran and Maureen Harrington contributed significantly to the development of this chapter. The author gratefully acknowledges their contribution. In addition, the chapter has benefited from review and comment by a broad array of qualified individuals and institutions, many of whom are listed in the chapter’s appendix.

23 24 Rising U.S. Stakes in Africa and should receive the support of U.S. government departments and agencies through allocations of their staff and financial resources. Fortunately, an attractive aspect of including capital market development in a country’s development program is that financial sector improvements should be less expensive than, for example, infrastructure or traditional poverty alleviation efforts. Much of the effort will likely take the form of technical assistance and training. The development benefit relative to dollar of expenditure should be high. Institutionalize assistance within the U.S. government. Several steps can be taken to institutionalize financial sector development assistance within the U.S. government, including ■ Bringing more people with capital market skills and experience into the government by, for example, establishing a separate salary scale within the government for financial markets experts; ■ Establishing an interagency working group devoted to capital market and financial sector development issues; ■ Encouraging the Millennium Challenge Corporation (MCC) to take a leadership role by including financial sector and capital market development programs within its activities; and ■ Using U.S. influence with the G-8 and with international financial institutions such as the World Bank and the International Monetary Fund (IMF) to increase their efforts in support of capital market and financial sector development. Provide comprehensive assistance for capital market development. Because formal savings channels do not capture a large amount of local wealth—held, for example, in cattle, houses, and land—there is a particular need for initiatives to boost domestic savings and investment in sub-Saharan African markets. Successfully mobilizing these local funds can yield amounts that are multiples of the amounts provided from traditional Official Development Assistance (ODA) and from foreign direct and portfolio investment. It can also improve resource allocation by placing capital in the hands of local stakeholders who are better positioned to make informed decisions than foreign investors operating at a distance. Important actions that the U.S. government can take to mobilize local capital and to build key components of sub-Saharan countries’ financial sectors are ■ Significantly increasing technical assistance, particularly from the U.S. Treasury and other government organizations with financial expertise; ■ Strengthening domestic banking institutions, payment systems, credit bureaus, and private pension funds; ■ Consolidating the excessive number of sub-Saharan stock exchanges; ■ Expanding current State Department initiatives to promote sovereign credit ratings and to establish benchmark yield curves; Paul V. Applegarth 25

■ Establishing dedicated Overseas Private Investment Corporation (OPIC) funds, and ■ Working with U.S. universities and the private sector to strengthen university and vocational financial, legal, and regulatory training.

Introduction

Since the early 1990s, aggregate private capital flows to developing nations have rapidly outpaced levels of Official Development Assistance (ODA). This is an important and positive trend given the limited amounts of, and competing demands for, ODA. However, sub-Saharan Africa, aside from South Africa, remains the only region of the developing world where this trend has not been realized: annual levels of development assistance inflows continue to be higher than private capital flows, and private capital flows in aggregate remain small.

Figure 1. Distribution of Official vs. Private Long-Term Net Resource Flows (Year 2000) (in percent)

100 80 60 40 20 0 Sub-Saharan East Asia and South Asia Latin Europe and Middle East Africa Pacific America and Central Asia and North Carribbean Africa Official Private

Source: World Bank, Global Economic Prospects 2003, figure A.3.10a. (© Global Economic Prospects; International Bank for Reconstruction and Development/World Bank.) Simultaneously, only low levels of domestic savings can be mobilized because of a high level of capital flight out of the continent1 and because a large amount of local wealth—real (cattle, houses, land, small businesses, etc.) and cash—is not captured by the formal sector.2 Constrained levels of ODA, small amounts of private foreign investment, and low levels of available domestic capital combined with high investment needs create a large financing gap that is impeding development.

1. Capital flight captures 39 percent of private wealth generated in Africa, according to most recent available data (World Bank, “Can Africa Claim the 21st Century?” March 2000). Approxi- mately $187 billion in African capital was invested outside the region between 1976 and 2003 (Abra- ham Mclaughlin, “Stock in Africa Going Up,” Christian Science Monitor, December 11, 2003). 2. Hernando DeSoto in The Mystery of Capital (New York: Basic Books, 2000), p. 5, estimates that “the value of savings among the poor is, in fact, immense—forty times all the foreign aid received throughout the world since 1945.” 26 Rising U.S. Stakes in Africa

Capital markets—encompassing markets for stocks, bonds, and other financial instruments—traditionally are thought of as exchanges or other centralized institutions for transactions between willing investors and those companies and borrowers in need of funding. This initiative to examine steps the U.S. government can take to promote capital market development arises from a recognition that generating appropriate systems, mechanisms, and incentives will encourage international and African investors to mobilize funds to help fill this gap, and thus boost sub-Saharan Africa’s economic growth and promote long-term poverty reduction. There is a particular need for initiatives to boost domestic savings and investment. Given the limited state of development of markets in many sub-Saharan countries, targeting capital market development in the region demands a broader commitment—i.e., a commitment to overall financial sector development, including, but not limited to, the banking system, pension and insurance mechanisms, social security schemes, small and medium-sized enterprise (SME) finance, and access to private nontraded sources of finance. This in turn requires a strong emphasis on developing concrete mechanisms for building a country’s financial architecture, which can serve as the base for effective management of existing financial resources and the mobilization of additional ones.

Assessment of Current U.S. Efforts in Capital Market and Financial Sector Development

To date, the U.S. government has placed little concerted focus on building the financial sector in sub-Saharan Africa, and it is currently ill-equipped to handle the subject in a substantial way. Though congressional hearings concerning “Africa’s Emerging Capital Markets” have been held in the past decade, a tangible mobilization of resources and programmatic effort has failed to emerge. This is in part due to confusion and a lack of consensus about what constitutes “capital market development.”3 It can also be attributed to the lack of an appropriate government home for capital market efforts. Although the U.S. Agency for International Development (USAID) is the nation’s designated international development agency, it has devoted very few resources to financial sector and capital market development in recent years. For instance, USAID has two people to staff its global financial sector development efforts, and the leader of these efforts is now spending half of his time on Iraq.4 Moreover, some aspects of capital market development and economic growth programs fall more within the realm of technical expertise held by the

3. In interviews with various governmental agencies (including the U.S. Treasury, USAID, the Overseas Private Investment Corporation [OPIC], United Nations Development Program [UNDP], the International Finance Corporation [IFC], World Bank, and the International Monetary Fund [IMF], private sector companies, and foreign-based participants in African development about their programs, responses to questions about capital market development covered the spectrum from trade and private sector development to foreign direct investment to commercial bank flows. 4. Recognizing the importance of financial sector development, USAID’s financial sector team is currently developing a new strategy. However, with its current resources and staff, its ability to implement a meaningful strategy will remain limited. Paul V. Applegarth 27

Department of Treasury, the Overseas Private Investment Corporation (OPIC), and others, than they do within USAID. As a result, capital market development has been overlooked in the face of other economic development initiatives, and the few efforts that have taken place have been, for the most part, uncoordinated. Therefore, going forward, it is critical to delineate and address “capital market development” as a category of its own, distinct from other economic development efforts. In addition, an appropriate “home” and a new framework for providing assistance for financial sector development may be called for. Finally, increased U.S. attention to capital market development does not imply only unilateral action. There are a number of ongoing capital market initiatives by European bilateral donors to which the United States has yet to contribute, or to which existing U.S. allocations are quite minimal. Partnering some U.S. efforts with such initiatives, as well as with some of the multilateral and African initiatives discussed further below, is an effective way of streamlining the cost and manpower needed to implement an effective capital market development strategy. Why capital market and financial sector development is important. Capital market and financial sector development is important for three key reasons: it promotes economic growth; it supports U.S. strategic interests; and it complements and reinforces existing U.S. bilateral and multilateral development initiatives. ■ Capital market and financial sector development promotes economic growth. In its recent publication, Finance for Growth, the World Bank concluded, “Getting the financial systems of developing countries to function more effectively in providing the full range of financial services . . . is a task that will be well rewarded with economic growth.”5 More specifically, capital market and financial sector development promotes growth in the following ways: ■ It promotes private sector development. Access to and ease in movement of financial resources fundamentally influence the prospects for private sector growth in developing country economies. The extent that existing firms can borrow and grow, the ability of emerging firms to act entrepreneurially, their willingness to invest in assets, and the ability to allocate their assets freely—all factor into economic growth. An examination of the levels of capital market development and economic growth in Asia with those in sub-Saharan Africa shows that India and China continue to add several hundred companies to their stock exchanges annually. The immediate benefit of the flourishing capital market activity in Asia is reflected in the sizeable increase in the momentum of private sector development. In contrast, the number of companies added by each of the major sub-Saharan African exchanges other than South Africa was generally fewer than 10. ■ It increases liquidity, which is linked to economic growth. An increase in the number of firms and investors participating in exchanges generates

5. Gerard Caprio and Patrick Honohan, Finance for Growth: Policy Choices in a Volatile World (New York: Oxford University Press, 2001), p. 2. 28 Rising U.S. Stakes in Africa

liquidity, or the volume of active trading that occurs. Liquidity has a proven relationship with economic growth; recent studies have found that countries with liquid markets experience faster rates of capital accumulation and greater productivity gains. Figure 2, adapted from a study by Ross Levine,6 depicts this positive relationship. As liquidity increases, firms gain increased assurance that they will be able to exit from longer-term investments. They therefore become more willing to make the permanent investments critical to development. Simultaneously, local consumers are more willing to mobilize domestic savings. This process allows for a market-based system of allocating financial resources, whereby more resources are more efficiently distributed to the more productive and innovative firms.

Figure 2. Economic Growth of Countries by Stock Market Liquidity between 1976 and 1993 (in percent)

3.4

2.4 2.2

2 Annual GrowthAnnual Rate

1.4

1 Very Illiquid Illiquid Liquid Very Liquid

Source: Adapted from Ross Levine, “Stock Markets: A Spur to Economic Growth,” Finance and Development 33, no. 1 (March 1996): 8, http://www.imf.org/external/pubs/ft/fandd/1996/03/pdf/levine.pdf.

■ It helps mobilize local savings and makes resources available for local decisionmaking. Capital market development encompasses more than just foreign inflows to emerging markets. Equally important is the cultivation of local investor interest as a means of increasing the available investment sources within an economy. An increase in domestic investor interest originates from the availability of profitable options for saving within the local economy; in other words, the existence of incentives to keep money in float domestically. Formal and credible savings options, which include such instruments as pension plans, insurance policies, and mortgage markets, are key to generating necessary sources of financing within an economy and to allow more resources

6. Ross Levine, “Stock Markets: A Spur to Economic Growth,” Finance and Development 33, no. 1 (March 1996): 8, http://www.imf.org/external/pubs/ft/fandd/1996/03/pdf/levine.pdf. Paul V. Applegarth 29

to be mobilized and allocated to various investment needs—thereby serving to drive the growth process. A central benefit of this activity is the increase in local decisionmaking and the increase in input from local stakeholders. If one accepts the principle that local decisions close to investment opportunities and by those with an economic stake in the outcome are better than less-informed decisions made at a distance, these informed local decisions in turn lead to improved resource allocation. ■ It enhances bank competition and develops a greater diversity of financial institutions. At the heart of local capital market development is the mobilization of domestic savings for a broader array of institutions with varied investment objectives. In comparison to other developing regions, sub- Saharan Africa does not mobilize its domestic capital effectively.7 The lack of long-term local currency savings instruments is a barrier to local investment of local capital. For example, in South Africa, only half of the adult population has a bank account, and the United Kingdom’s Department for International Development (DFID) estimates that the unbanked population Africa-wide is between 80 percent and 90 percent.8 Sub-Saharan African financial activity can be characterized by the oligopolistic behavior of a few commercial banks (in several cases, government-owned). The absence of adequate competition is reflected in the large gap between deposit rates for savers, which tend to be very low, and interest rates for borrowers, which tend to be very high. Moreover, there is evidence that banks’ returns on equity (ROE) are higher in Africa than in other developing regions.9 Cultivating channels for firms to issue various debt instruments and raise equity, while simultaneously providing more long- term options for saving and asset management for investors, will benefit enlarg- ing economies by increasing market efficiency. ■ It could increase remittances and facilitate their use. Establishing mechanisms for facilitating cost-effective transfers and savings of funds received through remittances—a rapidly emerging source of private capital in developing countries—can also contribute to economic growth. In 2002, sub- Saharan Africa’s share of the aggregate remittance flows to developing countries was 5 percent of $80 billion, or $4 billion. This amount may actually be under- stated, but is still quite significant in the context of sub-Saharan Africa’s current

7. The ratio of banking deposits to gross domestic product (GDP) provides an illustration of the extent to which local savings are being mobilized effectively. Sub-Saharan Africa has the lowest ratio of banking deposits to GDP among developing nations: sub-Saharan Africa—22 percent; South Asia—40 percent; Latin America/the Caribbean—40 percent. 8. Nicol Degli Innocenti, “Half of South Africa’s Population Do Not Have Bank Accounts,” Financial Times, November 11, 2003. The low level of banking was attributed to the low employ- ment levels and the lack of appropriate banking products. 9. According to a U.S. private equity firm that invests in African banks, ROEs in the banking sector vary considerably by region: sub-Saharan Africa—25.7 percent; South Asia—9.5 percent; Latin America—8.3 percent; and countries of the Organization for Economic Cooperation and Development (OECD)—5.7 percent. One observer has noted that the high banking spreads may be due to high tax rates and the need to compensate for the risk of lower credit borrowers. However, these factors do not explain the high bank ROEs. 30 Rising U.S. Stakes in Africa

foreign direct investment (FDI) level of $6 billion and international portfolio capital flows of $893 million.10 Some sub-Saharan African countries are even beginning to see levels of remittances overtake levels of ODA. For example, Nigeria’s ratio of remittances to ODA is 7:1 and Lesotho’s ratio is 4:1.11 Remit- tances offer a promising and stable potential for increasing domestic savings and fostering domestic investment. ■ It leads to improved corporate governance. Capital market development necessitates the creation of a legal and regulatory framework incorporating increased transparency and information dissemination. These monitoring systems heighten corporate governance, improve transparency, and boost investor confidence. Industry-level data from various studies have shown a positive relationship between market-based governance and improvements in industry efficiency. Industry efficiency is important because it promotes economic growth. ■ It rewards sound economic policies and creates tools for African countries to conduct monetary policy. The cost of sovereign borrowing is directly related to the economic conditions and policies in a country. A government that implements good economic policies is rewarded by lower borrowing costs on its sovereign bond issues, thus creating a market-based versus donor- driven incentive to strengthen financial sectors. Furthermore, debt markets provide a tool for central banks to manage the money supply and control inflation. Capital market and financial sector development supports U.S. strategic interests. Creating regulated and transparent financial sectors is not only good for development; it is a key U.S. strategic interest. ■ It helps to suppress terrorism. Nontransparent and inefficient financial systems provide an avenue for money laundering and financial assistance for terrorists. In the United States and internationally, significant government initiatives are under way to counter money laundering and terrorist financing throughout the world. Improving financial sector regulation and performance can contribute to this effort. ■ It reinforces U.S. leadership in a key sector. Financial sector development is an area where U.S. institutions predominate globally. Such an initiative would build leadership in an area of proven U.S. achievement. ■ It provides an opportunity to engage in African-led initiatives. Focusing on financial sector development offers a potential entry point for building cooperative relations with the New Partnership for African Develop- ment (NEPAD) and African Union (AU) leadership and its newly reconfigured secretariats.

10. World Bank, Global Economic Prospects 2003, Washington, D.C., 2002. 11. “Migrant Remittances to Developing Countries,” prepared for DFID by Bannock Consult- ing, June 2003. Paul V. Applegarth 31

Capital market and financial sector development is a prerequisite for the success of U.S. bilateral and multilateral initiatives to promote trade, private sector development, and good governance. In the words of one informed observer, “Without financial sector development, these other initiatives will fail.” ■ It enhances opportunities created by the Africa Growth and Oppor- tunity Act. The African Growth and Opportunity Act (AGOA) has achieved significant results by opening up U.S. markets to goods produced in Africa. Strengthening capital markets would complement AGOA’s benefits by ensuring that firms benefiting from AGOA trade can better access domestic financing to expand their businesses. ■ It builds on the opportunity presented by the Millennium Challenge Corporation. Focusing on financial sector development would complement the launch of the Millennium Challenge Corporation (MCC); indeed these efforts could be used systematically to demonstrate impact and focus early in the MCC’s life. The role of the MCC is discussed further below. ■ It reinforces G-8 transparency initiatives. Financial sector development can support international efforts to increase transparency in oil and other export revenues. Financial sector development programs could be oriented in part to the oil wealthy countries in Central and West Africa that are likely to experience a surge of oil earnings in the coming decade and that currently have little capacity to manage this dramatic increase in wealth in a transparent manner. ■ It supports the efforts of the Financial Systems Assessment Team. The U.S. government has established an interagency working group, the Financial Systems Assessment Team (FSAT), to coordinate all technical assistance with respect to money laundering and counterterrorism financing. The FSAT conducts country assessments of the regulatory framework, financial system, and law enforcement capabilities in order to determine whether technical assistance may be needed to bolster antiterrorist financing in key partner nations. ■ It complements the new joint International Development Associa- tion/International Finance Corporation Small and Medium-Sized Enterprises Initiative. With the strong support of the U.S. Department of the Treasury, the International Development Association (IDA) and the Inter- national Finance Corporation (IFC) recently announced a joint pilot initiative to provide support to micro, small, and medium-sized enterprises (MSME) in the following seven countries—Ghana, Kenya, Madagascar, Mali, Nigeria, Tan- zania, and Uganda. The program will focus on three areas: Providing access to financial services by strengthening of local financial institutions; increasing access to business development services for MSMEs; and improving the business/regulatory climate by identifying and resolving regulatory hurdles. Funds can be used to provide technical assistance or financing for MSMEs. Pilot countries will allocate a portion of their existing IDA country funds to finance this 32 Rising U.S. Stakes in Africa

effort. These IDA funds will be supplemented by contributions from the IFC and/or other sources.

Recommendations for U.S. Action

In light of the importance of sub-Saharan capital market and financial sector development in generating growth, promoting U.S. strategic interests, and supporting other initiatives, the U.S. government can take a number of actions to assist this development. These actions are summarized in three recommendations as follows: Establish capital market and financial sector development as an explicit objective of U.S. development assistance efforts in sub-Saharan Africa; institutionalize assistance to capital market and financial sector development within the government; and provide comprehensive U.S. support for the essential components of capital markets through increased funding, technical assistance, and coordination with other donors. Establish capital market and financial sector development as an explicit objective of U.S. development assistance efforts in sub- Saharan Africa. As discussed above, there is empirical evidence of a link between the development of a country’s capital markets and its developmental progress. Yet, until recently, the U.S. government placed very little attention on building sub-Saharan African capital markets. According to data provided by USAID officials, USAID had run several projects in the past, but all of them were started before 1993. Most were completed by that year, and all were finished by 1997. A similar lack of focus on sub-Saharan Africa was evident in USAID’s financial sector development work. Between 1988 and 2001, USAID spent about $118 million on financial sector development activities in Africa. That figure represents less than 10 percent of the total USAID expenditures on financial sector development worldwide. Moreover, as table 1 illustrates, the majority of these expenditures focused on “other” nonbanking financial institutions (NBFIs) and micro, rural, and small and medium enterprise finance programs, with very little focus on banking, securities and commodities, pensions and insurance reform, and housing finance. Making financial sector development a higher developmental priority within U.S. government agencies and institutions and making corresponding changes in their operations, organizational structures, and staffing would be positive first steps toward achieving that development. Establishing capital market and financial sector development as an objective should not be given top priority to the exclusion of other tasks and objectives. How- ever, it should not be deliberately excluded either, as it appears that it may have been at times in the past. Promoting capital market development in a country should complement other efforts to promote that country’s development. It should be recognized as an important and legitimate component of a country’s development programs, and receive allocations of U.S. government departments and agencies’ staff and financial resources to support it. Paul V. Applegarth 33

Table 1. USAID Spending on Financial Sector Development in Africa (in percent)

Percentage of World- Breakdown of Spending wide USAID Spending Sector of Assistance by Sector in Africa by Sector in Africa

Commercial banking 9 1

Securities and commodities 5 0

Pensions and insurance 0 0 Housing finance 4 0

Micro, rural, and SME finance 31 3

Other NBFIs 42 4

Multisector 10 1 Total 100 9

Source: Deloitte Touche Tohmatsu Emerging Markets, Ltd., “Financial Sector Review and Strategy: Data Base of Financial Activities, 1988–2001,” March 31, 2002. Fortunately, an attractive aspect of including capital market development in a country’s development program is that financial sector improvements should be less expensive than, for example, infrastructure or traditional poverty alleviation efforts. It is beyond the scope of this analysis to provide informed estimates of the budgetary costs to U.S. agencies of individual initiatives. However, much of the effort will likely take the form of technical assistance and training. The development benefit relative to dollar of expenditure should be high. It should be emphasized that it is important to develop mechanisms to measure this benefit. A commitment to strengthen financial sectors in Africa should be accompanied by a commitment to build appropriate performance measurements and to provide the necessary resources to do so. Institutionalize assistance to capital market and financial sector development within the government. As a complement to making financial sector development an objective, the government must take steps to increase its capacity to reach this objective. These steps include: ■ Bring more people with capital market skills and experience into the government. Currently, individuals with the relevant training and backgrounds are in scarce supply within the government, particularly in areas with mandates to promote development. Some professionals with these skills are at the Treasury Department and at government agencies and similar institutions such as the Federal National Mortgage Association (FNMA), the Office of the Comptroller of the Currency, the Federal Reserve, the Securities and Exchange Commission, the Accounting Oversight Board, and the Federal Deposit Insur- ance Corporation. However, generally, these staff are focused on areas other than development, and their skills and experience are not available to the developing world. 34 Rising U.S. Stakes in Africa

There are several historical and current reasons for this, including the low priority given capital market development in the past, the lack of recognition that the relevant skill sets were needed, and the low compensation relative to that obtainable in the market. Establishing financial market development as a developmental objective should help address the first issue. In addition, the Advisory Panel recommends the following: • Develop a separate salary scale for financial market experts within the U.S. government: The market provides high remuneration for skilled financial market experts. While the U.S. government can never fully meet these compensation levels, establishing a separate salary scale as it has for some other disciplines should help it attract and retain professionals with the necessary skills. • Adjust the current USAID candidate evaluation process to award more points for subject-matter expertise: Presently, when selecting potential candidates, USAID often awards extra points in the contract evaluation process for prior experience with USAID. This biases the process against candidates with skills in areas where USAID has not operated previously. Changing the scoring system to give higher points for skills in short supply should help facilitate the hiring of capital market experts. • Make greater use of executive exchange programs: Executive exchange programs bring professionals with needed and relevant skills into the government. ■ Encourage the Millennium Challenge Corporation to take a leadership role by including financial sector and capital market development programs within its activities. The new Millennium Challenge Account (MCA) and the Millennium Challenge Corporation that will implement it are in their conception designed to focus on promoting economic growth and investment. The creation of these entities presents a major opportunity to establish a foundation on which capital market development programs can be built and to mobilize significant amounts of new resources. Working with its partner countries in supporting their national initiatives and plans, the MCC will be in an excellent position to assist countries receiving MCC funding to build such programs into their country contracts and to become a pioneer in undertaking comprehensive capital market development efforts. Given the central role of local institutional bodies in the functioning of financial markets, political will within recipient nations and a sense of partnership in implementation are necessities. The partnership model on which the MCC is conceived can stimulate creation of the necessary domestic political will and should facilitate tailoring the program for each recipient country to fit that country’s own needs. ■ Establish an interagency working group devoted to capital market and financial sector development issues. This group would ideally be headed by the MCC and Treasury Department, with membership from the Paul V. Applegarth 35

State Department, USAID, OPIC, and other agencies with interest and expertise in the area. ■ Focus efforts on a limited number of countries initially. Because it cannot work with all countries at once, the U.S. government should consider focusing its initial efforts on countries that will be receiving large increases in external funds over the next few years and that would thus benefit immediately from having a sound financial sector to handle these increased inflows. Three categories of countries to consider are MCA partner countries, new oil and gas producing nations, and participants of President Bush’s Emergency Plan for AIDS Relief (PEPFAR). Successful initiatives in a few countries can demonstrate the effectiveness of financial sector development and can be rolled out by the MCC with other partner countries and by other U.S. agencies into non-MCA countries. ■ Use U.S. influence with international financial institutions such as the World Bank and the IMF to increase their efforts in support of capital market and financial sector development. International financial institutions (IFIs) have the resources, the expertise, and, in the case of the development banks, the mission to assist development. Yet their efforts to date in the sub-Saharan African financial sector appear to be limited. With U.S. encouragement and action, these institutions could do more to assist financial sector development. Specifically, the United States could • Support an increased allocation of Bretton Woods institutions’ resources to financial sector development in sub-Saharan Africa. The IFIs could provide an additional source of financing for capital market development efforts. • Support a significant increase in the number of IMF/IBRD Financial Sector Assessment Program efforts in sub-Saharan Africa (the program is discussed further below). • Encourage the IMF to include a focus on developing local markets in its sub-Saharan activities. ■ Commission additional economic work on the role of the financial sector and capital markets in contributing to development in sub- Saharan Africa. In order to design programs that work, it is important to understand how capital markets and financial sector development have contributed to growth in the past. For example, the 1996 study by Ross Levine and Sara Zervos, “Stock Markets, Banks, and Economic Growth,” demonstrated that stock market liquidity and banking sector development are followed by economic growth, capital accumulation, and productivity improvements.12 Although research on how capital market and financial sector development have contributed to growth has been undertaken in emerging markets, more analysis specific to Africa is needed.

12. Ross Levine and Sara Zervos, Stock Markets, Banks, and Economic Growth, Policy Research Working Paper 1690 (Washington, D.C.: World Bank, 1996); http://econ.worldbank.org/files/ 490_wps1690.pdf. 36 Rising U.S. Stakes in Africa

Economic impact studies of U.S. financial sector development assistance are also not conducted widely. For instance, as previously mentioned, USAID has spent approximately $1.2 billion on financial sector programs globally since 1988. How- ever, no information is available to measure the economic impact of that investment. ■ Better coordinate with, and increase U.S. government support for, initiatives of other donors and African institutions making efforts in the sector. As noted above, European bilateral donors have already undertaken a number of ongoing capital market strengthening initiatives. These efforts are often more ambitious and more sophisticated than those undertaken by the United States, yet the U.S. government has either not contributed to them at all or has made only minimal allocations.13 The United States should increase its coordination with, and consider greater involvement with, these efforts, as well as those being undertaken by UNDP, the African Development- Bank, NEPAD, the Southern African Development Community (SADC), and the Common Market for East and Southern Africa (COMESA). ■ Use G-8 initiatives to strengthen the financial sector in Africa. The G-8’s declaration on fighting corruption and improving transparency, issued at the 2003 Evian Summit in France contains commitments to several initiatives that can help strengthen the financial sector in developing countries: increasing public financial management and accountability; strengthening enforcement of anti-bribery laws; implementing the UN Convention against Corruption; fighting financial abuses; promoting transparency in government procurement and the awarding of concessions; and ensuring transparency in extractive industries. One of the specific recommendations supports the Financial Action Task Forces’ (FATF) enhanced “Know Your Customer” (banking customer due diligence) initiatives.14 Implementing Know Your Customer procedures can help strengthen the overall transparency of the banking sector. The United States should urge the active implementation of these procedures in sub-Saharan Africa to maximize their effect in strengthening the financial sector. Provide comprehensive U.S. government support for the essential components of capital markets. A well-developed capital market has at least four key components: a legal and regulatory framework, buyers and sellers, information, and a transaction infrastructure. Attention to each of these components is important in structuring capital market development assistance. For example, a comprehensive program could include the following: ■ Developing stable legal and regulatory frameworks. Securities regulation and oversight; corporate governance; accounting requirements; and banking/financial institution regulation;

13. One such partnership is the FIRST Initiative, discussed further below. 14. The Financial Action Task Force (FATF) on Money Laundering was established in 1989 by the G-7 Summit in Paris to develop and promote “policies, both at national and international levels, to combat money laundering and terrorist financing.” Paul V. Applegarth 37

■ Building market participants. Buyers (investors) and sellers (borrowers and companies needing funding); ■ Increasing access to information. Availability of information concerning general country and macroeconomic conditions; relevant laws and regulations; borrowers; and stocks; and ■ Improving the ability to trade and transact. Secure trading mechanisms, clearinghouses, custodians, transfer agents, and intermediaries (brokers, traders, and market-makers) The following sections discuss specific actions that the U.S. government can take to strengthen each component after an initial diagnostic review is completed. Because these components are interdependent, U.S. efforts to strengthen capital markets will have the greatest impact if programs are conducted comprehensively. Finally, it must be noted that the following recommendations presume that macroeconomic policies have been put in place to facilitate financial sector development. Although macroeconomic policy concerns are beyond the scope of this chapter, it is important to acknowledge that sound macroeconomic policies are a prerequisite for capital market development. Poor government behavior—for example, the funding of fiscal deficits with short-term high-yield Treasury bonds that crowd out productive local investment—macroeconomic instability, and exchange rate volatility will inhibit the productive use of capital and retard capital market development. ■ Improving Understanding of the Sector/Diagnostic Support. As countries are at varying stages of economic and financial development, undertaking a diagnostic analysis to understand the situation in each country is a prerequisite for other activities within it. • Support expansion of the IMF/IBRD Financial Sector Assessment Program. These Financial Sector Assessment Program (FSAP) reviews are generally well done, with a detailed assessment of the current situation in each country. There is an increasing development focus in the FSAP reports, including recommendations for next steps to further strengthen and develop the sectors. However, the number of such reviews is small relative to the number of countries.15 Increasing the staff and resources within the Bretton Woods institutions devoted to these assessments could materially boost sub- Saharan capital market development. • Encourage similar assessment efforts by U.S. entities if needed. To the extent that the IMF/IBRD program discussed above does not meet full needs, the creation of the MCC, USAID’s proposed new financial sector strategy, and some current Treasury Department efforts present an opportunity to expand work in this area.

15. The IMF has also had two special missions looking comprehensively at issues related to accessing private foreign capital in Ghana and Tanzania. The focus of these reports was on foreign capital, but they included FDI, banks, and local capital markets. 38 Rising U.S. Stakes in Africa

■ Developing Stable Legal and Regulatory Frameworks. To strengthen the enabling environment by establishing more transparent and effective regulatory and legal frameworks and by building the capacity of local financial sector reg- ulators, the U.S. government should take several specific steps: • Increase support to Treasury’s Office of Technical Assistance and place increased emphasis on insurance and pension reforms to boost the development of institutional savings options. The U.S. Department of the Treasury’s Office of Technical Assistance (OTA) provides advisory services to government officials, typically senior finance ministry or central bank counterparts, in several key regulatory areas necessary for a sound financial sector: tax policy and administration; government debt issuance and management; financial institutions policy and regulation; budget policy and management; and the prevention, detection and prosecution of financial crimes. The program originated in the early 1990s to assist former commu- nist countries in moving from a command to market economy. OTA has expanded its mission to other regions. In Africa, OTA is providing assistance to a number of governments including Uganda, Nigeria, South Africa, Chad, Ghana, Botswana, Ethiopia, Tanzania, Zambia, and the West African Economic and Monetary Union (WAEMU). The feedback on the results of this program has been quite positive. However, OTA has a modest budget to manage its programs and conduct program development missions and relies on funding from other government agencies, such as the State Depart- ment and USAID, to fund specific programs. Expanding the program could benefit sub-Saharan capital market development. • Consider becoming a more substantial donor to the FIRST Initiative and other relevant bilateral and multilateral partnership initiatives as they arise. The FIRST Initiative is a multilateral and bilateral grant fund supporting technical assistance to governments on the development of financial sector regulations, supervision, and structure. For the first four years of this initiative, the United Kingdom has committed up to $29 million; Canada, up to $7.5 million; the Netherlands, up to $8 million; and Sweden, up to $2 million. FIRST utilizes a multi-donor board to select and oversee initiatives. These projects are primarily public sector–oriented and target regulatory agencies and government bodies within recipient nations. Although this initiative covers all developing country regions, there are currently 10 projects under way in sub-Saharan Africa, and all build on the findings and recommendations of the IMF and World Bank Financial Sector Assessment Program Reports and the Reports on the Observances of Standards and Codes.16 Examples of projects include assistance to strengthen insurance regulation and supervision in Lesotho and capacity building of the Came- roon Financial Markets Commission.

16. Financial Sector Assessment Program Reports are available at http://www.imf.org/ external/np/fsap/fsap.asp#cp; Reports on the Observances of Standards and Codes are available at http://www.imf.org/external/np/rosc/rosc.asp. Paul V. Applegarth 39

• Provide technical assistance to African governments to strengthen accounting and disclosure requirements. Reliable and transparent financial statements are necessary to build confidence in African capital markets. African governments can help improve corporate governance by establishing globally accepted accounting and disclosure regulations. • Encourage increased use of the State Department’s Economic Support Funds to provide technical assistance to African governments on legal and regulatory reform. Although there are many competing demands for Eco- nomic Support Funds (ESF), a commitment from the State Department to finance technical assistance will help ensure that the U.S. government has the resources to help create sound financial sectors in Africa. • Consider introducing a corporate governance initiative in cooperation with the New Partnership for African Development. The New Partnership for African Development (NEPAD) has identified economic and corporate governance as one of its seven priority areas. Initiatives identified by NEPAD focus on strengthening macroeconomic management, public financial management, banking supervision and financial services regulation, and corporate governance. A Committee of Finance Ministers and Governors of Central Banks has been tasked with developing an action plan to address these focus areas. The U.S. government should consider developing corporate governance initiatives in cooperation with NEPAD. • Explore further avenues for U.S. government agencies to provide legal and regulatory assistance. The Department of Justice, the American Bar Associ- ation, and the American Law Institute are U.S. agencies that could offer valuable technical assistance to African governments on strengthening the rule of law and enhancing their regulatory environments. Other specialized agencies, including the National Association of Insurance Commissioners (NAIC), could also transfer their particular expertise. The possibilities for such additional collaborations should be examined. ■ Building Market Participants: Buyers, Sellers, and Financial Inter- mediaries. As discussed above, buyers, sellers, and financial intermediaries are essential to a market and to market liquidity. Strengthening deposit-taking institutions can be particularly helpful in countries where there are too few vehicles to mobilize domestic savings. The U.S. government can increase the number and quality of participants in sub-Saharan capital markets with the following measures: • Increase technical assistance to African financial institutions: Strengthening local insurance, pension, and social security institutions can increase domestic savings and improve the quality of investment decisionmaking. There are several ways to accomplish this: Strengthen existing banking institutions. A sound banking system, including institutions such as credit unions, savings and loans, and savings co-ops, is a key component of financial sector development. In an effort to promote efficiency 40 Rising U.S. Stakes in Africa

within the banking sector, the U.S. government could provide technical assistance to state-owned banks interested in privatizing or commercializing their operations. In countries where banks are privately owned or community-based, technical assistance could be provided to help improve operations, efficiency, and credit risk management. In countries where foreign investment in the banking sector is currently prohibited, the U.S. can encourage a change in this policy. By strengthening the banking sector, local companies should have increased access to working capital and short-term debt. Expand the Financial Services Volunteer Corps’ activities to include sub- Saharan Africa. Established at the request of former President George H.W. Bush, the Financial Services Volunteer Corps (FSVC) engages technical specialists to work on short-term, volunteer assignments, one to two weeks at a time, to help upgrade financial institutions and systems. FSVC programs focus on strengthening commercial banking systems, developing central bank capabilities, and building capital markets. Other focus areas include financial system legal reforms, payments system development, pension reform, and support to address financial corruption and terrorist finance. The not-for-profit organization has to date leveraged $45 million in USAID support as well as additional funds from the Departments of State, Commerce, and Treasury and the World Bank. To date, operations have primarily focused on developing market economies in Eastern Europe and the former Soviet Union, with recent growth in assistance to Asia and the Middle East. FSVC does not operate in sub-Saharan Africa. Utilize resources available through Volunteers for Prosperity. The USA Free- dom Corps was created in 2002 as a mechanism to facilitate volunteer opportunities for Americans responding to President Bush’s call for every citizen to volunteer time in service to communities in the United States or internationally. In September 2003, President Bush signed an executive order creating the Volunteers for Prosperity (VFP) program as an international component of the USA Freedom Corps. VFP volunteers will participate in U.S. programs designed to promote health and prosperity in developing countries. Financial sector programs should proactively explore opportunities to make maximum use of volunteer resources available through the VFP. • Encourage the establishment of private pension funds. Private pension funds could increase efficiency and competition in this sub-sector and the financial sector in general. Government-run funds tend to predominate in Africa. Some of these funds have been known to treat pension system assets as political assets and often favor lending to government-sponsored projects. The competition that would arise in a well-regulated system allowing private pension funds to operate alongside the state pension fund could not only help develop capital markets, but would also reward good management and keener analysis of investment alternatives. A complementary effort could include easing restrictions that require government pensions to invest only in government bonds and permitting government funds to diversify their portfolio to include corporate securities. Paul V. Applegarth 41

• Strengthen African educational and training institutions. A skilled work- force to build and support world-class financial institutions is a basic requirement for a sound financial sector. Several important initiatives to improve the educational opportunities on the continent are already under way. Support efforts of U.S. universities and institutions to increase the availability of finance training and skills throughout the continent. Leveraging the ability of U.S. universities and other entities to share their knowledge and expertise will help provide needed skills in Africa and expand awareness of Afri- can business issues in the United States. For example, Harvard Business School conducts a training program for private and public sector leaders in sub- Saharan Africa entitled “Making Markets Work.” Georgetown Business School is exploring options to help African business schools earn their internationally accepted accreditation, and the Smith School of Business at the University of Maryland has expressed interest in developing a finance education module. Additionally, Goldman Sachs is beginning to examine ways it can provide training for sub-Saharan African financial professionals. Consider supporting creation of a financial institution module within the IFC/World Bank Global Business School Network. This World Bank Group initiative serves to build “training partnerships” between developed and developing country business schools and is a valuable tool for cultivating indigenous management skills. Current programs with 7 African business schools have included locally based curriculum development and faculty training. Enhanc- ing the extent of these knowledge-sharing partnerships would help increase the capacities of African universities to train their future financial sector leaders. • Encourage the OPIC Board to create a fund to invest in publicly traded Afri- can securities. Historically, OPIC has only created funds that make private investments, leaving it to the market to create funds for public securities. There appears to be no statutory reason why OPIC has not created such funds in the past, merely precedent. This policy may well be appropriate in most emerging markets, which have a number of institutional investors and players. However, very few funds invest in African securities, and the risk that OPIC might preempt private sector activity seems remote. Indeed, the creation of OPIC funds that trade securities is likely to increase market liquidity and thereby encourage the creation of other funds. • Establish local training programs for brokers, accountants, and other financial market participants. Skilled intermediaries are in short supply in sub- Saharan Africa. Professional training programs can be developed to share U.S. expertise in this area. • Support the current U.S. Treasury–led initiative to create sub-Saharan housing/mortgage markets. In a speech at the end of his July 2003 trip to Africa, President Bush tasked the secretary of the treasury to lead an interagency process to strengthen African capital markets by increasing the availability of mortgage financing in Africa. The Department of Treasury– 42 Rising U.S. Stakes in Africa

led group is considering a series of programs to create mortgage bonds, provide mortgage guarantees, and/or establish loan programs for micro lenders to finance home construction and rehabilitation. These housing finance initiatives also create a multiplier effect by increasing the usage of local labor and materials, which thereby enhances economic growth. • Encourage the use of capital markets in sub-Saharan African privatization efforts. Privatization programs have a symbiotic relationship with capital market development. An increased number of privatizations can further the development of capital markets by increasing trading volumes, market capitalization, and liquidity. The existence of a well-functioning capital market increases the incentive for privatizations by providing a market-based, price-efficient framework. That can provide the highest proceeds to the government selling the company. The United States should provide increased technical assistance toward privatization programs that aim to utilize capital markets. • Create a private equity fund through OPIC and/or the MCC to invest in African financial institutions and intermediaries. Building world-class financial institutions and intermediaries in Africa, such as merchant banks, mutual funds, and trade credit providers, will help provide the necessary financial infrastructure for strong capital markets. Although financial institutions have been the beneficiaries of recent private equity investments, a significant share of international investments in Africa to date have targeted infrastructure development, energy and natural resource development, and communications firms. However, interest is growing in financial sector investment opportunities. Just recently, a fund was established to invest in privatized African banks. Building on this momentum, the U.S. government should consider establishing a private equity fund that focuses on African financial institutions and intermediaries, particularly those that invest longer term. • Explore opportunities to encourage U.S. firms to raise debt or equity in the local markets in which they operate. Increasing the pool of attractive investment opportunities for local investors in Africa can help create interest, participation, and thus liquidity in African capital markets. For instance, recipients of OPIC or donor-supported financing could be encouraged to consider issuing debt or equity in the local capital markets. While providing increased access to capital in the local currency, these efforts could also help build local support for and shared interest in the success of U.S. investments. Most corporate social responsibility programs to date have focused on providing health, education, or infrastructure benefits to local communities. However, as an innovative addition to such programs, Chevron/ Texaco raised financing in Angola. Other firms could be encouraged to create mechanisms to facilitate local investment opportunities. • Explore ways to use the guarantee authority of U.S. agencies to develop sub- Saharan capital markets. The U.S. Export-Import Bank recently provided a Paul V. Applegarth 43

guarantee for a bond issue on the Bond Exchange of South Africa to provide financing for the purchase of U.S. manufactured aircraft. The bond is supported by the full faith and credit of the U.S. government, thus providing an opportunity for local investors to benefit in an investment grade instrument while providing financing to increase U.S. exports to Africa. Additionally, project finance bonds have been issued successfully in other developing regions. Further research could be conducted to determine whether some of the African capital markets could support project finance bonds. • Encourage the Treasury Department to evaluate the potential use of African bond markets to raise development finance. The Asian Development Bank recently announced that it is seeking permission to issue a Chinese yuan denominated bond to finance development projects in Asia. In addition to providing financing, this effort can also help establish a benchmark for other long-term bond issuances. The Treasury Department supervises the U.S. government’s relationship with the IFIs and should explore opportunities to work with the African Development Bank to utilize African capital markets. • USAID should evaluate and consider encouraging the increased use of USAID’s Development Credit Authority to strengthen the banking sector and to increase capital availability. In 1998, USAID was given authority by Congress to use credit to achieve its development goals in addition to its traditional grant programs. This authority, known as Development Credit Authority (DCA), provides mission directors with a new mechanism to leverage local capital for development. Typically, DCA projects provide a 50 percent loan or bond guarantee to private lenders in recipient countries. Approximately $630 million in credit has been facilitated in 27 countries since the program’s inception. ■ Strengthening Information Flows. Good information is essential to an efficient market. Companies at different stages of development depend on different types of information providers. For example, earlier stage companies need credit bureaus to provide banks the information they need. More advanced countries needing institutional equity require sophisticated debt and equity research. Large-scale international borrowers benefit from sovereign ratings that allow institutional investors to assess overall political risk. The private sector, through firms such as LiquidAfrica, is beginning to supply research and information on public equities. However, additional efforts are needed to address the needs of companies at varying stages of development. Accordingly, the U.S. government should • Provide training in accounting and disclosure requirements to assist both private firms and public sector oversight capacities, thereby boosting corporate governance. Transparent and trusted financial statements are a fundamental element of information about public and private firms. As mentioned above, the U.S. government should consider providing technical assistance and funding to expand existing training efforts in Africa. For 44 Rising U.S. Stakes in Africa

instance, funding could be provided to local universities and colleges to expand their accounting curriculum. • Assist with the development of local credit bureaus and their governing regulations. According to the World Bank, only 23.5 percent of African countries surveyed for the “Doing Business” database have laws regulating the activities of credit bureaus.17 This figure is in stark contrast to the results for other regions: East and Southern Asia—62.5 percent; Europe and Cen- tral Asia—70 percent; Latin America and the Caribbean—71.4 percent; the Middle East and North Africa—85.7 percent; and the OECD—100 percent. • Continue current initiatives by the State Department and UNDP to promote sovereign credit ratings. Through assistance from the State Department and the UNDP, 13 African countries now have a sovereign rating. This is a significant increase from 2001, when only 4 African countries had a rating. The U.S. government should continue to expand its sovereign ratings program. • Expand current Department of State and Treasury Programs to establish benchmark yield curves and to harmonize securities regulations. One of the barriers to African firms using capital markets to raise debt finance is the lack of sovereign benchmark yield curves to use in pricing corporate debt. Many African nations do not issue long-term debt. The State Department is providing financing for a Treasury Department adviser to work with the governments of Uganda, Nigeria, and members of the West African Eco- nomic and Monetary Union (WAEMU) to establish benchmark yield curves. The work in the WAEMU countries is designed to harmonize government debt issuance regulations and practices, as well as standardize as much as possible the structure of securities among these countries, with the goal of increasing liquidity by facilitating cross-border trading and hold- ings. This technical assistance should be made available to other African nations and regions. • Facilitate the availability of rating services to local markets. Several local ratings agencies exist in sub-Saharan Africa. Their effort to provide ratings coverage of sub-Saharan firms is important. Through vehicles such as the private equity fund discussed above, the U.S. government can help ensure that these firms have access to financing to expand their services. In addition, the participation of international ratings agencies in local markets could also be encouraged. • Provide technical assistance to firms on meeting listing requirements. Ear- lier this year, the State Department initiated a small technical assistance program in Uganda focused on helping firms meet the accounting and disclosure requirements requisite for listing on exchanges. The IFC provides similar assistance through its APDF capacity-building facility. This type of

17. World Bank, Doing Business in 2004: Understanding Regulation (New York: Oxford Univer- sity Press, October 2003), pp. 55–69. Paul V. Applegarth 45

assistance could be expanded to countries where lack of knowledge of listing requirements is a barrier to using capital markets. • Examine whether there are appropriate ways for the U.S. government to facilitate coverage of frontier African exchanges by Wall Street. South Africa receives a great deal of coverage by Wall Street research departments. How- ever, the same cannot be said for other African exchanges. The U.S. government should explore whether there may be an appropriate role for the government to play in facilitating the research coverage of companies on other African exchanges and the development of a frontier Africa index. • Improve systems to collect information on cross-border capital flows. Work by the United Kingdom’s Department for International Development (DFID) in Tanzania revealed that cross-border capital flows were four times larger than previously thought. DFID expects that a similar pattern may exist elsewhere. Understanding the magnitude and uses of cross-border flows could promote their more effective use. ■ Strengthening the Ability to Trade and Transact. Modernizing and upgrading market infrastructure and trading procedures can help improve efficiency and transparency. • Encourage stock market consolidation and support the market regionaliza- tion efforts of the UNDP, World Bank, NEPAD, SADC, and other regional organizations. Secure trading platforms with trustworthy security agents are important to a functioning market. Qualified custodians, transfer agents, and clearinghouses are needed throughout sub-Saharan Africa. However, there may be too many stock exchanges. During the last decade, the number of African stock exchanges has risen significantly. There are now stock markets in Algeria, Botswana, Côte d’Ivoire, Egypt, Ghana, Kenya, Malawi, Mauritius, Morocco, Mozambique, Namibia, Nigeria, South Africa, Sudan, Swaziland, Tanzania, Tunisia, Uganda, Zambia, and Zimba- bwe.18 Many of the exchanges have only a few listed stocks and are characterized by limited capitalization and low liquidity. The ratio of stock market capitalization to GDP is less than 20 percent in sub-Saharan Africa compared with more than 100 percent in developed countries.19 Further, this already low capitalization is concentrated in the South African market, which accounted for 88 percent of market capitalization in the region in 2002. The problem is further aggravated by the trend toward decapitalization of local exchanges with the movement of larger companies to international exchanges, such as the London or New York Stock Exchanges, and the acquisition by some of the remaining listed companies by global companies. For example, there have been few listings and a trend towards de-listings on South Africa’s JSE. Accord- ing to S&P’s Emerging Markets Review, as of January 2003, there were 468

18. United Nations Development Program, African Stock Markets Handbook, 2001. 19. World Bank, World Development Indicators, 2001. 46 Rising U.S. Stakes in Africa

companies listed on the JSE, down from 472 a year earlier. In 2002, more than 50 companies de-listed from the JSE. In 2001, 85 companies de-listed. A large proportion of the JSE’s top share listings, including Anglo American, Billiton, Old Mutual, and South African Breweries, have moved their primary listings from the JSE to the London Stock Exchange (LSE), citing a need for access to the LSE’s much larger capital market, in line with their aim to become truly global companies. Rather than spending more development resources on the “bricks and mortar” of additional exchanges, some consolidation is needed. Harmonizing listing requirements/regulations, exchanging data, information and technology sharing, and cross listings are some of the steps that could build volume and liquidity. A number of stock market consolidation and regulatory harmonization programs are already under way throughout Africa. For instance, NEPAD has programs to harmonize regulatory frameworks and a single African trading platform. In addition, the SADC Committee of Stock Exchanges has articulated a vision of “an integrated real-time network of national securities markets within SADC” by 2006. The JSE is leading a two-phased initiative to achieve the SADC objective. Phase one would provide participating exchanges access to the JSE’s trading platform. The exchanges would retain their autonomy and would operate as a segment of the JSE. Phase two would involve the harmonization of listing requirements among participating exchanges, trading access among member exchanges, and the creation of a Pan African Board. The board would consist of the companies most likely to enlist interest from international investors. The U.S. government should explore avenues to provide support to these existing African and multilateral efforts. • Provide assistance with the development of payment systems. Many African countries do not have well-functioning payment systems and significant amounts of capital can be tied up in a process as simple as check clearing. Transparent and well-functioning payment systems provide the mechanism for money to move throughout the market. Inefficient payment systems can increase risks, transaction costs, and the amount of time that funds are locked up in the clearing and settlement process and thus unavailable for productive use. The Bank for International Settlements (BIS) has developed a series of Core Principles that are intended for use as universal guidelines to encourage the design and operation of safer and more efficient systemically important payment systems worldwide, and the SADC, for example, is already working to improve payment systems within its region. The U.S. government could provide technical assistance to governments interested in implementing the BIS Core Principles. • Provide technical assistance to clearinghouses, custodians, and transfer agents. Confidence in the trading mechanism is necessary to increase the number of local and international investors participating in African capital markets. The U.S. government should consider offering technical assistance Paul V. Applegarth 47

to existing clearinghouses, custodians, and transfer agents to strengthen their capacity to provide a secure trading environment and to build confidence in local markets as viable savings mechanisms.

Conclusion

Capital market and financial sector development can be an important facilitator of economic growth in sub-Saharan Africa. It also supports U.S. strategic interests and complements other U.S. bilateral and multilateral initiatives. The U.S. government should recognize this by adopting the following measures: (1) establishing capital market and financial sector development as an explicit objective of U.S. development assistance efforts in sub-Saharan Africa; (2) institutionalizing assistance to capital market and financial sector development within the government; and (3) providing comprehensive U.S. government support for the essential components of capital markets through, inter alia, increased funding, technical assistance, and coordination with other donors. 48 Rising U.S. Stakes in Africa

Appendix: Individuals and Institutions That Contributed Comments and Reviews for This Chapter

Government Agencies U.S. Agency for International Development Constance Berry Newman John Crihfield Jay Smith John Wasielewski

U.S. Department of State Alan Larson Anne Pence

U.S. Department of Treasury John Taylor Michael Grifferty Clay Lowery Ged Smith Office of African Nations Office of Technical Assistance

Overseas Private Investment Corporation Peter Watson Marysue Shore

U.K. Department for International Gavin McGillivray Development-Financial Sector Team Richard Boulter Robert Cook Suzanne Parkin David JN Stanton

Multilateral Institutions International Monetary Fund Jacqueline Irving Capital Markets Team Charles Blitzer

United Nations Development Program Zephirin Diabre

World Bank Group International Finance Corporation (IFC) Guy Pfeffermann Global Business Network Laura Bures Krishnan Srinivasan

IFC Private Equity and Investment Funds & Teresa Barger Global Financial Markets Ayaan Adam Anne Chacour Hawkins Jean-Phillipe Prosper Paul V. Applegarth 49

IFC Private Sector Development Group Michael Klein

Multilateral Investment Guarantee Agency David Bridgman Thomas Vis

World Bank Financial Sector Team, Gerard Byam Africa Region Ann Christine Rennie Tony Thompson

Private Sector and Trusts American International Group Frank Wisner

Citibank Stanley Fisher

Emerging Markets Partnership Thomas Gibian

FinMark Trust David Porteus

First Africa Group Kofi Adjepong-Boateng

Liquid Africa Cyrille Nkontchou

Modern Africa Fund Managers Steve Cashin

The Scowcroft Group Walter Kansteiner James Dunlap WPA Wendy Abt

Think Tanks Center for Strategic and International Studies J. Stephen Morrison

Council on Foreign Relations Princeton Lyman

Universities Georgetown University Chester A. Crocker

Harvard Business School Debora Spar

University of Maryland Lemma Senbet chapter 3

To Guarantee the Peace An Action Strategy for a Post-Conflict Sudan

Dina Esposito and Bathsheba N. Crocker

Executive Summary

Ongoing peace negotiations offer the best opportunity in decades to end Sudan's civil war—the longest-running such conflict in Africa. A negotiated settlement between the government of Sudan and the Sudan People's Liberation Movement/ Army would be a historic achievement. Stabilizing Sudan and moving ahead with postwar reconstruction will be a daunting task. The accord’s core bargain will invite tension and confusion, simultaneously building national institutions to preserve the unity of Sudan while creating an autonomous southern entity. Sudan’s needs are immense, and the reconstruction period will be complicated by tremendous challenges. These include pervasive mistrust and uncertainty that will inhibit north-south collaboration on reconstruction efforts; north-south asymmetries in terms of institutional capacities and skilled workers; the presence of many potential spoilers, multiple “hot spots,” or unstable areas requiring civilian or military responses; large-scale population movements; massive debt; issues related to poor governance practices and misuse of resources; and possibly meddlesome neighbors. ■ An accord will also raise the question of what posture the United States and other external guarantors will take in the postwar period to ensure a true end to hostilities, build confidence among long-warring parties, and produce tangible benefits for the Sudanese people. The United States has worked in close partnership with Britain, Norway, Kenya, and the United Nations to end Sudan's war. This unique multilateral model must be expanded and sustained throughout the reconstruction phase in order to guarantee Sudan's peace. ■ Ending the north-south war in Sudan is just the beginning of a six-year experiment leading toward a referendum on self-determination in southern Sudan. It This chapter originally appeared as a report, under the same title, of the CSIS Post-Conflict Reconstruction Project, directed by Frederick Barton and Bathsheba Crocker. Dina Esposito, a consultant to the project, and Bathsheba Crocker wrote the report. John Love, Daniel Werbel-Sanborn, and Lance Lesher contributed to the research and writing. See this chapter’s appendix B for further information about the work of the CSIS Post-Conflict Reconstruction Project.

50 Dina Esposito and Bathsheba N. Crocker 51

will be a long and tense period during which myriad events could tempt the parties to renege on their commitments. In addition, conflicts elsewhere in Sudan, including the intense conflict ongoing in Darfur, potentially could bring down the entire peace effort if war there spreads or gains support among spoilers on either side. ■ This analysis does not cover the full range of reconstruction needs in Sudan, which are vast. It focuses on four priorities that must be addressed by the U.S. government and the international community to protect against reversion to war or failed-state status in Sudan. • First, the international community must work with the Sudanese to provide sufficient security to protect against the resumption of hostilities and allow reconstruction efforts to move forward. • Second, the United States, other major powers, and the United Nations must demonstrate resolve by expediting new diplomatic, economic, and security initiatives to reinforce the peace. • Third, donors must begin to press for the liberalization of autocratic governing structures in both southern and northern Sudan. • Fourth, reconstruction programs should promote the opening and integration of Sudanese societies, building connections between northerners and southerners and among various groups in the north and south. ■ Even before a peace agreement is signed, the international community should be preparing to take the following steps to further this four-part vision: • Under the UN's chapter VII authority, deploy an international quick response force and peacekeeping/monitoring force • Ensure the success of the joint/integrated units of Sudan's post-peace armed forces • Ensure appropriate, coordinated, high-level political authority over international security functions • Sustain robust diplomatic engagement • Offer substantial economic assistance • Support peacekeeping operations during the life of the interim period • Establish benchmarks to measure both the unity and southern regional governments’ progress toward improved governance • Build capacity throughout Sudan and open up its political processes • Develop transparent oversight mechanisms over oil wealth and other national and regional revenue streams • Use a “connection lens” when identifying priority reconstruction tasks, including through encouraging expanded people-to-people dialogues • Prepare for a constitutional convention. 52 Rising U.S. Stakes in Africa

The authors take no position on whether Sudan should remain united or be divided into two separate states. Regardless of that outcome, the goal of a more peaceful and open Sudan in which the spirit of the Machakos Protocol and the elements of the peace agreement are respected remains the same. The United States, the United Nations, and other major donors must take the steps outlined here for that goal to be achieved. The stakes in Sudan are enormous, from combating terrorism, persistent conflict, and failing states in Africa to introducing democracy and openness in the Middle East and improving U.S. goodwill in the Arab and Muslim worlds. Succeed- ing will require the United States and its partners to begin preparing now to commit the time, resources, and attention necessary to guarantee the peace in Sudan.

Introduction

Ongoing peace negotiations offer the best opportunity in decades to end Sudan’s civil war—the longest-running such conflict in Africa. If a negotiated settlement is reached in mid-2004, it will be a historic achievement, signaling that the Govern- ment of Sudan (GOS) and the Sudan People’s Liberation Movement/Army (SPLM/A) have finally mustered the will to find a negotiated exit from war. But the accord will raise the question of what posture the United States and other external guarantors will take in the postwar period. Will they take the steps necessary to ensure a true end to armed hostilities, build confidence among long- warring parties, and produce tangible benefits for the Sudanese people? Sudan’s predominantly Arab, Muslim north and its Christian and animist Afri- can south have been locked in war for all but 11 years since the country gained independence in 1956, fueled by struggles over resources, power sharing, religious freedom, and basic human and social rights. Since the war resumed in 1983, some 2 million Sudanese have lost their lives; about 5 million more are displaced in their own country or are refugees in neighboring states. Those in war-affected areas in Sudan live in abysmal conditions. Relief efforts, though massive, provide a bare minimum of the basic needs for the beleaguered southern population. Stabilizing Sudan and moving ahead with postwar reconstruction will be daunting. Hatred, mistrust, and uncertainty run deep among the Sudanese, and yet major issues may be deferred or left ambiguous as the parties move through the negotiated endgame. There are vast asymmetries between the north and the south—as well as between Khartoum and the rest of the country—in terms of human and institutional capacities. The south has little administrative and intellectual capacity—because of decades of war and lack of education—to begin an effective form of southern self-rule as envisioned in the draft peace accord. It will inherit virtually no institutions or infrastructure from which to begin delivering services. Potential spoilers to a successful peace include numerous armed militias, hardliners on both sides, and potentially meddlesome neighbors. Within both northern Dina Esposito and Bathsheba N. Crocker 53 and southern Sudan, there are multiple hot spots involving garrison towns, canton- ment areas, and movement home by internally displaced persons that will require military or police responses and will have dramatic humanitarian and political import. Compounding the challenges is the parties’ history of poor governance, manipulation of donor assistance for political gain, and mismanagement of resources. On a per capita basis, Sudan is among the world’s poorest, least-developed, and most indebted countries. In addition, the peace agreement does not speak to the full complexity of ongoing conflict in Sudan. In the northern periphery regions—most notably Darfur, today—Muslims are waging war on Muslims. And in the south, ethnic groups— such as the Dinka and Nuer—have battled over issues of land and water rights and political and economic power. In this extraordinarily diverse country of 37 million people, it is difficult to speak of a common regional identity, let alone a common national one. Whether the draft peace agreement embodies the successful formula for a long- term peace is uncertain. Internally, much rests on the political will and capacities of the two signatories to interpret and implement the agreement in good faith and the broad engagement of the Sudanese people. Externally, success depends on sustained, high-level outside engagement. The United States has made an exceptional diplomatic effort to end Sudan’s war in close and unique partnership with Britain, Norway, and Kenya. That effort has involved sustained engagement by the president and secretary of state as well as by other top officials at the U.S. State Department and the U.S. Agency for Interna- tional Development (USAID) and by a U.S. presidential envoy. Senior British and Norwegian officials have been equally active, and UN secretary-general Kofi Annan has also played a key role. This unique multilateral model should be expanded and sustained in the reconstruction phase. Not only does it best serve Sudan’s interests—it could also signal a renewed U.S. commitment to multilateralism. An accord will affirm the value of high-level U.S. engagement, in concert with African, European, and UN partners, to end a chronic war. It will validate the U.S. strategy of employing robust threats and inducements, especially in the aftermath of September 11, and the positive impact that highly mobilized American constituencies can have in sustaining U.S. engagement in Africa. Moreover, it could facilitate the lifting of U.S. bilateral sanctions. But ending the war is just the beginning. The agreement is only the opening gambit in a six-year high-stakes game that will culminate in a referendum on self- determination for southern Sudan. Although this timeframe allows considerable time for political and economic reforms, it will be a tense period during which myriad events could tempt the parties to renege on their commitments. The possibility that this six-year experiment will end in a chaotic, failed-state scenario or the creation of two autocratic, one-party states cannot be ruled out. The primary goal for the post-peace period in Sudan should be the creation of a more peaceful and open society in which the spirit of the Machakos Protocol and the elements of the peace process are fulfilled.1 The reconstruction needs of Sudan are vast, and this analysis does not address all of them. Instead, it focuses on the 54 Rising U.S. Stakes in Africa immediate priorities that must be addressed by the U.S. government and the international community in order to achieve this goal. ■ First, the international community must work with the Sudanese to provide sufficient security to protect against the resumption of hostilities and allow reconstruction efforts to move forward. This can only be achieved through a sufficiently mandated, funded, and equipped UN peace operation, including an international quick reaction force. External parties cannot assume that key security vulnerabilities will be resolved off-line by the parties themselves. ■ Second, it will be critical for the United States, other major powers, and UN leadership to demonstrate resolve by expediting new diplomatic, economic, and security initiatives to reinforce the peace. ■ Third, donors must begin to press for the liberalization of autocratic governing structures in both southern and northern Sudan. ■ Fourth, it will be important that the donor community leverage reconstruction programs to promote the opening and integration of Sudanese societies, building connections between both northerners and southerners and among various groups in the north and south. The Sudanese people have suffered profoundly and are tacitly united by a wea- riness of war. The international community cannot return to “business as usual” once a peace accord is signed. But thus far, it is unclear that the United States and other donors are planning to commit the level of human and financial resources, diplomatic engagement, and peacekeeping support needed to ensure that security is maintained and peace is won. Given the enormous ongoing efforts in Afghanistan and Iraq, it is worth considering why the United States should also commit to winning the peace in Sudan. First, long and serious interest in the fate of the southern Sudanese on the part of varied U.S. constituencies has resulted in an enormous outlay of U.S. humanitarian assistance to Sudan—almost $2 billion since 1983. Committing to a stable and peaceful postwar Sudan would be a reflection and logical progression of the U.S. investment to date. Second, Sudan is a core country in the U.S. effort to combat failed states, persistent conflict, and terrorism throughout the Horn of Africa/Red Sea region. If the United States fails to take the necessary steps to ensure against Sudan’s falling into failed-state status, regional instability will continue to threaten U.S. interests in this key region of Africa. Because of Sudan’s oil wealth, there is perhaps the even greater possibility that its experiment with peace and democratic change will fail. This makes it even more important that U.S. policy address questions of oil transparency wisely and rigorously. Third, Sudan is a critical proving ground for President Bush's expressed commitment to introduce democracy and openness in the Middle East and among

1. That protocol, and early draft language for the peace agreement, strive toward a democratic system of governance and “political and economic justice which respects the fundamental human and political rights of all Sudanese people.” Machakos Protocol, July 20, 2002, . Dina Esposito and Bathsheba N. Crocker 55

Muslim societies. An end to Sudan’s civil war presents an opportunity for the United States to work with Arab partners and other friends and allies toward promoting the president's vision. Finally, sustained commitment to a post-conflict Sudan would reverberate far past Khartoum in highlighting U.S. goodwill and commitment, particularly essential given U.S. difficulties with public diplomacy in the Arab and Muslim world.

The Peace Process

Status of the Peace Process Sudan has seen numerous rounds of failed peace talks since the formation of the SPLM/A and the resumption of war in 1983. Both the government and the southern rebel movement have long believed that the war could be won on the battlefield. But in recent years, complex strategic calculations by both parties (linked to their respective political survival), military stalemate, and increasing political pressure in the form of UN and U.S. sanctions and diplomatic estrangement on the world stage have led both sides to take peace more seriously. Each side has signaled its intention to sign an agreement in early 2004. On July 20, 2002, the GOS and the SPLM/A signed the Machakos Protocol, designed to lead to a comprehensive peace agreement.2 This protocol, the ensuing and continuing talks, and a security agreement signed in September 20033 reflect a new commitment to peace, which, if realized, will be a major shift from recent history. The breakthrough at Machakos centers on two crucial components. First, at the end of a six-year “interim period” following a comprehensive agreement, the GOS and SPLM/A will jointly organize an internationally monitored referendum in southern Sudan that will allow southern Sudanese to confirm Sudan’s unity or vote for secession. Second, in states outside southern Sudan, Shari`a—Islamic law—will be the source of law for national legislation. Southern states shall have as their source of legislation popular consensus and local customs. The Machakos Protocol also commits both parties to work together during the interim period to “make unity attractive” to the people of southern Sudan. (See text box on page 56.) Since the initialing of the protocol, there have been near-continuous rounds of talks seeking resolution on a broad array of issues, the most critical of which follow: ■ A mutually agreeable formula for sharing the nation’s natural resource wealth; ■ A mutually agreeable formula for sharing political power between the GOS and the SPLM, and to a lesser extent with other opposition groups; ■ The status of the GOS and SPLM armed forces (i.e., two standing armies and their relations to a national integrated force);

2. Machakos Protocol, July 20, 2002. 3. Agreement on Security Arrangements during the Interim Period, Naivasha, Kenya, September 25, 2003, . 56 Rising U.S. Stakes in Africa

Key Elements of the Machakos Protocol

The GOS and the SPLM/A agreed, inter alia, on the following:

■ Peace implementation will be conducted in ways that make the unity of Sudan attractive.

■ The southern Sudanese have the right to govern affairs in their region and to participate equitably in the national government.

■ The southern Sudanese have the right to self-determination, including through a referendum to determine their future status. ■ A democratic system of governance will be established.

■ There will be a national constitution that guarantees freedom of religion and an inclusive constitutional review process during the interim period.

■ The sources of law for national legislation in states outside southern Sudan will be Shari`a and the consensus of the people. Peace implementation will include the following elements:

■ A six-month pre-interim period ■ A six-year interim period during which mechanisms and institutions provided for in the agreement will be operationalized

■ An independent assessment and evaluation commission to monitor peace implementation, to include Sudanese and outside representatives

■ An internationally monitored referendum in the south to confirm the unity of Sudan or vote for secession, at the end of the six-year period.

■ Whether and how Shari`a law will apply in Khartoum given the Machakos agreement on respect for the country’s religious diversity; and ■ The status of the so-called marginalized areas—the Nuba Mountains, Southern Blue Nile, and Abyei. These areas have significant ethnic southern populations but lie north of the 1956 north-south line. Each in its own way seeks to preserve special treatment within the context of a peaceful Sudan.4 Although partial progress has been made on many of these issues, only the security arrangements have been finalized—based on intensive negotiations between GOS first vice president Ali Uthman Mohammed Taha and SPLM/A chairman John Garang in September 2003. The security agreement for the interim period will allow the SPLM/A to retain a large enough military force to defend itself if the cease-fire lapses, in case the GOS abrogates the peace agreement, or to uphold a cessation vote. The GOS and SPLM/A have agreed to a mutual drawdown of their forces, redeployment on their respective sides of the 1956 north-south boundary,

4. These three areas have seen some of the most intensive fighting during the conflict, and their people hold key positions in the SPLM/A leadership, not to mention the rank and file. Their future is being negotiated as a separate issue, with broad autonomous arrangement likely for Southern Blue Nile and Nuba, and an administrative redrawing of boundaries a possibility for Abyei. Dina Esposito and Bathsheba N. Crocker 57 and the creation of an integrated force composed of troops from both sides. (See text box on page 63.) The able leadership of Kenyan mediator Lt. Gen. Lazaro K. Sumbeiywo, working under the auspices of the Intergovernmental Authority on Development (IGAD) regional body, has been key to the progress achieved to date. A group of donors known as the IGAD Partners Forum has proven critical. In particular, the so-called troika countries—the United States, the United Kingdom, and Norway— have emerged as intimate collaborators in the process. Through promises of a “peace dividend” if an agreement is signed and threats of severe penalties if it is not, the troika is placing substantial pressure on both sides to make a deal.5

Critical Challenges

Despite these positive elements, the current peace process and draft final accord pose several critical challenges that will have to be addressed in the post-peace phase if backsliding and paralysis are to be avoided and if the agreement is to be transformed into a durable peace. ■ Significant issues will remain unresolved or open to widely divergent interpretation. Major issues may be deferred or left ambiguous, in the belief that they can be resolved in the interim period. But as the experience of the past 50 years shows, Sudan’s peace will not flow simply by virtue of a peace agreement’s being signed. The emerging agreements call, inter alia, for managing militia groups, revision of the constitution, applying transparency to revenue streams, and assurance of improved human rights, but they do not include detailed provisions to achieve these aims. It is expected that some progress will be made in defining implementation plans during the six-month pre-interim period. U.S. and other donor engagement will be essential to the success of such plans. ■ The accord’s core bargain will invite tension and confusion. The agreement rests on a core bargain that provides for two simultaneous institutional solutions to Sudan’s chronic war. At the same time, the accord envisions building incentives and new national institutions to preserve the unity of Sudan. A de facto autonomous entity would govern in the south and a national unity government in the north, and the final status of the south would be left undetermined until the referendum. The SPLM/A is likely to invest heavily in the southern regional government, and both the north and south could focus

5. The United States’ Sudan Peace Act is one example of threatened penalties. It requires the president to determine that the GOS and SPLM are negotiating in good faith and that negotiations should continue. If the president determines instead that the GOS has not engaged in good faith negotiations, then he is required to impose certain sanctions, including working to oppose international financial institution loans, credits, or guarantees to the GOS; the consideration of downgrad- ing or suspending diplomatic relations between the United States and the GOS; taking steps to deny the GOS access to oil revenues; and seeking a UN Security Council resolution to impose an arms embargo on the GOS. Sudan Peace Act, §6, H.R. 5531 (October 2002). 58 Rising U.S. Stakes in Africa

Remembering Addis Ababa

In the ongoing peace talks, the SPLM/A’s bottom line includes the right to secede after the six-year interim period, the retention of an independent southern army, and clear wealth and power-sharing formulas. This reflects its intent to avoid the weaknesses of the 1972 Addis Ababa Accord. That accord, which ushered in the only period of peace Sudan has known since its independence in 1956, was gradually and unilaterally abro- gated by then president Nimeiri. Under that agreement, the south lacked any guarantee to ensure that the north would maintain its commitments and was unable to counter the north’s progressive usurping of southern political and economic power. For example, Nimeiri replaced southern troops with northern units when he wanted to ensure Khartoum’s control over the (then prospective) Bentiu oil fields. Natural resource-rich areas that were to revert to the south were reabsorbed by the north. Abyei and parts of Blue Nile were never allowed to conduct referenda to determine if they would merge with the south, as provided for in the Addis agreement. Nimeiri’s imposition of Shari`a law and other steps toward Islamization that rendered non-Muslims second-class citizens made the return to war in 1983 all but inevitable. See Ann Lesch, The Sudan: Contested National Identities (Bloomington: Indi- ana University Press, 1998), pp. 45–58.

exclusively on building truly separate institutions in their regions unless they are encouraged to collaborate. Many postwar reconstruction decisions will be heavily scrutinized for evidence of prejudice toward unity or secession. The three military forces/two political centers construct called for in the peace process enhances the possibility that separate military forces will be used to address the inevitable tensions. ■ The peace process is exclusive. Opposition groups to the GOS and the SPLM/A, civil society groups, and armed militias have expressed intense frus- tration at their lack of a role in the peace talks. IGAD and the troika have supported exclusivity on the grounds that it offers the only realistic hope of getting a signed agreement in the near term. The cooperation of these groups is crucial, however, to build popular support and legitimacy for the accord. ■ There is little public knowledge of the peace. The general populace in both northern and southern Sudan knows very little of what transpires at the talks or of the likely shape of the peace agreement. This lack of knowledge has led to the proliferation of unreasonable expectations about the speed of economic recovery and the levels of donor engagement and economic aid. ■ The international community’s ad hoc oversight of current violations could presage weak monitoring of a future agreement. In defiance of a memorandum of understanding and cessation of hostilities agreement between the GOS and SPLM/A, both sides have engaged in armed violations, testing the international community’s commitment. A similar pattern should be anticipated following the signing of a formal peace accord. Until now, the international community has generally lacked the capacity and will to hold the parties accountable for their transgressions. Present monitoring mech- Dina Esposito and Bathsheba N. Crocker 59

anisms have limited scope and strengths, and diplomats have been hesitant to threaten the peace talks by emphasizing violations. It is unclear whether the international community will create robust, effective mechanisms to monitor the accord and have the political will to act forcefully in the face of repeated violations. ■ There is no common understanding of several key issues in the Sep- tember 2003 security agreement. The agreement presents many new and innovative concepts that have the potential to bring the parties together and help ensure a lasting peace. But these concepts are introduced only notionally, and the agreement lacks the substantive details necessary to ensure a common understanding between the parties in terms of definition and application of concepts. Key issues requiring resolution include the future role of the Ministry of Defense (and perhaps the creation of separate ministries); the chain of command of the three-army construct; the operational concept of the new joint/ integrated units; the organization and role of the Joint Defense Board (JDB); and the scope and purpose of the common military doctrine. (See text box on page 63 for further description of the security agreement.)

The Reconstruction Process

Planning for Peace and Reconstruction In many ways, the Sudanese and their donor partners have been impressively forward-leaning in anticipation of peace. A series of donor coordination conferences has already occurred. An innovative GOS-SPLM/A Joint Planning Mechanism (JPM) was established to help the two parties assess needs, identify reconstruction priorities, and draw up action plans for the pre-interim period. The United Nations and donors have undertaken substantial research in a wide range of sectors, advancing baseline information and strategic planning by sector. The long-absent World Bank has taken initial steps to reengage, and the two largest donors—the United States and the European Union (EU)—have already approved reconstruction strategies in place. Working with donors, the GOS and SPLM/A have identified priority areas for near-term reconstruction efforts that donors are planning to advance through “quick start” programs designed to raise public confidence in the political transition process and rapidly illustrate to the Sudanese people the benefits of peace—the so-called peace dividend. These priority areas, the parallel reconstruction planning efforts under way in the north and south, and the ongoing donor programs and funding plans are discussed in more detail in this chapter’s appendix A, page 82.

The Reconstruction Context Myriad challenges will complicate Sudan’s post-conflict reconstruction. Critical factors that threaten to destabilize or limit successful reconstruction include: ■ Entrenched hatred, mistrust, and uncertainty. After 40 years of war, hatred and fear define the north-south relationship. Those feelings are matched 60 Rising U.S. Stakes in Africa

only by the mistrust resulting from Sudan’s long history of broken peace agreements. Most Sudanese in war-affected regions have never known peace in their lifetimes and have little faith in the willingness or ability of “the other” to live up to their commitments and deliver lasting peace. The GOS’s proven skill at manipulation and the SPLM/A’s paranoia that it will lose ground during peace implementation will encumber effective collaboration. This, coupled with most southerners’ present desire for secession, suggests that outsiders will have to seriously encourage steps to bridge the north-south divide. ■ North-South asymmetries. The bulk of Sudan’s institutional capacities and skilled workers reside in the north of the country, specifically Khartoum. Southern Sudan’s population (comprising perhaps as many as 5 million people) is served by an estimated 86 doctors, 600 nurses, and 23 judges. The south has no functioning government, which makes talk of reconstruction even more daunting and threatens the south’s ability to engage as an equal partner in complex discussions regarding peace implementation and reconstruction priorities. ■ Center-periphery conflicts. A patchwork of northern-based conflicts— ongoing fighting in Darfur in the west, areas near Kassala in the east, and continued tensions in the marginalized areas of Abyei, Southern Blue Nile, and the Nuba Mountains—threatens Khartoum’s power and Sudan’s sovereign unity. Successful implementation of a GOS-SPLM/A peace accord is not likely to fully stabilize Sudan. Achieving a sustainable peace will require moving beyond the north-south paradigm and looking at the center-periphery issues related to Khartoum’s stranglehold on economic and political power that are generating all of these conflicts. ■ The presence of militias. There are an estimated 32 militias in southern Sudan—about 3 each in Equatoria and Bahr el Ghazal regions and about 26 in Upper Nile. Ranging in size from a few dozen armed men to as many as a few thousand, these groups are responsible for some of the most heinous abuses committed during the war, are the most unpredictable element of the security picture, and are arguably among the greatest threats to the peace accord. Although most are ostensibly allied with either the GOS or SPLM/A, the degree to which they are actually controlled by these parties is a matter of significant debate. Any assumption that both sides will simply take the necessary steps to bring their militias in line is misplaced. Yet the process of “dealing with the militias” has been left to the two negotiating parties outside the terms of the agreement. Despite the cessation of hostilities between the parties, money and arms continue to flow to militia groups, and they remain active. The SPLA has taken steps to reconcile with some of the GOS-aligned militias, but the process is far from complete. ■ Other spoilers and the regional players. Hardliners within the SPLM/A and the GOS continue to argue that the price of peace is too steep for their interests. In addition, a number of Christian rights activists actively oppose negotiation with the GOS and may support armed groups to carry on the fight.6 The Lord’s Resistance Army, a Ugandan rebel group operating in remote areas Dina Esposito and Bathsheba N. Crocker 61

of southern Sudan, has attacked civilians, its former supporters, the Sudanese army, and GOS-backed militias. It is also likely to target reconstruction assistance. Although Sudan’s neighbors are largely supportive of the peace process, elements within Chad and Eritrea could have both the interest and the means to fuel destabilization in western and eastern regions of Sudan, respectively. ■ Multiple “hot spots” will require civilian policing and military responses. The peace will likely be threatened in multiple locations simultaneously. Potential “hot spots” include the GOS-held garrison towns of the south as they are transferred to SPLM/A administration; oil-rich areas such as the Bentiu region; the marginalized areas of Abyei, Nuba Mountains, and Southern Blue Nile; and transit routes of Internally Displaced Persons (IDPs) in the volatile transition areas between the north and the south. In southern urban centers like Juba, Malakal, and Wau—garrison towns that have essentially been islands in a sea of SPLM/A-held territory—hostilities are likely as long-sepa- rated populations commingle and new administrative centers of southern power are established. ■ Large-scale population movements. Sudan is home to the largest population of IDPs in the world. Surveys indicate that two-thirds of the nearly 2 million IDPs in and around Khartoum desire to return home, many of them immediately after a peace settlement. In the immediate post-peace months, UNHCR anticipates the return of 110,000 refugees from neighboring countries. The prospect of providing an effective safety net for IDPs and refugees is daunting. Given the lack of services for current inhabitants of southern Sudan, returning IDPs and refugees will generate conflict over limited resources. IDPs returning from the north also will be highly vulnerable to attack as they travel through the volatile north-south transition zones. In addition, the political jockeying around IDP movements will be intense. Large-scale, quick returns are in the SPLM/A’s interest in terms of preparing for the national census and referendum. And although many in the GOS will be eager to see the northern-based IDPs depart, they also have a vested interest in ensuring that some southerners remain in the north: they provide cheap labor and attract donor resources. Both sides will see the IDPs as the potential swing voters who could influence the outcome of the referendum. ■ Lack of accountable governing structures. Both the GOS and the SPLM/A are autocratic entities with no democratic tradition. Security forces operate with impunity in the north, as does the SPLM military in the south. Serious violations of human rights are well documented in both regions, though the north is considered the worse offender. Freedom of assembly, freedom of speech, and the formation of political parties are stifled in both areas. The authority of traditional leaders has been trampled, and civil society groups

6. “Fighting a Peace Plan; Some Christian Aid Groups Are Supporting the Rebels,” Newsweek International, August 18, 2003, . 62 Rising U.S. Stakes in Africa

muted. At present, neither is sufficiently empowered to fully engage in issues of peace and development. ■ A history of assistance manipulation and nontransparent use of resources. Both the GOS and the SPLM/A have a long history of diverting humanitarian assistance for their own gain. In addition, neither can currently claim transparent accounting for public resources. The interest in and ability of the GOS and SPLM/A to allocate donor resources responsibly is questionable. ■ Massive debt. Sudan’s foreign debt is an estimated $21 billion, making it one of the most indebted countries in the world, on a per capita basis. The bulk of the principal was accrued in the 1970s and early 1980s, although interest arrears now exceed the original loan values. Sudan’s challenge will be to improve the lives of its citizens through reconstruction and development efforts while simultaneously dealing with its debt and other macroeconomic imbalances. Recovery will be entirely dependent on the generosity of both donors and creditors. ■ Travel permitting procedures. GOS and SPLM restrictions on travel by international NGO and UN personnel as well as their local Sudanese staff have been a major impediment to the relief effort. The north’s system, in particular, is highly obstructive. The newly established unity and southern regional governments must grant complete, unfettered access if they expect international help with reconstruction.

Strategic Vision

This chapter does not prejudge the result of a referendum on self-determination for southern Sudan. Regardless of that outcome, the goal of a more peaceful and open Sudan in which the spirit of Machakos and the elements of the peace agreement are respected remains the same. But if the international community and the Sudanese fail to address the four elements below, the likely results will be autocratic or failed- state scenarios and continued, significant internal conflict. ■ Secure the peace ■ Expedite new diplomatic, economic, and peacekeeping initiatives to reinforce the peace ■ Liberalize governing structures in northern and southern Sudan ■ Leverage reconstruction efforts to promote the opening and integration of Sudanese societies. Even before a peace agreement is signed, the international community should be preparing to take the following steps to further this overall vision. Dina Esposito and Bathsheba N. Crocker 63

Key Elements of the September 2003 Security Agreement

■ The GOS and SPLM/A will maintain separate forces, to be treated equally as Sudan’s Armed Forces.

■ Both sides’ forces will be proportionally downsized. ■ The cease-fire will be internationally monitored.

■ Both sides’ forces will disengage and return to their respective sides of the 1956 north-south boundary. The Sudan Armed Forces (SAF) will redeploy all its nonintegrated forces from south to north within two and one-half years, and the SPLA will redeploy all its nonintegrated forces in the Nuba Mountains and Southern Blue Nile from north to south as soon as joint/integrated units are formed and deployed.

■ The parties will implement disarmament, demobilization, and reintegration programs. ■ Joint/integrated units shall be formed with equal numbers from the SAF and SPLA. These units are intended to have symbolic weight, form the backbone of a single army if unity is affirmed, be involved in reconstruction efforts, and maintain a presence in the marginalized areas.

■ Joint/integrated forces will deploy a total of 24,000 troops in southern Sudan, 6,000 in the Nuba Mountains, 6,000 in southern Blue Nile, and 3,000 in Khartoum.

■ A Joint Defense Board (JDB) shall be established, under the presidency and composed of chiefs of both armies, to coordinate the separate forces and command the joint/integrated units. ■ The parties shall determine a common military doctrine based on the joint/integrated units. ■ No armed group allied to the parties is to be tolerated outside the umbrella of the three services.

■ A comprehensive cease-fire agreement will be included in the final peace agreement.

Secure the Peace The security agreement between the parties will not overcome the primary security challenge of the interim period: ensuring that neither the parties nor spoiler groups push Sudan back into war. Reaching agreement on security issues related to the peace was a significant breakthrough for the parties, but major challenges remain. Perhaps the key security vulnerabilities in the immediate post-peace period will be uncertainties surrounding both sides’ willingness to adhere to the agreement (especially given the numerous broken agreements in the past) and the support for and strength of militias. The security agreement also leaves unresolved other key issues, such as the number of soldiers to be retained in the separate GOS and SPLA armed forces and, hence, the number of soldiers on both sides to be demobilized; protecting IDPs as they return home; ensuring security in such hot spots as oil areas and garrison 64 Rising U.S. Stakes in Africa towns; designing effective reintegration strategies; and developing effective cease- fire and human rights monitoring procedures. The security arrangement between the two negotiating parties will have to be reinforced with a robust international security operation that is mandated from the beginning to address these real threats to the peace. That mandate must include the ability to use force to counter militias and hardline military elements on either side. Moreover, although northern “hot spots” such as Darfur and Kassala are not part of the north-south peace agreement, these volatile regions cannot continue to be ignored with the justification that the peace agreement is important enough on its own. Continuing full-scale warfare, such as that currently ongoing in Darfur, could well bring down the entire effort if it spreads or gains support among spoilers on either side. The key international players—the United Nations and the troika in particular—must work with the parties, before and after an agreement is signed, to obtain cease-fires in these areas as well. International security arrangements should be extended to these areas at that time. The United Nations Department of Peacekeeping Operations (DPKO) and the troika governments are already engaged in discussions with the Sudanese concerning issues such as the size and mandate of a UN peacekeeping force, the number and type of international monitors, the deployment of international civilian police (CIVPOL) and the establishment of a joint civil police service, and demobilization, disarmament, and reintegration (DDR) of former combatants. These will all be key elements of an eventual post-conflict security plan. The recommendations below address three make-or-break elements of a security plan that are not being sufficiently addressed as part of the current planning processes. Under the UN’s chapter VII authority, deploy an international quick response force and peacekeeping/monitoring force. The U.S. and UN planning thus far envisions deploying a peacekeeping force mandated under the UN’s chapter VI authority; in other words, the peacekeeping force would not be mandated to use force except for self-defensive purposes or under extreme circumstances for the protection of Sudanese civilians. The international community must acknowledge, however, that nonmilitary measures will not be effective in all instances in Sudan. There will be cases where militia groups, breakaway military elements within either party, or rebel or proxy forces supported by Sudan’s neighbors will have to be dealt with forcefully if peace is to be maintained. Although the long-term solution to dealing with spoilers should be to form a specially trained and equipped rapid response capacity within Sudan’s joint/integrated units, the immediate post-conflict needs will outweigh the capacities of Sudan’s security forces. Talk of a chapter VII mandate will be controversial to UN Security Council members, the troika countries, the parties in Sudan, and potential troop-contributing countries. But as the nearby examples of Angola, Sierra Leone, and Congo too aptly demonstrate, relying on the initial goodwill of the parties alone will not ensure the long-term success of a chapter VI mission. In all three of those cases, the initial chapter VI mandate was acknowledged as inadequate—and in Sierra Leone and Congo, transitioned to a chapter VII mandate—only after serious threats to the Dina Esposito and Bathsheba N. Crocker 65 peace that included massive loss of civilian life. Simply put, chapter VI missions are an outmoded concept in the Africa context. Although the parties in Sudan appear to be acting in good faith now, the six- year interim period envisioned in Machakos is a long time to reasonably expect the accord to go unchallenged, either from hardliners on both sides or from other spoilers. The bulk of the peacekeepers and monitors in Sudan would not need to use chapter VII authorities during the life of the peacekeeping mission, but there will be a need for a small, agile international response team that can use lethal force. This need should be frankly acknowledged and anticipated. It is preferable to train and deploy under chapter VII—and never use that authority—than to deploy under chapter VI and risk the likely eventual failure of the UN mission. Moreover, a signed peace agreement in Sudan does not automatically disqualify the country for status as a chapter VII mission. None of the international troops are envisioned as an interpositional force between the Sudan Armed Forces (SAF) and the SPLA. In fact, it would be to both parties’ advantage to agree to a small international fighting force—in addition to the international peacekeeping force—that could help protect against a reversion to war during a particularly sensitive time in the life of the peace agreement. The parties could see such a force as a form of insurance, to reinforce their legitimacy and commitment to a lasting peace. It would also meet the clear demand on the part of the Sudanese people for a serious signal from the international community that it will provide the necessary guarantees to help secure the peace. The United States, Britain, and Norway should be pursuing discussions now, at the UN Security Council and with the Sudanese parties under the auspices of IGAD, with a view to coming to agreement on a chapter VII mandate that would include the following elements: ■ International Quick Response Force (QRF). An international QRF should be deployed as a special element of a large peacekeeping force. It would serve in a “reserve” capacity and would be trained and mandated to conduct counterinsurgency operations against militia groups, breakaway military elements, and foreign-supported rebel or proxy forces operating in contravention of the security agreement. The force, as envisioned here, would not have to be large. A light infantry battalion-sized force—500 to 600 soldiers—would provide sufficient reserve capacity to the larger peacekeeping force. The QRF would only need to be used in extreme circumstances that could be narrowly defined under memoranda of understanding and rules of engagement. But the credible deterrent and enforcement value of this response force would be indispensable to the security posture in the south. Troops for the QRF could be recruited either as part of the overall UN peacekeeping mission or under a lead nation model. Under either option, the QRF troops should come from a sole donor country, be task-organized and trained as an integrated team, and possess the requisite capabilities to perform the mission envisioned above. Arguably, only a NATO country could meet these criteria. We recognize that it will be challenging, as a political matter, to recruit 66 Rising U.S. Stakes in Africa

a country to play the lead nation role—or provide the troops—for the QRF. The United States should begin working now with key allies on Sudan in order to identify possible willing candidates to take on this role. To maximize its deterrent value, the QRF should be centrally located in the south and conduct regular, visible training exercises in known flashpoints and areas most likely to host belligerents. To be effective, the QRF will also need rapid, sufficient transport capability—in Sudan, helicopters—but such transportation and other combat service support could be provided by the peacekeeping force to reduce the QRF’s size and footprint and maximize cost efficiencies. The QRF would be deployed only for a limited duration, to fill the security gap until the Sudanese joint/integrated units develop sufficient counterinsurgency capacity. To that end, the QRF could also provide a training cadre to work with other international advisers and trainers (discussed below) to train Sudanese rapid response units. Once indigenous capacity is developed within Sudan to handle potential security threats, the international QRF could transition out of Sudan; it is reasonable to assume at least a one-to-two year period before such a transition of responsibility could occur. ■ International Peacekeepers/Monitors. As noted above, the United Nations and interested donors are already planning for the deployment of a UN peacekeeping force into Sudan, although further discussion and focus is needed on the operational concepts, rules of engagement, and location of the envisioned force—the overall size, shape, and composition of which remains unclear. Any such force should include peacekeepers and unarmed cease-fire and human rights monitors and should draw on the largely successful Joint Military Commission (JMC) model of pairing international monitors with GOS and SPLM forces.7 In general, the peacekeeping and monitoring force should make use of the existing infrastructure and personnel already in Sudan as part of the JMC, the Civilian Protection Monitoring Team (CPMT), and the Verification Monitoring Team (VMT).8 Those disparate functions could form the basis of an international peacekeeping and monitoring force—helping to fill the inevitable gap before peacekeepers are deployed—and would gain efficiencies in terms of lower costs and greater experience, expertise, and familiarity with the parties, terrain, and issues.

7. Joint Military Commission/Joint Monitoring Mission: A Norwegian-led Joint Military Com- mission/Joint Monitoring Mission was established by a donor group known as the Friends of the Nuba Mountains to monitor the January 2002 Nuba Mountains cease-fire agreement. The JMC monitors the cessation of hostilities and guarantees the free movement of civilians, goods, and humanitarian assistance. Monitoring teams, under the guidance of the JMC, conduct community patrols to improve the sense of security, investigate attacks on civilians, monitor troop locations, verify the contents of humanitarian aid shipments, improve local roads through de-mining and repair, monitor community meetings, and engage in peace-building activities. The general sense of security has improved markedly in the Nuba Mountains, and some internally displaced persons (IDPs) are returning to the area. One unique feature of this mission is the “jointness” of the monitoring—international monitors are paired with GOS and SPLM monitors to patrol the region. Dina Esposito and Bathsheba N. Crocker 67

The peacekeepers should be adequately manned and equipped to provide protection for UN personnel, ensure freedom of movement of UN activities, protect UN equipment and vital infrastructure, and protect civilians under imminent threat of physical violence.9 Blanket coverage of southern Sudan by peacekeepers will be impractical; its vastness and complexity will require a more custom-tailored approach. Because the peacekeepers will not be an interpositional force, they will not need to be everywhere at once but can instead focus their presence in areas where security risks will be the greatest, such as garrison towns, oil areas, and IDP transit routes. The force will need superb long-range communications equipment and sufficient helicopter transportation to deploy a 150-man infantry company to remote locations on short notice. Rather than sheer size, the force can capitalize on its strong mandate, connectivity, speed of deployment, and the QRF reserve element to ensure adequate provision of security. The international monitoring force should be organized along the model of the largely successful JMC in the Nuba Mountains, combining international monitors with representatives from the SAF and SPLA. Not only has such a model enhanced the security of civilians and JMC personnel in the Nuba Mountains, but it also addresses the desire to involve the Sudanese as much as possible in handling security tasks in the post-peace phase. Clear distinctions between joint monitoring and observer missions, peacekeepers, and QRF capacity and force size by region will help rationalize force structure and size and keep the overall cost of the chapter VII force more manageable. ■ Policing. Several impending issues could overwhelm Sudan’s existing security structures, and in any event would be more appropriately handled by a police force rather than the SAF or SPLA. These include revenge violence, harassment of in-transit IDP populations, and the shift of GOS, SPLA, and militia forces out of areas where they have been providing at least some modicum of security. International civilian police will be needed to train and develop indigenous Sudanese policing capacity. But in the first few years after the peace, CIVPOL

8. Civilian Protection Monitoring Team: This 20-person human rights monitoring team was established to investigate reports of attacks against civilians by military and paramilitary forces in the aftermath of a cessation of hostilities agreement between the GOS and the SPLM. The team investigates violations, issues publicly available incident reports, and, if a serious violation occurs, makes recommendations intended to avoid similar incidents in the future. Supporters argue that by demonstrating to the parties its capacity to produce comprehensive assessments, the CPMT has had a dampening effect on civilian attacks. Critics argue that its impact has been marginal, because even when attention is drawn to a serious violation, the CPMT has no capacity to impose punitive measures. Verification Monitoring Team: This team was established to monitor the cessation of hostilities in the south but has been hampered by both GOS and SPLM obstruction and is barely operational. 9. Border monitoring will be another necessary function. Along less troublesome border areas, the joint/integrated units could perform this task. Satellite and other technology could also be employed. 68 Rising U.S. Stakes in Africa

will also need to have executive policing capacity in order to actually help preserve public safety and prevent a vacuum. In addition, the United Nations and key donors should consider the use of constabulary (or gendarmerie) forces, particularly in key urban centers in the south. Such forces would deploy more rapidly than CIVPOL, have heightened capacities, and could address certain rapid reaction needs—such as low-level militia activity—in their areas without the need to call in the QRF. In addition to Italy, Spain, and France, other countries, including Argentina, Senegal, Jordan, Lebanon, Romania, and India have such standing capacity within their security forces. Ensure the success of the joint/integrated units of Sudan's post- peace armed forces. The joint/integrated units are the most innovative concept in the security agreement and provide the greatest prospect for ensuring lasting peace and security in Sudan. For those forces to succeed in their various envisioned functions—and particularly to form the backbone of a single army if unity is affirmed—the donor community must make this joint military experiment a high priority. Donors’ planning should focus on the following elements: ■ Establish an international advisory and training group. The United Nations is not currently planning to establish an international advisory capacity as part of its peacekeeping force. But such a group should be established to provide advice and training to the joint/integrated units at every level from the national headquarters to the individual joint/integrated brigades. Advice should focus on developing the new joint military doctrine, training concepts, combat development processes, joint force structure, integration, and basing methodology. International trainers would be used to help professionalize the joint/integrated forces and develop rapid reaction capacity within those forces. Developing that capacity quickly will be key to turning over security tasks to the Sudanese and transitioning the international QRF out of Sudan. ■ Ensure highly professional forces. The key international players should encourage the SAF and SPLA to provide their best talent to the joint units, including by working out a rigorous selection and reward process. In addition, the joint/integrated units should be provided with new, standard uniforms and equipment to emphasize their professional status. Donors should initially prioritize individual officer training for the SPLA in order to improve skill sets needed for promotion within the joint/integrated units. ■ Condition security assistance measures. Any consideration by the United States and others in the international community to normalize military relations and commence security assistance should be contingent upon compliance with the terms of the security agreement and other peace terms, including eliminating sponsorship of militia groups. Security assistance should be prioritized to flow to the joint/integrated units so as to contribute most effectively to their reconstruction roles or their development of a quick reaction force to handle armed militant groups operating in contravention of the security agreement. Dina Esposito and Bathsheba N. Crocker 69

The United States will need to address any limitations on providing security assistance to the joint/integrated units that arise from its many sanctions provisions. U.S. bilateral security assistance should focus on those units, even if that requires providing assistance to the unity government. Although controversial, doing so will provide a longer-term guarantee of peace in Sudan than providing security assistance only to the SPLA. Ensure appropriate, coordinated, high-level political authority over international security functions. Successful international efforts to help guarantee the peace will require strong political leadership and decisionmaking authority by a UN special representative to the secretary-general (SRSG) and a highly experienced representative for security affairs. The work of these two key persons should be tightly coordinated, including through co-location of headquarters. Through a national coordination center and decentralized regional offices, the security representative would manage and coordinate all international security functions—the peacekeeping force and monitors, the QRF, the advisory and training group, and CIVPOL—and maintain a presence throughout southern Sudan. These should be combined in the same UN “chain of command” to achieve unity and consistency of effort, ensure lateral coordination of functions at every level, and achieve resource efficiencies. The United Nations should recruit both the SRSG and his representative for security affairs in advance of the signing of a peace agreement. Their early engagement will help alleviate some of the planning and coordination shortfalls that typically occur in the start-up of missions. One primary function of the UN security representative should be to establish dialogue mechanisms to ensure that the military elements of the parties remain engaged to address critical security issues. The security representative can best facilitate this dialogue by serving as the principal interlocutor and adviser to the new Joint Defense Board (JDB), which includes representation from the joint/integrated forces, the SAF, and the SPLA. The parties have not yet defined the JDB concept. But to best serve the goals of effective civilian control of the military and regular dialogue between the parties' militaries, the JDB should neither be an ad hoc group that meets periodically nor merely an opportunity for a few SPLM/A members to sit in the Ministry of Defense in Khartoum. Rather, it should be the standing nucleus of the national joint/integrated force headquarters. The UN’s security representative could use the JDB as a means to apply constant pressure on the national military leaders to deal with the thorniest unresolved security matters. Thus, joint working groups should meet regularly, with the assistance of the international advisory group, to develop strategies for addressing issues such as the development and staffing of the joint/integrated units, the creation of a common military doctrine, the elimination of sponsorship of militias, and strategies to monitor and control weapons flows and potential spoilers. The security representative must be positioned to offer and withhold effective incentives to garner the cooperation of the parties on key security issues.10 70 Rising U.S. Stakes in Africa

Expedite New Diplomatic, Economic, and Peacekeeping Initiatives to Reinforce the Peace Unless the international community makes a sustained commitment to post- conflict reconstruction in Sudan, peace will not succeed. Third party “guarantees” must have three elements: sustained and robust diplomatic engagement, substantial economic assistance, and peacekeeping engagement that will endure through the southern referendum at the end of the interim period. As described above (see sections entitled “The Peace Process” and “The Reconstruction Process”), a peace agreement is likely to be a coerced arrangement between two less-than-committed parties, and the challenges to be addressed in the reconstruction phase are daunting. Only an aggressive international posture that includes all three of these elements can provide the pressure and incentives needed to reinforce the prospects for peace. Sustain robust diplomatic engagement. Arriving at the verge of a peace deal has required a complex dance among IGAD, the troika partners, and other key actors, including Egypt and other European nations. The United States, in particular, has played a pivotal role. Together, the United States, Britain, and Norway are in daily contact with the negotiating parties and IGAD, offering advice and counsel and maintaining pressure on all to reach the finish line. But there is a danger that the troika members will “declare victory” with the signing of a peace agreement and reconfigure themselves to return to a business-as-usual diplomatic posture toward Sudan. (U.S. engagements elsewhere in the world and presidential elections in 2004 potentially reinforce this prospect.) This would virtually ensure the failure of the peace and reconstruction process. Key decisionmakers in the troika capitals must ensure that diplomatic engagement is both sustained and reconfigured to best address the numerous and potentially explosive peace implementation issues.11 This will involve continued high-level engagement in national capitals and expanded staff numbers in Sudan, where the day-to-day details of peace implementation will be worked out. In order to meet the challenge:

10. Such carrots might include information sharing, impartial investigative capacity, acknowl- edgment of compliance leading to increased assistance, and improved international recognition and legitimacy. 11. The August 2003 “Nakuru” draft peace agreement proposed by IGAD, though not accepted by the parties, provides some insight into the scope of issues that will probably be left to the interim period. These include land rights, the census, elections, participants in the constitutional review process, civil service hiring policies, an internal borders review, the monitoring of natural resource wealth, and the creation of a mechanism to deal with amnesty, reparation, truth, and justice and reconciliation. The Nakuru draft describes the creation of many powerful commissions to address these and other issues. The persons selected to serve on those commissions and the extent of third party oversight of their work will be important elements in determining the commissions’ success or failure. See Nakuru Draft Framework parts I and II, . Dina Esposito and Bathsheba N. Crocker 71

■ Donors should urge the early selection of a special representative to the secretary-general of the United Nations to provide a political umbrella for all diplomatic, economic, and security activities. The United States and other donors should strongly support a multilateral reconstruction model, and Secu- rity Council members should begin discussions now with a view toward a UN Security Council Resolution calling for the appointment of an SRSG for Sudan. The UN secretary-general should begin identifying potential candidates in advance to ensure that there is a team in place for the post-peace mission. ■ To effectively guarantee Sudan’s ambitious and complex peace agreement, external powers and organizations—as well as the Sudanese players—will have to remain linked to each other and capable of fixing threats to the settlement. The multilateral model of the U.S.-Norway-UK troika, the IGAD Partners Forum, and the United Nations should be sustained and converted into a standing implementation body that would allow the key actors (signatories and observers) to engage in regular, face-to-face meetings (e.g., monthly, bi- monthly, or on demand) to identify, address, and resolve the large array of issues and challenges that will arise. Such a body would provide a standing safety net underneath the peace agreement so that conflict management and dispute resolution issues are not left to ad hoc consultations or urgent UN Secu- rity Council meetings. ■ The United States and other donors should substantially increase their embassy staff levels in Khartoum and open consular offices in the south (Juba or the designated southern capital) as soon as security permits. The United States should upgrade the U.S. chargé d’affaires position to ambassadorial rank and establish serious political and economic sections led by senior Foreign Service officers in its embassy; it should also place a consul general in the south. The Sudan Program Office staff in Washington, D.C., should not be downsized until an expanded embassy team is in place. Similar staff upgrades and expansion are recommended below for USAID. European bilateral missions and the European Commission mission should take a similar approach, with the EC providing a unified European front in the south.12 Offer Substantial Economic Assistance. Although the “quick start” programs planned by the international community are an important symbol, donors must sustain their commitment over a multi-year period in order to address Sudan’s reconstruction priorities effectively. Some 50 percent of countries that emerge from civil war will fall back into conflict within a decade.13 A recent World

12. The United States currently has a small embassy in Khartoum. Headed by a chargé d’affaires, it includes a deputy chief of mission, one political officer, one defense attaché, and one public affairs officer; there is no economic officer. Only six EU member nations are represented in Khartoum, all with very small missions. The European Commission also has a small mission. Nei- ther the United States nor other donors has a permanent presence in southern Sudan at present. 13. Paul Collier et al., Breaking the Conflict Trap: Civil War and Development Policy (New York: Oxford University Press, 2003), p. 7, . 72 Rising U.S. Stakes in Africa

Bank study suggests that donors can expect a 10-year investment plan in post- conflict countries before rapid growth can be sustained without outside assistance. Even a robust assistance program cannot produce substantial growth in the first three years.14 Significantly, the European Union has already announced a planned contribution to post-peace Sudan of some $500 million in addition to its ongoing humanitarian aid program. There is little to suggest, however, that other donors are serious about meeting Sudan’s overall reconstruction needs. The U.S. president’s fiscal year 2004 budget request—which includes $87 million for reconstruction assistance for Sudan—is based on a stalemate scenario, not peace.15 It does not include the “peace dividend” that the U.S. government has promised will follow a signed agreement; nor does it include resources for key reconstruction needs, including a peacekeeping operation, the reintegration of ex- combatants, large-scale reconstruction projects (such as urgently needed infrastructure rehabilitation), or the return of significant numbers of IDPs. An informal survey of other Western donors suggests that few are planning for the reestablish- ment of bilateral assistance programs at this time; most anticipate only modest resource flows through multilateral and NGO assistance. (See this chapter’s appendix A for more details on donor funding.) If donors do not muster the necessary resources, the best-laid plans will be rendered meaningless. Recent funding trends for Sudan are not grounds for hope. According to the United Nations, insufficient and delayed funding has replaced lack of access as its number one constraint in relief efforts in Sudan.16 Relief requirements will remain high. Generous grants over a multi-year period must be combined with creative approaches to Sudan’s backbreaking debt, which, if left unaddressed, will virtually guarantee a failed recovery effort. ■ Donors must identify larger amounts of reconstruction resources to meet Sudan’s post-peace requirements. Strategies should take a medium-term view that sustains commitment at least through the life of the interim period. The troika should jointly petition other donors to expand contributions in support of Sudan’s peace effort. ■ The Bush administration should begin conferring with Congress on the question of supplemental funding that will be needed immediately upon the signing of a peace deal. Any additional funding for Sudan should include authorization

14. Ibid., p. 167. 15. This $87 million figure includes development assistance, child survival funds, transitional assistance, and economic support funds. It does not include humanitarian assistance or food aid, which will likely continue to be the largest share of U.S. assistance to Sudan. Up to $20 million is potentially available from the Iraq War Supplemental, but no decisions have been made regarding these funds. 16. By the end of September 2003, only 42 percent of the UN’s $263 million annual appeal for Sudan had been received. Resources were considerably short of UN appeal targets in 2001 and 2002 as well. The United Nations has requested $465.5 million in its 2004 appeal for emergency and transition assistance. Dina Esposito and Bathsheba N. Crocker 73

for the United States to restructure or reduce Sudan’s debt burden. Delaying this process until after an agreement is signed will result in missed opportunities to reinforce the peace. ■ Donors should expand their in-country presence to address center-periphery reconstruction tasks as well as north-south issues, as discussed later in this chapter. This includes the placement of senior-level development officials in Khartoum as well as a Juba-based staff when security permits. For the United States, this means placing high-ranking USAID Foreign Service officers in both Khartoum and Juba, who can engage in discussions with the new unity and southern regional governments on reconstruction issues. As the Khartoum and southern Sudan offices are established, programs operating from Nairobi, Kenya, should be phased out. ■ The United States will also need to execute the numerous waivers and amendments to the sanctions provisions that will prohibit assistance to the new unity government. Although the issue of removing Sudan from the list of state sponsors of terrorism will be controversial politically, the Bush administration should begin working with Congress as soon as possible on the necessity and mechanics of doing so, assuming that Sudan's government meets the criteria for removal from the list. Similarly, the administration should work with Congress to address the myriad other sanctions—related to human rights concerns, religious persecution, debt, and the war—that limit U.S. assistance to Sudan. A new version of the Sudan Peace Act could provide the necessary legislative authority to lift or waive current U.S. sanctions and authorize substantial resources for both the south and the north for the life of the interim period, contingent upon both parties’ progress in implementation of the agreement. It could also suggest penalties for noncompliance. Maintaining the complex web of U.S. sanctions will make it extremely difficult—if not impossible—for the United States to provide the types of assistance that will be necessary to ensure that peace survives in Sudan.17 ■ Creditors should immediately initiate an informal dialogue about Sudan’s debt and begin by settling on a realistic amount of debt that Sudan can afford to carry forward. According to international norms regarding the capacity of a country to pay off debt—which hold that the maximum ratio of debt to exports should be 150 percent—Sudan’s threshold for how much debt it can carry is $3 billion. Thus an affordable long-term total debt amount for Sudan will be significantly lower than the $21 billion it is currently carrying, meaning that large elements of the total debt package must be written off or otherwise reduced. Contingent upon the successful completion of the peace process, options around debt forgiveness and rescheduling should be developed now, including

17. For a comprehensive overview of U.S. sanctions against Sudan, see Bathsheba Crocker, “Addressing U.S. Sanctions against Sudan,” Supplement I to To Guarantee the Peace: An Action Strat- egy for a Post-Conflict Sudan, March 2004, available at http://www.csis.org/isp/pcr/ 0403_guarantee01.pdf. 74 Rising U.S. Stakes in Africa

measures of progress during the interim period, such as government transparency of revenue and spending and the development of budgeting and auditing capacity in each of Sudan’s states. The sooner these issues are addressed, the faster Sudan will become eligible for the International Monetary Fund (IMF) programs that will further reduce its debt burden, qualify it for new loans, and provide needed financing. The role of the United States is critical to moving this issue, because of its central position at the IMF and the World Bank. The U.S. government (including the Treasury and State Departments) must be prepared to break out of standard practices and call for a bilateral creditor support group to draw up contingency plans even as the peace talks proceed. Sudan’s economic future will depend on a wise resolution of its debt overhang. Support peacekeeping operations during the life of the interim period. As discussed throughout this chapter, numerous events could trigger a return to violence over the six-year life of the interim period. Although the shape and functions of the peace operations will evolve over time, donors must support an international peacekeeping mission for the life of the interim period, up to and through the referendum determining whether Sudan will remain one country or split in two. Donors must immediately identify the human and financial resources required to field a robust, chapter VII peacekeeping operation, including the resources and troops for the Quick Reaction Force recommended above. The United States must identify funds for this operation; it cannot be in the position of holding up the UN's force for Sudan because its share of the costs is not ready. Fulsome U.S. support of the peacekeeping operations will also require addressing sanctions and other legal constraints on providing assistance to Sudan.

Liberalize Governing Structures in Northern and Southern Sudan The Machakos Protocol binds the signatories to a comprehensive solution that replaces war “not just with peace, but also with the social, political and economic justice which respects the fundamental human and political rights of all the Sudanese people.”18 It calls for the parties to work together to establish a democratic system of governance and states that the transition process will include “an inclusive constitutional review process.” A national constitution—melding elements of the current constitution and the peace agreement—is supposed to address the critical issues of power and wealth sharing, as well as guarantee religious freedoms. In effect, the agreement provides room for the settlement of the north-south conflict to be used as a vehicle by which to address governance problems throughout Sudan. Donors should take full advantage of this opening. The international recognition and respect to be gained by fully implementing the peace, Sudan’s urgent need for debt relief and international investments to jumpstart the economy (both north and south), and the end of the war will make both sides more amena- ble to outside influence with regard to governance reform.

18. Machakos Protocol, July 20, 2002. Dina Esposito and Bathsheba N. Crocker 75

The donor relief structures that have operated from a north-south perspective for more than two decades must be replaced with a model that addresses change at the centers (Khartoum and Juba, or the designated seat of a new southern regional government) as well as the periphery (poor, rural parts of northern and southern Sudan). The model should emphasize devolution of power to all state and local governments. Donors must offer solid inducements and impose penalties on both negotiating parties if governance reforms are not implemented. Assistance must flow directly to both the unity government in Khartoum and the southern regional government that will be established in the context of the agreement. It should be phased and conditioned to catalyze change. The following steps are essential: Establish benchmarks to measure both the unity and southern regional governments’ progress toward improved governance. Do- nors—including the IGAD Partners Forum, the United States, the European Union, and the Arab League—should work together now to agree on a common set of benchmarks for both the unity and southern regional governments that would encourage much-needed reforms and adherence to the peace agreement’s terms.19 Unless assistance is conditioned, and there is a real threat of its being withheld, the parties are unlikely to impose the necessary reforms. While the European Union and the Arab League will be the primary contributors to the unity government in the near term, it should be made clear that the prospect of future assistance from the United States and other western donors will hinge on progress toward these agreed benchmarks.20 Critical benchmarks for the unity government should include: ■ The immediate lifting of the state of emergency, which severely curtails political and civil liberties. ■ A reasonable, clear, and binding timetable for elections and an open constitutional process in which all major opposition parties and civil society organizations can engage. ■ Clear steps toward improving freedoms overall—especially with regard to freedom of expression (including for independent media), movement (including by lifting travel restrictions), assembly, and religion.

19. A number of excellent, already proposed benchmarks could serve as a baseline for donor discussions. See, e.g., the benchmarks proposed by former UN special rapporteur on human rights in Sudan Gerhart Baum, Question of the Violations of Human Rights and Fundamental Freedoms in Any Part of the World, Situation of Human Rights in Sudan, Report of the Special Rapporteur, January 6, 2003, E/CN.4/2003/42, , and those proposed by the European Coalition on Oil in Sudan (ECOS), a coalition of more than 80 European development and human rights organizations, . 20. The European Union has announced $500 million to be released in the event of an agreement. The Arab League has announced a $117 million contribution. “Arab League to Fund Projects in South Sudan,” July 20, 2003, . 76 Rising U.S. Stakes in Africa

■ Adoption of mechanisms for ensuring transparent oversight of national and regional revenue streams, including allocation and use of oil revenue. ■ Revision or annulment of existing restrictive laws, especially the amendments to the National Security Act—which allows, inter alia, for prolonged detentions without counsel or outside contact—and amendments to the Criminal Proce- dure Act of 1991, which enhanced law enforcement powers of investigation, arrest, interrogation, and detention without judicial review. ■ Reform of the GOS internal security apparatus, a multi-headed hydra used to control the population and neutralize opposition to the regime. Internal security forces are responsible for widespread human rights abuses in the north. Common benchmarks for the southern regional government should be similarly focused on steps that ensure progress toward the rapid establishment of basic freedoms and sound governance at the regional and local levels. Build capacity throughout Sudan and open its political processes. The end of the war should bring to an end parallel donor program- ming for the north and the south. Rather than seeking to “make unity attractive”— as Machakos calls for—continuing to think of Sudan in terms of a north-south divide will likely predetermine the referendum’s outcome and will do little to address the deep-seated political and economic marginalization that is breeding discontent and conflict in Sudan’s impoverished peripheral regions. Moving beyond a north-south orientation will involve two elements. First, the United States and other donors must provide direct assistance in the form of international expertise (technical assistance) and capacity building/training to both the unity government and southern regional government and to state governments to address needed governance reforms. Second, Sudan’s political processes in both the north and the south must be opened up to provide the chance for long-excluded players to participate in shaping Sudan’s future. The United States and other donors will also need robust programs of support for civil society development in the north and the south, including support for “watchdog” groups specializing in human rights, anticorruption, and independent news reporting, all of which will be key to producing a more open society in Sudan. Political party training will help Sudanese engage in ways other than violence to create change. Southern Sudan as yet has no viable alternative to the SPLM/A, which itself requires political transformation. Northern Sudan’s opposition political parties have historically failed to offer a vision for a united Sudan that embraces the country’s ethnic and religious diversity. An infusion of support to identify and facilitate the growth of the next generation of political leaders in Sudan will be critical to the country’s transformation process. Amending the north-south divide of ongoing programs will have significant implications for the United States. It will require, at a minimum, opening a USAID mission in Khartoum, and addressing the variety of sanctions that currently constrain direct U.S. assistance to the GOS, as discussed above, beginning on page 70. Dina Esposito and Bathsheba N. Crocker 77

Develop transparent oversight mechanisms over oil wealth and other national and regional revenue streams. The parties have recently reached a preliminary agreement on wealth-sharing arrangements, the details of which are not yet known.21 It is, however, expected that the SPLM/A will likely begin to receive hundreds of millions of dollars from oil revenues annually after the signing of an agreement. (Sudan currently produces about 250,000–300,000 barrels of oil per day, and, since 2002, GOS earnings from oil have been about $1 billion a year.) This will be in addition to the hundreds of millions of dollars in external donor support that will flow to both the southern regional government and the national unity government. Both the GOS and the SPLM/A lack the management capacity and institutional infrastructure to manage vast sums. The GOS has a history of nontransparent use and allocation of resources, including a pattern of “off budget” use of oil funds that are not openly accounted for. Addressing these shortfalls and protecting against misuse or waste of oil and other revenues will require assistance for capacity building in the south and the development of mechanisms to ensure transparent use and allocation of resources in both the north and the south, including third party monitors.22 Donors intend to provide funds—at least in part—through World Bank or UN-monitored trust funds. They will also need to focus immediately on building institutions and capacity in the south that can manage and account for revenue streams. Transparency in the oil sector will be particularly important, given the GOS’s alleged past use of oil money to fund its war efforts. There is also the danger that Sudan will succumb to the so-called resource curse, its natural resource wealth per- versely increasing the prospects of violent conflict, low economic growth, poor human development indicators, bad governance, and human rights abuses.23 To avoid this, donors should focus on establishing transparent mechanisms for monitoring Sudan's oil sector and should consider urging Sudan to establish a natural resource fund, such as those in Alaska, Norway, Chad, and Chile. In particular, donors should insist on transparency of oil revenue streams, oil contracts and payments, and allocation of oil revenues as a condition of assistance. Further, monitoring mechanisms should include impartial, third party actors. An oil advisory board, with membership agreed upon by both parties and the donor community, could help provide the southern Sudanese with much-needed technical assistance on issues such as product pricing, managing the downstream sector, marketing oil, and strategizing with regard to the economic viability of new transportation routes (such as a pipeline to Kenya, which the SPLM/A would favor). The Sudanese will also need sound advice and international oversight on how to spend their oil wealth, to help avoid rent-seeking behaviors, gold-plated projects,

21. Andrew England, “Sudan Government, Rebels Agree on Oil Revenue,” Associated Press, December 21, 2003. 22. In this regard, the International Monetary Fund (IMF) has been monitoring the GOS’s budgetary practices since 1997. 23. Svetlana Tsalik, Caspian Oil Windfalls: Who Will Benefit? (New York: Open Society Insti- tute, 2003), pp. 3–4. 78 Rising U.S. Stakes in Africa and corruption. Donors could condition assistance on international vetting of potential projects on which oil revenues might be spent. A natural resource fund, if successful, could help stabilize fiscal policy throughout Sudan and serve as a political compact between Sudan's governing bodies and the population, forcing northern and southern entities to be transparent about oil revenues and expenditures.24 Given the lack of capital in Sudan, any such fund would likely function as a trust fund/account for all oil wealth before it is distributed to the national budget, the southern regional government’s budget, or to other parties. It could be overseen by national, regional, and state government actors, as well as international members, and could monitor income and expenses, advise on expenditure decisions, and ensure openness. Such a fund could function to force government entities to be more responsive to citizens and involve Sudan's citizens and civil society in decisions about reconstruction and other national, regional, and local priorities. It could help connect Sudan's northern and southern populations around a common purpose. Although the model used for the Chad-Cameroon oil pipeline is not directly applicable to Sudan, its use of civil society-based committees to monitor the use of the funds and to direct resources to poverty reduction strategies should be stud- ied—and perhaps reshaped to the Sudan context—with the goal of engaging the Sudanese people more directly in the allocation and monitoring of oil revenues.25 All Sudanese must perceive that the revenues generated from oil are fully accounted for and that the wealth shared between northern and southern leaders reaches national, regional, and local priority needs.

Leverage Reconstruction Efforts to Promote the Opening and Integration of Sudanese Societies Regardless of the ultimate outcome of the referendum—unity or separation— reconstruction efforts should be geared toward ensuring greater connections among the Sudanese, both between northerners and southerners, but also among various groups in the north and in the south. Unity should mean one country that is more open, connected, and peaceful in order to avoid a reversion to civil war. Separation should mean two countries at peace with each other and with friendly, mutually beneficial political and economic relations. Donors should focus reconstruction efforts on restoring physical and nonphysical ties among the Sudanese, which would open up markets, allow freer movement of people, and encourage national dialogue around common areas of interest. Reconstruction efforts could also be used to reinforce the Machakos Protocol's promise of an open constitutional process. Donors should take the following steps:

24. Ibid., p. 2. 25. For further information, see “Chad-Cameroon Petroleum Development and Pipeline Project,” ; “World Bank Inaugurates Chad-Cameroon Oil Pipeline,” New York Times, October 3, 2003. Dina Esposito and Bathsheba N. Crocker 79

Use a “connection lens” when identifying priority reconstruction tasks, including through encouraging expanded people-to-people dialogues. Sudan’s transportation and communications infrastructure is either nonexistent or in abysmal condition, particularly in the south. Roads are few, and most are impassable during the rainy season;26 there are few roads linking southern and northern Sudan, and few that link the towns in southern Sudan. Traveling by barge and foot are the only affordable options for most Sudanese; international relief workers rely on air transport provided by the United Nations. There is little electricity—save that provided by generators—in the south; most of the south lacks access to clean water; and there are no telephones and few newspapers. If news travels, it does so over radio (not widely available) or by word of mouth. Infrastructure reconstruction—or in many cases construction—will be an early priority focus for donors. But how reconstruction tasks are undertaken will be as important as what tasks are selected. Donor assistance will naturally and appropriately flow to war-affected areas as a priority. But donors should also use a “connection lens” in the reconstruction phase—in other words, focus on projects that build connections among different communities, groups, and government entities across regional and ethnic divides. Programs that connect southern Sudan to neighboring African countries— a high priority for the SPLM/A—should not be conducted to the exclusion of programs that connect northern and southern Sudan. ■ Telecommunication and physical infrastructure projects should close physical distances and intentionally generate north-south, intra-south, or east-west collaboration to achieve a common goal. Cellular phone technology, roads, and water projects should be prioritized. ■ Working with the GOS and SPLM/A, donors should design national campaigns around issues of common concern, such as malaria control, clean water, or literacy. ■ Early planning and project implementation should counter the lack of consultation that has defined the peace process and bring people within and between communities together for consultations on reconstruction priorities. In addition, donors should encourage expanded intra-south dialogue along the lines of that started by the New Sudan Council of Churches (NSCC) and a new national dialogue process that begins to bridge north and south and other regional divides. The NSCC grassroots peace processes in southern Sudan have successfully ended a number of long and violent intra-south conflicts with an emphasis on intense “people to people” dialogue. Some of the most lethal fighting in the civil war to date has actually been intra-south fighting between the Dinka and Nuer ethnic groups. There is no reason to assume that these, or other, ethnic tensions in northern and southern Sudan will simply dissolve after a peace is signed.

26. Within an area of 2.5 million square kilometers, Sudan has only 55,000 km of roads, most of which are seasonal earth roads and sand tracks. Sudan’s rail network, the largest in Africa, is in extremely poor condition. 80 Rising U.S. Stakes in Africa

As one southern Sudanese aptly, and simply, said, “If there is no communication, then no peace.”27 Promoting a new vision for Sudan’s future—that includes the possibility of unity—will require massively enhanced efforts to facilitate communications to—and among—the people of Sudan. Given the realities of illiteracy, current restrictions on freedom of the press, multiple languages, and the lack of electricity, to name a few, effective communications among the Sudanese will require increased people-to-people dialogues across Sudan. Indeed, extensive grassroots consultations in the north and south have revealed that most war-affected populations have more faith in the ability of the Sudanese people—local leaders, women, and youth—to create conditions for peace than they do in SPLM/A chairman Garang and GOS president Bashir. Throughout the country, people have expressed the need for greater community dialogue and opportunities for local peace building as well as greater dialogue around the peace process. Prepare for a constitutional convention. As discussed throughout this chapter, numerous issues threaten to undermine the goals of Machakos and the peace agreement, not least among them the lack of knowledge and involvement in the peace process among Sudan’s populace. A constitutional drafting process could help to fill this gap, allowing for effective information exchange and the broader involvement of civil society and other actors that have been marginalized during the war and peace process. It could serve to address and resolve some of the many uncertainties in the peace agreements by providing a dialogue mechanism within which Sudanese could grapple with the outstanding fundamental issues that will determine whether Sudan remains one or splits in two. Machakos envisions that an interim constitution—which will combine elements of the current constitution with the peace agreement—will be drafted immediately after the peace agreement is signed. It references “an inclusive constitutional review process” during the interim period but does not, even vaguely, define the outlines of that process, and the peace agreement probably will not develop constitutional issues further. An inclusive constitutional drafting process could lead to a new constitution defining the outline and underpinnings of a new Sudan. The process would allow for the inclusion of all important political constituencies, such as civil society groups, traditional leaders, and ordinary Sudanese who thus far have not been given a voice in defining Sudan’s future. It would draw some power away from militant groups and entrenched leaders and help strengthen nascent nonstate actors and political parties. It would also provide a mechanism for addressing key issues left for the implementation phase of Sudan’s peace. If the interim period is not used as a time to bring the south on board with the idea of eventual unity—by way of an inclusive and open constitutional drafting process that will by necessity address thorny questions—then separation will be a foregone conclusion. (Indeed, a coun- trywide referendum on the constitution could confirm Sudan’s eventual status even before the referendum on self-determination.)

27. Paul Murphy, Even the Meeting Trees Are Perishing, final report of a grassroots consultation process commissioned by the IGAD Partner’s Forum, Nairobi, Kenya, August 2001, p. 29, . Dina Esposito and Bathsheba N. Crocker 81

Such a process would not necessarily begin until one or two years into the interim period, to allow enough time to determine whether the transitional arrangements are taking hold and for the southern regional government to begin functioning. Regardless, the process would provide the impetus to keep the parties seriously engaged in working toward keeping the peace. A national constitution drafting process could become the fulcrum for creating a unified Sudan attractive to southerners and other marginalized groups and for dealing with north-south and center-periphery questions. Together with the other steps recommended in this chapter, bringing the Sudanese together to draft a new constitution will be a key guarantee to help sustain the long-awaited peace.

Conclusion

Lasting peace in Sudan would reverberate throughout Africa, the Arab world, and globally. But signing an historic peace agreement will not guarantee successful post- conflict reconstruction in Sudan. Several critical openings must follow—with expanded roles for the Sudanese people and their international partners. Sudanese fighters from both sides will need to integrate into joint military units that defend Sudan’s borders and gain capacity to deal with internal rogue elements. A robust chapter VII-mandated international security presence, along with carefully conditioned security assistance and effective DDR programs, will be a key part of achieving those aims. Sudanese politicians must expand the opportunities for fresh and excluded voices to participate in Sudan’s governing structures (north and south, national, regional, and local) and its political processes. Benchmarks against which international assistance is measured could help guarantee this need, as would an inclusive constitutional drafting process. Sustained economic assistance and forward-leaning decisions on reducing Sudan’s debt burden will help move Sudan on the path to economic growth. At the same time, international pressure must be brought to bear on the Sudanese to ensure that revenue streams—particularly oil—are handled transparently and for the benefit of Sudan’s people, not its leaders. Uncertainty, hatred, and mistrust run deep within Sudan. Donors must focus on building connections among the Sudanese and bringing communities together around common goals. The past focus on north-south issues should give way to more inclusive programs that begin to address the political and economic marginalization that is fueling discontent and conflict in Sudan’s peripheral regions. Lasting peace will require not just changing attitudes within Sudan, but shifting outside practices to better confront the enormous challenges that will complicate reconstruction efforts. Sudan’s coming peace presents an opportunity to move beyond almost 40 years of civil war. The United States, the United Nations, and other friends of Sudan must now consolidate and capitalize on that opportunity. 82 Rising U.S. Stakes in Africa

Appendix A: Reconstruction Planning for Sudan

North-South Collaboration Working with donors, the GOS and SPLM/A have identified priority areas for near term reconstruction efforts. These are: capacity building at all levels; return and reintegration of displaced persons and refugees; economic development including small-scale enterprises; development of infrastructure; rehabilitation of basic services—health, education (including HIV/AIDS awareness and prevention), water and sanitation, and food security; data collection and surveys for analysis and sector policy formulation; governance, law and order, and human rights; welfare and social development; peace culture and information; and mine action programs. Donors are planning to advance this agenda through “quick start” programs. A Joint Planning Mechanism (JPM) involving technical experts from both the GOS and the SPLM/A was integral to the development of these priority areas and was established to play a role in directing reconstruction tasks, but it is now largely moribund. Currently, the GOS and SPLM/A post-peace planning processes are for the most part being conducted in isolation. The GOS and SPLM/A continue to have fundamental differences over the extent to which reconstruction resources should be directed through a new unity government or transferred directly to the southern regional entity by donors. The GOS hopes to make the unity government a major conduit for resource flows, and perceives that planning and programs for the south will simply be incorporated into existing ministry accounts. The SPLM/A wants to bypass all unity government structures and funding mechanisms to avoid past failures of the north to transfer resources as promised. It is intent on undertaking independent initiatives with little or no input or oversight from the unity government.28 These differences raise important questions about the extent to which the GOS and SPLM/A are serious about creating a national unity government that involves meaningful partnership. If international organizations and donors are serious about encouraging unity or, at a minimum, creating meaningful dialogue between northern and southern entities, they will have to start with reform within their own operations. So far, only the United Nations has made significant organizational changes in anticipation of a “one country” approach.29 NGOs now operating independent, parallel north-south programs will need to conduct peace-building efforts among their own northern and southern staffs and craft new strategies and operational approaches if they seek to support the Machakos Protocol’s goal of giving unity a chance. Donors will need to do the same, adopting a center-periphery strategy as discussed in this chapter. As a primary source of funding for NGOs, donors will have a major role to play in reshaping the NGO approach in the aftermath of an agreement.

28. These findings were borne out in an October 2003 conference hosted by CSIS that brought together health officials from the north and south. 29. A new Khartoum-based UN representative recently radically overhauled the UN system and expanded its field offices. Previously, the United Nations was running two separate programs, one for the north and one for the south. Dina Esposito and Bathsheba N. Crocker 83

Innovation Two decades into relief delivery, a number of humanitarian implementing agencies have begun to lay the groundwork for development, in spite of war. In secure areas of the south, innovative programs are underway to restore livelihoods while saving lives, to build civil society capacity, to assist with the creation of southern governing structures, and to invest in a number of critical sectors, including agriculture and basic education. The U.S. government, the largest provider of humanitarian aid to the south, has been at the forefront of these initiatives. In addition to its $155 million contribution for humanitarian and food aid programs, it provided $24.5 million in transition and development assistance in fiscal year (FY) 2003 and has requested $87 million more in nonhumanitarian assistance for FY 2004 (including a projected $6 million for transitional assistance). Transition assistance programs are building the capacity of the justice system, and supporting independent media, conflict resolution, and local peace processes. Development activities are focused on improved governance in the south, infrastructure repair, agriculture, education, health services, and other economic recovery activities.

Donor Funding Plans Information below is based primarily on informal conversations with donors in the fall of 2003. Some portions are also drawn from UN and newspaper reports. United States. The largest sustained U.S. humanitarian assistance account throughout the 1990s and early 2000s has been for Sudan. Over the last two decades (since 1983) the United States has spent almost $2 billion in humanitarian assistance there, predominantly in the south. This is testament to the support for southern Sudan within consecutive U.S. administrations, Congress, and among numerous interest groups focused on issues such as hunger, human rights, the oppression of Christians, and slavery. If the administration receives its requested FY 2004 budget levels for Sudan, the Sudan account will be the single largest U.S. development assistance account in Africa. Yet, funds will still be insufficient to address post-conflict needs, as discussed in this chapter. The United States is the largest donor to Sudan. FY 2003 funds totaled $178.9 million: $113 million in food aid, $42 million in International Disaster Assistance funds, $2 million in Transition Assistance funds; and $22.5 million in Development Assistance funds. The current FY 2004 funding request is based on a “stalemate” scenario. It includes $16.4 million in Child Survival funds, $49.6 million in Development Assis- tance funds, and $15 million in Economic Support Funds. The Office of Transition Assistance is tentatively planning for a $6 million program in FY 2004, contingent upon actual levels appropriated by Congress. Total food aid and humanitarian assistance funding vary annually according to need and funds availability. European Union. In the event of peace, the European Union’s post conflict strategy will provide approximately $516 million for education and food security. Other sectors that may be supported include human rights, good governance, rule 84 Rising U.S. Stakes in Africa of law and land mine clearance. Funds may also be used for DDR activities. In support of the strategy, UNDP has received funds from the EU for sectoral studies in the areas of rule of law, governance and sustainable livelihoods. Humanitarian assistance programs will also continue. The EU has provided about $29 million in humanitarian assistance this year and expects a similar outlay in 2004. Canada. Sudan is not a “priority” country for development resources; future funding will be modest. Canada will continue its support for vulnerable groups affected by conflict, including IDPs and refugees. Denmark. Provided $3.5 million in humanitarian aid in calendar and FY 2002. They plan to make a contribution for peacekeeping in event of an agreement; there is no plan for a bilateral aid program. Sudan has considerable debt to Den- mark, which Denmark expects to be managed under an international debt forgiveness program. United Kingdom. Committed $29 million for Sudan in FY 2002/2003. Resources went toward health programs; peace building, including support for the Nuba Mountains Joint Military Commission; education; coordination and security support for relief operations; anti-abduction and anti-slavery efforts; demining; and research. The FY 2003/2004 focus is on supporting the peace process, governance, justice, security, DDR, development of civil society and economic reform. Humanitarian aid will also continue. The Netherlands. Bilateral assistance may resume in the event of an agreement. It expects to spend about $11 million in FY 2003 for emergency and relief operations and some $1.23 million on support for the Nuba Mountains Joint Mili- tary Commission and the Verification and Monitoring Team. If peace occurs, it plans to add an additional $5 million to its budget for Sudan. Additional funds will be tied to implementation of the peace accord and progress in areas of democratization, human rights, and the rule of law. Norway. In the event of a peace agreement, Norway plans to increase its diplomatic and economic aid presence in Khartoum and southern Sudan and resume direct bilateral assistance, including for nonhumanitarian purposes. It anticipates the resumption of development assistance and providing support for any international monitoring of cease-fire arrangements. Norway provided roughly $32.5 million to Sudan in 2003 for humanitarian assistance efforts and to support the peace process (including support to IGAD, the JMC, and the VMT). It also supports capacity building initiatives for the SPLM, working closely with the World Bank and UNICEF. In 2004, it anticipates a total contribution to Sudan of at least $40 million. This aid will be focused on war-affected areas and will include humanitarian assistance, education, health, and sanitation, assistance for IDPs, support for local media initiatives, and support for security arrangements (e.g., mine clearance and DDR). Norway is also beginning to consider debt relief issues. As co-chair of the IGAD Partners Forum, Norway has offered to host a donors’ conference for Sudan reconstruction needs shortly after an agreement is signed. Italy. Aid may be dramatically reduced in the near term due to an economic downturn in Italy. It provided about $8.7 million to Sudan in 2002 and 2003. Pro- Dina Esposito and Bathsheba N. Crocker 85 grams supported include basic education, health care, nutrition, demobilization of child soldiers, improvements in water and sanitation, and food security. One of Italy’s priority areas is the demobilization of child soldiers. Sudan. In May 2003, the Arab press reported President Bashir as saying Sudanese firms had pledged $2 million to help rebuild schools and roads. The Gov- ernment of Sudan itself has pledged 2.5 billion dinars for Sudan’s reconstruction fund. In addition, the head of the Government’s Rehabilitation and Development reported recent success during a fundraising tour of Arab states.30 Arab Fund for Economic and Social Development. Pledged up to $10 million for water projects in the south and funds to cover 50 percent of the estimated $150 million needed to build a road between Renk and Malakal in the south. Saudi Development Fund. Pledged the remaining 50 percent of funds needed for the Renk-Malakal road. Abu Dhabi Development Fund. Pledged $10 million to rehabilitate Sudan Railways. The sultan of the UAE agreed to finance the construction of a highway in southeastern Sudan, linking Ed Damazin and Qissan.

Appendix B: Background and Acknowledgments

The Africa Policy Advisory Panel commissioned the CSIS Post-Conflict Recon- struction Project to examine the critical challenges—for U.S. policymakers, other major powers, and international organizations—should a peace settlement be concluded in Sudan. The Norwegian government generously agreed to provide supplementary support to CSIS’s Sudan work. The report was transmitted to Secre- tary of State Colin Powell in December 2003 and released as a stand-alone CSIS publication in January 2004. Since mid-2002, the prospects for ending Sudan’s war through a peace settlement have risen significantly, propelled forward by the July 2002 Machakos Protocol and the September 2003 security agreement between Sudan’s warring parties. This progress has made more urgent the need to analyze the most acute threats to the effective consolidation of an accord that, most close observers agree, will be imperfect, incomplete, and replete with ambiguities and contradictions. After extensive background research and interviews in Washington, a CSIS four-person team traveled to Sudan and neighboring Kenya for three weeks in fall 2003. The team conducted site visits and interviews in and around Khartoum and to locations in the three main areas of southern Sudan—Bahr al Ghazal, Upper Nile, and Equatoria. In the south, it traveled to the Government of Sudan (GOS)- held garrison towns of Malakal (Upper Nile State), Bentiu (Unity State) and Kadugli (in the Nuba Mountains, Southern Kordofan). It also visited the Sudan People’s Liberation Movement/Army (SPLM/A)-held towns of Rumbek (Lakes

30. “Government, Firms Promote Peace in Sudan with Reconstruction Funds,” Agence France Presse, May 29, 2003. 86 Rising U.S. Stakes in Africa

State) and Yei (Bahr Al Jebel State). The team also conducted interviews in Nairobi and Lokichoggio, Kenya. The team met with hundreds of individuals—both Sudanese and independent experts on Sudan. In Sudan and Kenya, the team’s contacts ranged from high-level GOS and SPLM/A officials to opposition political party members in the north, business persons, human rights groups, advocates for women and children, indigenous peace building organizations, other civil society groups, local chiefs, primary school teachers, university professors, religious groups, merchants, internally displaced persons, and other “ordinary” Sudanese. The team met with diplomats as well as United Nations and nongovernmental organization (NGO) representatives in Sudan and Kenya. It visited with representatives of the Joint Military Commis- sion, currently monitoring the Nuba Mountains cease-fire, and the Civilian Protection Monitoring Team (CPMT), which is monitoring human rights abuses against civilians, primarily in the south. This chapter drew extensively on the work of CSIS’s Post-Conflict Reconstruc- tion Project, under the direction of Frederick Barton and Bathsheba Crocker. The study began in collaboration with the Association of the United States Army (AUSA), whose Post-Conflict Reconstruction Task Framework, numerous white papers, and reports entitled Play to Win and A Wiser Peace: An Action Strategy for a Post-Conflict Iraq, provided the intellectual underpinnings to the recommendations contained here. The project directors and report authors would like to especially thank Con- gressman Frank Wolf, former assistant secretary of state for African affairs Walter Kansteiner, the U.S. Department of State, the government of Norway, and the Sec- retary of State’s Africa Policy Advisory Panel for their generous support of this project. We would also like to thank Dr. John Hamre, president and CEO of CSIS, for his invaluable support of the ongoing work of the Post-Conflict Reconstruction Project. We also thank Kurt Campbell and Michèle Flournoy of CSIS's Interna- tional Security Program who provide continued guidance, advice, and insights to the project. Daniel Werbel-Sanborn, our former research assistant, has our enduring gratitude for arranging and staffing our trip to Sudan, his assistance in developing the content of this report and work on earlier drafts, and his unwavering commitment. We are particularly grateful for the guidance and assistance of CSIS’s Africa Project in the development and production of this report, in particular J. Stephen Morrison, Jennifer Cooke, Nelly Swilla, Sarah Skorupski, Esther Cesarz, and Jessica Krueger. Chester Crocker, Princeton Lyman, Gen. Carlton Fulford, Robert Rotberg, Jeffrey Herbst, and Vinca LaFleur deserve special thanks for having taken the time to review early drafts of this report and provide excellent and insightful comments. We also thank Brig. Gen. Jan Erik Wilhelmsen, Robert Oakley, Victoria Holt, David Rhoad, George Schroeder, Robert Perito, David Goldwyn, Michael Pan, and Ashley Douglas for their contributions along the way. Several CSIS staff members have been especially helpful in developing this report, particularly Jessica Cox, Julianne Smith, and Margaret Cosentino. Dina Esposito and Bathsheba N. Crocker 87

This report and our trip to Sudan would not have been possible without the incredible patience, support, and assistance of dozens of people in Washington D.C., New York City, Sudan, and Kenya; no one list could capture all their names. But in particular, we extend heartfelt thanks to Hanan Abbas and Dr. Anis Haggar. We are also immensely grateful for the gracious assistance we received from the United Nations, the U.S. Agency for International Development, the United Nations, the Joint Military Commission, and several NGOs throughout Sudan, including CARE, Save the Children Fund/U.S., International Rescue Committee, Catholic Relief Services, and Christian Aid. Finally, the project directors would like to thank Dina Esposito, our magnificent and loyal project consultant, whose expertise and commitment to Sudan and dedi- cation to this report were truly invaluable and are deeply appreciated. Her patience and good humor have seen us through three weeks in Sudan and Kenya and many more months in Washington, D.C., seeing this report come to life. The project directors and report authors are entirely responsible for the content and judgments in this chapter. chapter 4

A Natural Resource Conservation Initiative for Africa

Nicholas P. Lapham

Executive Summary

U.S. foreign policy toward Africa should place greater emphasis on natural resource conservation, both as a priority in its own right and as a critical factor in achieving U.S. objectives related to preventing conflict, reducing poverty, and promoting democracy, economic growth, and public health. This would respond to a key challenge in Africa’s development and would benefit the United States in numerous ways, including through building closer bilateral ties, achieving important global environmental benefits, and more effectively addressing existing policy goals. The United States has a distinct comparative advantage—above and beyond Europe, Japan, and other industrialized countries—in helping Africa address conservation concerns. Secretary of State Colin Powell recognizes this and has taken several positive steps through his leadership on the Congo Basin Forest Partnership and the President’s Initiative against Illegal Logging. The challenge now is to build on these efforts. The Africa Policy Advisory Panel’s Natural Resource Conservation Working Group has identified three areas for enhanced U.S. engagement and leadership: transboundary natural resource conservation; governance of natural resources; and unsustainable commercial wildlife exploitation. The following recommendations respond to these issues and taken together constitute an African Conservation Ini- tiative that Secretary Powell could consider announcing on Earth Day 2004. ■ Scale up and sustain U.S. assistance (diplomatic, technical, and financial) to regional partnerships aimed at conserving key transboundary ecosystems.

The author wishes to acknowledge the following contributing authors: Richard Carroll and Judy Oglethorpe (World Wildlife Fund), James Deutsch and Steve Osofsky (Wildlife Conservation Society), Heather Eves (Bushmeat Crisis Task Force), Nancy Gelman (Africa Biodiversity Collaborative Group), Harry Van der Linde (African Wildlife Foundation), and Peter Veit (World Resources Institute).

88 Nicholas P. Lapham 89

A vital component of regional cooperation is the conservation of shared ecosystems that extend beyond national borders. U.S. leadership can catalyze economic, security, health, and environmental benefits from efforts undertaken jointly with the countries concerned to conserve these natural systems. • Specifically, the State Department and U.S. Agency for International Devel- opment (USAID) should sustain their support of the Congo Basin Forest Partnership and pursue similar initiatives for the Miombo-Mopane Wood- lands complex in Southern Africa and the Guinea Current Large Marine Ecosystem off the West African coast. ■ Prioritize improved natural resource management as a key component in U.S. efforts to promote good governance. The mismanagement of natural resources such as forests, wildlife, and water drives corruption, conflict, and rural poverty in Africa. Giving these issues greater weight in U.S.-Africa policy is essential to achieving long-term strategic interests. • Specific and immediate actions include prioritizing forest-sector reform in efforts to promote peace and stability in Liberia and the Democratic Repub- lic of Congo, affording a higher priority to community-based natural resource management (CBNRM) as a tool for promoting democracy, good governance, and rural development, and working with key governmental and NGO partners to strengthen African judicial systems to better develop, understand, and enforce natural resource laws. ■ Expand and better coordinate U.S. government activities to address the African bushmeat crisis. The commercial exploitation of African wildlife for human consumption threatens to increase the transmission and spread of deadly diseases affecting people, livestock, and wildlife; create regional food security problems; and cause the extinction of highly valued wildlife species, most notably, great apes. An effective U.S. government response requires the coordinated and strategic deployment of assets from a variety of agencies. • The secretary of state, through the Bureau of Oceans and International Environmental and Scientific Affairs, should coordinate an integrated U.S. response to the bushmeat crisis that includes specific actions from the Depart- ments of Agriculture, Homeland Security, and Interior as well as USAID, Centers for Disease Control and Prevention (CDC), the Trade and Develop- ment Authority, and the Overseas Private Investment Corporation (OPIC). ■ Develop stronger programs and incentives to more effectively engage the U.S. diplomatic corps in Africa on natural resource conservation issues. • The State Department should implement specific educational, training, recruiting, and performance evaluation measures to improve the capability of the Foreign Service to address conservation issues. 90 Rising U.S. Stakes in Africa

■ Restore and expand U.S. technical assistance programs that build the capacity of Africans—from practitioners to political leaders—in natural resource conservation. Professional training is essential for effective natural resource conservation. Afri- cans have few opportunities to access such training, and existing conservation capacity is being eroded by the HIV/AIDS epidemic. With its unparalleled breadth of conservation expertise, the United States is uniquely positioned to address this need. • The U.S. government should restore and expand cost-effective programs run by the State Department, USAID, the Department of Interior, and other agencies to train African students, management professionals, and political leaders in natural resource conservation. ■ Increase U.S. investment in African parks and protected areas. Parks and other protected areas are critical to conserving Africa’s natural resources. The United States, with the world’s largest and most diverse protected areas network, has a distinct comparative advantage in supporting their management. • The secretary of state should encourage passage of the African Growth and Opportunity Act (AGOA III) legislation now pending in the House of Rep- resentatives, which includes language directing the president to invest in park protection; engage other major donors, conservation NGOs, and interested private-sector parties in catalyzing greater support for African protected areas, perhaps through a Partnership for Africa’s Parks; strengthen incentives for creating and properly managing protected areas by giving special recognition to Madagascar, Gabon, and other nations that take strong conservation action; and ensure adequate funding for the Presi- dent’s Initiative against Illegal Logging, which targets protected areas in Africa.

Introduction

In Africa, perhaps more so than anywhere else on earth, natural resources—from forests and fisheries to wildlife and water—are a source of wealth and power. They underpin economies, provide livelihoods for rural people, maintain vital ecological services, and constitute a unique natural heritage. At the same time, their mismanagement fuels conflict, feeds corruption, deepens poverty, and increases the incidence of disease. For these reasons, managing Africa’s natural resources through sound and sustainable conservation practices stands as one of the continent’s most pressing challenges. U.S. foreign policy toward Africa has not historically emphasized the importance of natural resource conservation, either as a priority in its own right or as a critical factor in achieving U.S. policy objectives related to preventing conflict, reducing poverty, and promoting democracy, economic development, and public health. Secretary of State Colin Powell has opened the door for change by exerting Nicholas P. Lapham 91

U.S. leadership in supporting the Congo Basin Forest Partnership and the Presi- dent’s Initiative against Illegal Logging. During a visit to Gabon last year, the first ever by a U.S. secretary of state to another nation to promote environmental conservation, the Secretary Powell stated, “I am and always will be a conservationist for Africa.” No country is better positioned to help Africa address conservation issues. The United States invented the national park concept as a model for natural heritage protection that has been adopted by countries throughout the world. Its broader network of local, state, and national public lands provides a wealth of experience on how to integrate environmental protection with economic development, recre- ation, cultural preservation, and a host of other objectives. Its technical capacity— through the National Park Service, Fish and Wildlife Service, Forest Service, National Marine Fisheries Service, and a host of other agencies at both the federal and state level—is unparalleled. Its international presence, through the activities of the U.S. Agency for International Development (USAID), provides a keen sense for how to adapt conservation models to different political systems, cultures, and economies. This chapter identifies three initial priorities for enhanced U.S. leadership: transboundary natural resource conservation; governance of natural resources; and unsustainable commercial wildlife exploitation. It calls on Secretary Powell to launch an African Conservation Initiative that includes specific policy actions for each of these priorities, as well as several crosscutting recommendations for inte- grating natural resource conservation firmly into U.S.-Africa policy.

Key Priorities

■ Addressing Transboundary Natural Resource Conservation as a Core Compo- nent of Integrated Regional Development Experience has shown us time and again that environmental issues have far-reaching implications in other spheres of diplomacy. Because environmental issues are also health issues. They relate to good governance. They hold important conse- quences for stability within a region or stability within a particular country. And environmental issues are absolutely integral to development throughout the world.—Secretary of State Colin Powell, Earth Day, 2003 Africa is increasingly looking to regional institutions and collaborations to promote economic development and solve pressing problems. This trend, perhaps best embodied by the Southern African Development Community (SADC), offers important opportunities for U.S. initiatives to promote peace and stability, democracy, and better trade relations. A key component to the success of these regional efforts is the effective conservation of shared ecosystems. These natural systems— whether savanna, freshwater, forest, or marine—stretch beyond national borders and often define regions themselves. Over the past two decades, a variety of regional agreements and mechanisms have emerged that promote a collaborative African approach to managing shared 92 Rising U.S. Stakes in Africa ecosystems. These include the Nile Basin Initiative, the Yaoundé Declaration (related to conservation and sustainable use of the Congo Basin forests), the Nairobi and Abidjan Conventions (addressing coastal and marine management in East and West Africa respectively), the Accra Declaration (related to conserving marine resources in the Gulf of Guinea), and the Southern African Development Community’s Protocol on Wildlife Protection and Law Enforcement. Furthermore, the importance of transboundary natural resource management is highlighted in the New Partnership for African Development’s (NEPAD) Environmental Action Plan. The Important Role of Protected Areas. Protected areas, including those that straddle national borders, are a common ingredient in effective transboundary conservation. At the World Parks Congress in September 2003, former South African president Nelson Mandela remarked, “We take particular pleasure and pride in the new international partnerships we are developing in southern Africa, partnerships between neighboring states to create trans-frontier protected areas or ‘peace parks.’” In 2001, there were 35 transfrontier protected area com- plexes in Africa (including 148 individual protected areas) involving 34 countries. These areas have delivered important benefits. In 2002, South Africa, Mozambique, and Zimbabwe signed a treaty to establish the Great Limpopo Transfrontier Park, a bold initiative to conserve the environment, promote economic development through tourism, and provide a major unifying focus among countries that until recently were strongly opposed politically. Bipartisan legislation now pending in the U.S. Congress underscores the importance of transboundary protected areas to economic development. The bill to extend the Africa Growth and Opportunity Act (AGOA III) includes a significant emphasis on ecotourism, noting that sub-Saharan Africa enjoys an international comparative advantage in ecotourism because it features extensive protected areas that host a variety of ecosystems and traditional cultures that are major attractions for nature- oriented tourism . . . . National parks and reserves in sub-Saharan Africa should be considered a basis for regional development, involving communities living within and adjacent to them and, given their strong international recognition, provide an advantage in ecotourism marketing and promotion . . . . Many natural zones in sub-Saharan Africa cross the political borders of several countries; therefore, transboundary cooperation is fundamental for all types of ecotourism development. Among other things, the bill calls on the president to “encourage and facilitate transboundary cooperation in sub-Saharan African countries to establish and protect cross-border parks and natural zones.” Transfrontier conservation can also work in conflict regions. The mountain gorilla—one of the world’s rarest mammals—would be extinct but for the joint efforts of Rwanda, Uganda, and Democratic Republic of Congo to conserve its tiny remaining habitat. Remarkably, despite the movements of armed groups and refugees in the vicinity, the mountain gorilla population actually increased in the last Nicholas P. Lapham 93 decade from 320 to 355 individuals, and gorilla tourism is once again an important component of the regional economy. In Central Africa, a collaborative agreement among Cameroon, the Central African Republic, and the Republic of Congo created the Sangha River Trinational Park, which links key reserves from all three countries and is the first of 13 priority transborder networks endorsed by the Yaoundé Summit. These networks helped form the basis for the Congo Basin Forest Partnership (CBFP), an effort catalyzed by the United States that demonstrates the potential to expand regional conservation partnerships in Africa. The Congo Basin Forest Partnership as a Model for U.S. Leadership. The Congo Basin forests are vital to economic development, food security, watershed protection, biodiversity conservation, and a host of other concerns. The CBFP unites African governments, key public donors (e.g., USAID, the World Bank, the European Union, and Japan), industry, and civil society in an effort to promote their conservation and sustainable use. In so doing, the CBFP draws heavily from the 1999 Yaoundé Declaration, a regional agreement on forest conservation signed by Central African heads of state. U.S. financial support to the CBFP targets 11 priority landscapes and empha- sizes protected area conservation. This reflects a distinct niche for the United States and fills a gap in assistance provided by the European Union and other donors. U.S. support, which leverages significant private-sector funds, is also essential to addressing Central Africa’s bushmeat crisis, which is threatening public health, endangering food security, and decimating wildlife populations (see below). Tackling regional conservation problems in Africa is not new to the United States. USAID, for example, through the Central African Regional Program for the Environment (CARPE), has been supporting this kind of work for years. What the CBFP does—through Secretary Powell’s personal engagement, the significant increase in U.S. technical and financial support, and the strategic targeting of such support—is elevate the U.S. response to a scale that more appropriately addresses the magnitude of the problem. It is this scaling up that is needed in other key regions across the continent. The Miombo-Mopane Woodlands and Guinea Current Large Marine Ecosystem: Opportunities for Enhanced and Sustained U.S. Engagement. The Miombo-Mopane Woodlands, which extend through 10 countries in Southern Africa (Angola, Botswana, Democratic Republic of Congo, Malawi, Mozambique, Namibia, South Africa, Tanzania, Zambia, and Zimbabwe), comprise one of the largest remaining tropical wilderness areas in the world. They are home to some of Africa’s poorest and most natural-resource-dependent people and to some of its biggest wildlife concentrations. They also harbor Africa’s largest protected areas, including several transfrontier peace parks that simultaneously advance conservation and economic development and improve bilateral relations. SADC, through its Protocol on Wildlife Conservation and Law Enforcement, provides a strong vehicle for regional cooperation in conserving the Miombo-Mopane ecosystem. Key needs include improving protected area management, addressing overharvesting and illegal trade of wildlife, preventing the transmission of infec- 94 Rising U.S. Stakes in Africa tious diseases among wildlife, livestock, and people, and promoting good environmental governance through community-based natural resource management. All of these needs match up well with U.S. capacity and strategic interests. The Guinea Current Large Marine Ecosystem off West Africa is one of the world’s most important ocean environments. It harbors vast oil reserves, a globally significant marine and coastal fishery, and a tremendous diversity of wildlife, including many species found nowhere else. How this ecosystem is managed has important implications for regional stability and bears heavily on economic development, food security, public health, and environmental sustainability for the 16 nations that are part of it (Angola, Benin, Cameroon, Republic of Congo, Demo- cratic Republic of the Congo, Côte d’Ivoire, Gabon, Ghana, Equatorial Guinea, Guinea, Guinea-Bissau, Liberia, Nigeria, São Tomé and Príncipe, Sierra Leone, and Togo). Threats include overfishing, particularly by foreign fleets; destruction of coastal mangrove forests and other habitats; pollution from sewage, agricultural activities, industrial waste, and oil spills; and urbanization of the coastal environment. The 1998 Accra Declaration provides a framework for regional cooperation in tackling these problems, and the Global Environment Facility, with technical support from the National Oceanographic and Atmospheric Administration (NOAA), has recently significantly expanded its investment in the area. Building on the White Water to Blue Water initiative it has piloted for the Caribbean region, the United States is in a strong position to scale up its support in a strategic and cata- lytic way. There are other important opportunities throughout Africa. The Albertine Rift (including Burundi, Democratic Republic of Congo, Rwanda, Tanzania, Uganda, and Zambia), the East Africa Marine Ecosystem (stretching from southern Somali- land to South Africa), the Eastern Arc Forests (Kenya and Tanzania), the Great Lakes (including the countries bordering on Lake Malawi, Lake Tanganyika, and Lake Victoria), the Guinean Lowland Forests (including Benin, Cameroon, Ghana, Guinea, Côte d’Ivoire, Liberia, Nigeria, and Togo), the Nile Basin (including Burundi, Democratic Republic of Congo, Egypt, Eritrea, Ethiopia, Kenya, Rwanda, Sudan, Tanzania, and Uganda), the Okavango Delta (including Angola, Botswana, and Namibia), the Serengeti/Mara Savanna Ecosystem (Tanzania and Kenya), and the Zambezi River Basin (Botswana, Mozambique, Namibia, Zambia, and Zimba- bwe) are some of the many transboundary ecosystems where enhanced U.S. engagement in promoting conservation efforts could have a significant impact. ■ Improving Natural Resource Governance as a Way of Preventing Conflict and Promoting Democracy Conservation is the application of common sense to the common problems for the common good. Since its objective is the ownership, control, development, process- ing, distribution, and use of the natural resources for the benefit of the people, it is by its very nature the antithesis of monopoly. So long as people are oppressed by the lack of such ownership and control, so long will they continue to be cheated of their right to life, liberty, and the pursuit of happiness, cheated out of their enjoyment of the earth and all that it contains.—Gifford Pinchot, Breaking New Ground, 1947 Nicholas P. Lapham 95

Although Africa is resource rich, most Africans remain mired in poverty. This incongruence is closely linked to resource mismanagement, which in turn leads to the disenfranchisement of rural populations. Given the value of land and other natural resources, nature is at the heart of considerable competition, conflict, and corruption. Too often, Africa’s political and economic elite receives a disproportionate share of the benefits from resource use, while the poor absorb a disproportionate share of associated social and environmental costs. History has shown that when natural resources become valuable, such as through commercial- ization, the elite find ways to capture them. Indeed, access to natural resources (land, forests, etc.) is a major incentive for seeking political office and a major perk of gaining it. In turn, resources are used not only to enrich the officeholders and their families, but also to ensure that they remain in power. In essence, there is little accountability by many African states to their citizens over the private-sector use of public natural resources. Many citizens and nongovernmental organizations (NGOs) believe that agreements are often negotiated behind closed doors and involve kickbacks, rent seeking, patronage, and other forms of corruption. They also believe that the state does not get its fair share of revenue and that the revenue generated is mismanaged and not used appropriately. A further problem is that benefits often fail to accrue to those needing them most— government departments with conservation responsibilities and local communities who must live with the impacts of resource mismanagement. A critical need is to encourage African governments to ensure good use, including fair distribution, of state revenues from timber, wildlife, and other natural resources by promoting transparency in the allocation of large-scale concessions to the private sector and in the appropriation of the associated state revenues. Liberia, much in the international spotlight of late, poignantly demonstrates why these issues matter to the United States. Forest Sector Reform in Liberia as a Key to Peace and Stability. Liberia has the largest remaining forested areas in West Africa. These forests are a vital national asset. They have historically provided for economic growth and job creation. They sustain key watersheds, and they support one of the most biologi- cally diverse environments on earth. Yet they are also at the heart of the country’s recent turmoil. It is widely known that former Liberian president Charles Taylor misappropriated timber revenue to fund the ruthless military campaigns that have tormented Liberia, the region, and the world for the last several years. This led the UN Security Council in early 2003 to take the extraordinary step of imposing sanctions on Liberian timber exports. Whether Liberia can get back on its feet depends heavily on effective reform of the nation’s forest sector. Such reform could lead to a sustainable and transparent timber industry that provides economic development and jobs for rural people. It could also seize on the opportunity to create a vibrant network of national parks that conserve Liberia’s natural heritage, offer significant tourism potential, and promote improved relations with neighbors in the region. On the other hand, without forest sector reform, Liberia is far more likely to join the ranks of post-conflict nations that slip back into chaos, as timber revenue once again becomes the cur- 96 Rising U.S. Stakes in Africa rency that fuels unrest, sows instability, and erodes the natural resource base for future generations. The United States has a significant strategic interest in seeing Liberia emerge as a stable and peaceful force in the region and has committed its own troops and considerable resources toward this end. Without paying close attention to governance issues associated with the management of Liberia’s forests, this effort is unlikely to succeed. Similarly, good forest sector governance is an essential component to promoting democracy, peace, and sustainable development in other forest-rich African nations, such as the Democratic Republic of Congo, for example. Community-based Natural Resource Management as a Good Governance Tool. Ensuring a greater degree of local ownership over natural resources is vital to improving governance in Africa. In the past decade, community-based natural resource management (CBNRM) has helped provide rural people a stronger voice in decisionmaking and ensure that they receive greater benefit from resource use. Examples of CBNRM projects include those involving ecotourism, game ranching, sustainable trophy hunting, handicraft production, bee keeping, and wild fruit juice production. Experience indicates that community- based organizations (CBOs) established to administer CBNRM are improving local governance and supporting democracy. Indeed, CBNRM’s very success is proving to be its biggest problem. In many countries, the political elite has come to view the increasing power and influence of CBOs as a threat to authority while the economic elite looks for ways to capture CBNRM profits. Strengthening CBNRM is a critical need in many African countries. Key activities include forming CBO federations and improving the law and practice of environmental procedural rights, including the rights of access to information, decisionmaking, and recourse in environmental matters. Other initiatives include independent monitoring of the practice of these rights, contributing to constitutional reforms that will guarantee procedural rights, and supporting the enactment of framework environmental management statutes and sectoral natural resource laws/regulations that articulate guidelines/minimum standards for the practice of procedural rights. In recognition of CBNRM’s importance in promoting democracy, good governance, and sustainable resource conservation, USAID has taken a lead role in supporting CBNRM projects across Africa over the past decade. Two well-known and successful examples are the Administrative Design for Management (ADMADE) project in Zambia and the Living in a Finite Environment (LIFE) program in Namibia. The challenge now is to build on this legacy by expanding and learning from USAID’s CBNRM programs and by affording CBNRM a more prominent place in U.S.-Africa policy. ■ Tackling the African Bushmeat Trade to Promote Public Health, Food Security, and Environmental Protection The survival of our wildlife is a matter of grave concern to all of us in Africa. These wild creatures amid the wild places they inhabit are not only important as a source of wonder and inspiration but are an integral part of our natural resources and of Nicholas P. Lapham 97

our future livelihood and well-being.—Julius Nyerere, Arusha Declaration, Sep- tember 1961 The overexploitation of African wildlife for human consumption has mush- roomed into a crisis of global proportion. The problem is perhaps most immediate in the forests of Central Africa where increased penetration into previously inacces- sible areas by logging and mining interests has helped fuel a dramatic explosion in the hunting of wild animals, including many threatened and endangered species. Unsustainable quantities of wild meat are now reaching large population centers, in turn driving further demand. Bushmeat networks extend beyond the borders of African nations and reach markets as far away as London, Paris, Atlanta, and Wash- ington, D.C., where eating wild animals is a status symbol in certain communities. All this occurs even though the majority of the trade is illegal both within nations and by international law/treaty. The United States has a variety of mechanisms through which it can respond, including international agreements that address wildlife use, such as the Conven- tion on the International Trade in Endangered Species (CITES). An important recent development is the signing of the Africa Forest Law Enforcement and Gover- nance (AFLEG) Ministerial Declaration (October 16, 2003) by 40 bushmeat producer and consumer nations worldwide. The declaration establishes a mandate for international cooperation toward supporting sustainable forest practices, including the management and monitoring of the bushmeat trade. Numerous agencies of the U.S. government also possess relevant technical expertise and resources that, if effectively combined, could provide significant support toward African efforts to address this crisis. There are several strong arguments for increased U.S. leadership. Bushmeat as a Vector for the Spread of Highly Infectious Disease. In a globalizing world, emerging health threats—to people, livestock, and wildlife—can spread as never before, and the United States as a matter of public health and national security must treat such threats extremely seriously. HIV, Ebola, monkey pox, and foot and mouth disease all demonstrate the worldwide risks that the wildlife/human/livestock interface in Africa poses. Butchering and eating wildlife, particularly apes and other primates, is a particular concern. It is now understood that the HIV virus crossed the species barrier from chimpanzees to humans several times in Central Africa, probably as a result of the hunting and consumption of chimpanzees for food. Similarly, recent outbreaks of Ebola virus in the Congo appear to have resulted from human consumption of apes. Although the quantity of bushmeat exported from Central Africa to Europe and the United States is small compared to the quantity consumed in the region, anecdotal reports suggest that such exports may be widespread and may pose a risk of transmitting emerging diseases to the wider world. For example, the recent U.S. Food and Drug Administration ban (November 3, 2003) on imports of all African rodents—dead or alive—is a direct response to the monkey pox outbreak in the Midwest caused by infected rodents imported from Africa. Bushmeat as a Threat to Food Security. Numerous rural communities throughout Africa are historically dependent on wildlife as a primary protein 98 Rising U.S. Stakes in Africa source and have hunted sustainably for generations. Today’s bushmeat “industry” is depriving these communities of their basic nutritional needs, contributing to disease risks (especially when immune systems are depressed), and raising longer-term food security concerns. The Pygmy populations of Central Africa are a good example of an entire culture that is at risk. Food security is also an issue for the urban poor for whom bushmeat has relatively recently become an important source of nutrition. Identifying alternative sources of protein for these populations, sources that do not directly or indirectly threaten Africa’s remaining biodiversity, poses a real challenge. There is an interest- ing link here to the marine environment, where overfishing off the West African coast (often to supply markets in Europe) has led to a corresponding increase in localized hunting for terrestrial bushmeat. Bushmeat as a Major Environmental Crisis. Top experts have called the unsustainable commercial harvesting of Africa’s wildlife the single greatest threat to Africa’s biodiversity. It has very rapidly eradicated almost all large mammals from unprotected areas in West Africa and threatens to do the same over the next 20 years in Central Africa. As this occurs, species for which the U.S. public has expressed particular concern, including elephants and great apes, will be at grave risk. East and Southern Africa are also currently experiencing dramatic increases in commercial hunting, and the data are just beginning to emerge regarding environmental impacts in these regions. The problem is not solely terrestrial in scope: overfishing is a significant problem in Africa’s major freshwater systems and in virtually all of its marine environments. Extinction of key species caused by hunting pressure in turn threatens irreversible ecological change. For example, loss of fruit eaters within tropical African forests alters the seed dispersal patterns of up to 80 percent of tree species. This could change forest composition and potentially alter rates of carbon sequestration. Loss of grazers could have an equivalent impact on savanna ecosystem structure and function.

Policy Recommendations

Following are six policy recommendations that constitute a proposed African Con- servation Initiative for the U.S. government. The first three respond to the specific priorities described above. The second three are crosscutting in nature. Taken together, they would significantly elevate the profile of natural resource conservation in U.S.-Africa policy and enhance the overall effectiveness of U.S. efforts to promote peace, democracy, economic development, and improved relations with the continent. As a way of highlighting their importance, our working group urges the secretary of state to consider announcing these initiatives as a package in a major address on Earth Day 2004 and pledges its support toward their further development. ■ Scale up and sustain U.S. assistance (diplomatic, technical, and financial) to regional partnerships aimed at conserving key transboundary ecosystems. Nicholas P. Lapham 99

Regional cooperation is fundamental to Africa’s development. A vital component of such cooperation is the conservation of shared ecosystems that extend beyond the borders of individual nations. U.S. leadership can play a pivotal role in catalyzing economic, security, health, and environmental benefits from efforts undertaken jointly with the countries concerned to conserve these natural systems. Specifically, the State Department and USAID, with Secretary Powell’s personal leadership, as well as that of the assistant secretaries for African affairs and oceans and international environmental and scientific affairs and the USAID assistant administrator for Africa, should • Ensure the effectiveness and sustainability of the Congo Basin Forest Part- nership by maintaining it as a significant diplomatic priority, supporting its full funding, and extending its duration beyond the initial three years; • Pursue regional initiatives for the Miombo-Mopane Woodlands and the Guinea Current Large Marine Ecosystem. As an initial step, invite governments, regional institutions, leading conservation organizations, local community representatives, and interested private-sector parties to offer and discuss specific recommendations for enhanced U.S. engagement; and • Seek opportunities to promote and raise the profile of conservation initiatives in other priority regions, including but not limited to the Albertine Rift, the East Africa Marine Ecosystem, the Eastern Arc Forests, the Great Lakes, the Guinean Lowland Forests, the Nile Basin, the Okavango Delta, the Serengeti/Mara Savanna Ecosystem, and the Zambezi River Basin. ■ Prioritize improved natural resource management as a key component in U.S. efforts to promote good governance. The mismanagement of natural resources such as forests, wildlife, and water is a driving force behind corruption and conflict in Africa and is a leading cause of poverty, particularly in rural regions. Giving these issues greater weight in U.S.-Africa policy is essential to achieving long-term strategic interests. The secretary of state should take the following initial actions: • Prioritize forest sector reform as a use of the $200 million recently appropriated for Liberia’s reconstruction. In this respect, the United States should assist with developing a transparent, sustainable timber industry and a vibrant national parks network—making sure that the result benefits the Liberian people. It should also work with partners to ensure that significant reform of the forest sector occurs before UN sanctions on Liberian timber exports are lifted; • Promote the incorporation of forest conservation as an important aspect of the peace process in the Democratic Republic of Congo, emphasizing the need for a sustainable, transparent timber industry and a robust, well-managed network of national parks and forest reserves; • Increase the use of community-based natural resource management (CBNRM) as a tool to promote democracy, good governance, and rural development across Africa; and 100 Rising U.S. Stakes in Africa

• Work with other U.S. agencies, the UN Environment Program, and NGO partners to strengthen African judicial systems to better develop, understand, and enforce natural resource and environmental laws. ■ Expand and better coordinate U.S. government activities to address the African bushmeat crisis. The commercial exploitation of African wildlife for human consumption, commonly referred to as the bushmeat trade, is a global crisis. It threatens to increase the transmission and spread of deadly diseases, create food security problems in key African regions, and cause the extinction of highly valued wildlife species, including great apes. An effective U.S. response requires the coordinated and strategic deployment of assets from a variety of U.S. agencies. The secretary of state, through the Bureau of Oceans and International Environmental and Scientific Affairs, should coordinate such a response to include: • The Centers for Disease Control and Prevention, in collaboration with leading NGOs, conducting urgent research into the links between human health and the bushmeat trade; • USAID (e.g., through the Global Development Alliance) working with the private sector to assist Africans in developing viable protein alternatives within a context of appropriate environmental safeguards; • The Trade and Development Authority and Overseas Private Investment Corporation discouraging U.S. commercial interests, particularly the mining industry, from practices that exacerbate the bushmeat problem, such as opening new areas to increased hunting pressure; • The State Department pressuring European and Asian governments to crack down on logging companies within their respective countries that are engaged in unsustainable practices in Central and West Africa; • The State and Interior Departments working with African nations to encourage compliance with international wildlife protection agreements; • The Interior and Homeland Security Departments better training customs agents in detecting shipments of bushmeat entering the United States; • The Agriculture and Interior Departments, in collaboration with leading conservation NGOs, assisting African counterpart agencies in mitigating disease threats to wildlife and livestock within Africa and in overseas markets; and • The State and Interior Departments supporting African efforts to conserve additional undisturbed areas as national parks and protected areas. ■ Develop stronger programs and incentives to more effectively engage the U.S. diplomatic corps in Africa on natural resource conservation issues. A combination of factors discourage effective leadership within the U.S. diplomatic corps on conservation and environmental issues and, as a result, minimizes the Nicholas P. Lapham 101 emphasis on such concerns in U.S. bilateral relationships with African nations. U.S. diplomats headed to Africa receive, at best, ad hoc exposure to conservation issues prior to assuming their posts. State Department personnel dedicated primarily to environmental concerns—that is regional environmental officers (of which there are three in Africa) and environment, science, and technology (EST) attaches— rarely possess the natural resource backgrounds necessary to effectively address key issues. Achieving success in the area of conservation and the environment is not generally seen as an important element to furthering a career within the Foreign Service. The State Department should take the following actions to alter this dynamic: • Support a program at the Georgetown University School of Foreign Service to better train prospective Foreign Service officers in natural resource conservation; • Establish a mandatory training program for Foreign Service officers posted to Africa on natural resource conservation and its links to conflict prevention, good governance, poverty reduction, etc.; • Create a prestigious fellowship to allow promising Foreign Service professionals to spend a year with a leading scientific institution or conservation NGO; • Strengthen the role of State Department regional environmental officers by recruiting individuals with strong natural resource backgrounds; and • Build conservation/environment criteria into the system for rating the performance of Foreign Service officers leaving African posts. ■ Restore and expand key U.S. technical assistance programs that build the capacity of Africans—from practitioners to political leaders—in natural resource conservation. Professional training is a prerequisite for effective natural resource conservation. Africans have few opportunities to gain access to such training, and existing African conservation capacity is being eroded by the HIV/AIDS epidemic. With its unparalleled breadth of conservation experience and expertise, the United States is uniquely positioned to address this need. The U.S. government has historically run small, cost-effective programs to train African students and management professionals in natural resource conservation. These programs, many of which have fallen victim to budget cuts, should be restored and expanded. Opportunities should also be explored to engage African parliamentarians and other government political leaders. The State Department recently collaborated with the Department of Interior to host a delegation of top officials from Gabon. As Gabon works to create its own national park system, the purpose of the trip was to expose key Gabonese officials to the potential of parks to achieve environmental protection while stimulating economic growth and job creation. Specific actions the U.S. government should take to build increased African capacity in natural resource conservation include: 102 Rising U.S. Stakes in Africa

• Develop through the State Department, in partnership with other U.S. technical agencies and leading conservation NGOs, a formalized program of study tours and exchanges for African parliamentarians and other government leaders; • Restart the International Short Course run by the International Affairs Office of the National Park Service. This program provided essential training to emerging leaders from protected area agencies around the world. Some of Africa’s most respected protected area officials are graduates; • Restore the USAID Advanced Training for Leadership and Skills (ATLAS) scholarship program for future African leaders to study conservation- related topics at the undergraduate and post-graduate levels at U.S. universities; • Provide increased technical assistance through the Department of Interior’s International Technical Assistance Program to African wildlife and protected area authorities on key issues including law enforcement, wildlife monitoring, disease management, ecotourism development, geographic information systems (GIS) technology, etc.; • Increase USAID support for Africa’s three regional wildlife colleges (including providing scholarships to African national park staff) and encourage linkages between these institutions and leading U.S. universities. The colleges are the College of Wildlife Management in Mweka, Tanzania; the Ecole de Faune in Garoua, Cameroon; and the Southern Africa Wildlife College in South Africa; and • Expand efforts to engage the Peace Corps in supporting programs in Africa that build natural resource management capacity. ■ Increase U.S. investment in African parks and protected areas. Parks and other protected areas are a cornerstone of natural resource conservation efforts throughout Africa and contribute significantly to each of the core themes identified in this chapter. For example, peace parks that straddle national borders often anchor initiatives to promote effective transboundary conservation; protected forest areas provide critical refuges for wildlife that are essential to addressing the bushmeat crisis, while marine protected areas provide breeding grounds for commercial fisheries; and well-managed national parks can help support good governance both nationally and locally. African governments continue to take bold actions to establish new parks and protected areas. In 2002, Gabon created a national parks network covering more than 10 percent of the country’s land area. In 2003, Madagascar announced that it would triple the number of its protected areas. The World Parks Congress that took place in Durban, South Africa, in September 2003 underscored the need for international assistance in helping Africa develop and maintain a comprehensive protected area network. Supporting the creation and management of parks and protected areas is a dis- cipline in which the United States has a distinct comparative advantage. The United Nicholas P. Lapham 103

States has the world’s largest and most diverse network of protected areas and a wide range of expertise in managing such areas for multiple objectives, from strict protection to sustainable use. Specifically, the secretary of state should • Encourage passage of the African Growth and Opportunity Act (AGOA III) legislation now pending in the House of Representatives that includes language directing the president to invest in park protection; • Engage other major donors, leading conservation NGOs, and interested private-sector parties in an effort to catalyze greater support for African protected areas, perhaps through a Partnership for Africa’s Parks; • Strengthen incentives for creating and properly managing protected areas by giving special recognition to Madagascar, Gabon, and other nations that take strong conservation action; and • Ensure that the President’s Initiative against Illegal Logging, which has protected areas as a focus, receives adequate funding and targets Africa as a priority. chapter 5

Countering the Terrorist Threat in Africa

J. Stephen Morrison and Princeton N. Lyman

Executive Summary

Specific Recommendations

■ The administration should articulate a coherent, compelling framework for U.S. counterterrorism policy in Africa. That effort should define the strategic context for the president’s multiple initiatives in Africa as well as the active reassessment of Africa’s place in global security now under way in the U.S. European Command and NATO. The framework should take account of the special challenges—and opportunities—present in Sudan, Somalia, and Nigeria. It should involve wider disclosures of successes in counterterrorist efforts. It should speak directly to raising Africa as an intelligence priority and include commitments to close diplomatic gaps in important places and dramatically expand human intelligence and language training. It should include a renewed focus on curbing the proliferation of surface-to-air missiles in Africa and propose that the Kimberley Process be used to tighten controls over terror financing through diamond channels. It should move the Pan Sahel Initiative forward through a major increase in multiyear funding of $100 million or more, while

104 J. Stephen Morrison and Princeton N. Lyman 105 simultaneously advancing a major U.S.-Muslim outreach initiative of $200 million a year. ■ The administration should reorganize itself internally. It is essential to overcome divided responsibility for Africa among the Department of Defense’s regional commands. Africa’s almost seamless borders and networks of both trafficking and conflict demand a more unified command structure in the United States for military training, intelligence, and, as necessary, deployment. Similarly, an empowered antiterrorism task force is needed to overcome the internal divide in the State Department that separates North Africa from the Africa Bureau, links these more effectively with the Counterterrorism Coordinator’s office, and strengthens the place of public diplomacy. ■ The administration should propose to Congress a major continent-wide Mus- lim outreach initiative on a dramatically large scale. It should be a multiyear effort involving new additional funding of at least $200 million a year. With a Muslim population of well over 300 million, Africa provides a large pool for recruitment by Muslim extremists and, at the same time, provides a unique opportunity for the United States to engage the Muslim world. The approach should emphasize constant engagement with Muslims representing the full spectrum of opinion, with special attention to communities’ vulnerabilities. Specifically the administration should • Increase pressure on the Saudi government to regulate financial flows by Saudi charities to madrassas in Africa at the same time that the United States demonstrates the seriousness of its commitment to expand educational opportunities. • Increase diplomatic engagement with Muslim leaders, with special priority to northern Nigeria, coastal communities of Kenya and Tanzania, and countries served by the Pan Sahel Initiative. • Expand humanitarian and development assistance to Muslim communities, including direct support to Somaliland. ■ The administration should pursue a credible policy for ending Somalia’s role as a collapsed state that continues to provide a base of support and transit opportunities for Al Qaeda and its affiliates. In 2004, the administration should systematically test the feasibility of supporting a new multipronged, multilateral approach to Somalia. The following are specific steps the administration should take in 2004: • Formulate a three-to-five year road map for the restoration of civilian rule, the marginalization of armed militias, and the restoration of elementary social services. • Impose enhanced pressure upon Somalia’s militias, making use of new instruments including the Coalition Maritime Task Force and the U.S.-led 106 Rising U.S. Stakes in Africa

Combined Joint Task Force to strengthen naval interdictions and other means of enforcing an international arms embargo. • Create new channels of humanitarian and developmental assistance. ■ The administration should advance cooperation on counterterrorism with Sudan, with or without a peace settlement. Sudan is motivated to avoid retaliatory action by the United States and to win Sudan’s removal from the U.S. list of state sponsors of terror. The U.S.-Sudan dialogue on counterterrorism, however, remains vulnerable to breakdown. It is subject to strong cross-pressures related to efforts to negotiate a peace settlement in Sudan and the influence of U.S. interest groups acting in support of the Sudan People’s Liberation Movement/Army (SPLM/A). Specifically, the administration should • Clarify and reaffirm the specific conditions, expectations, and timeline for removing Sudan from the list of state sponsors of terror, incorporated into a precise action plan. • Open consultations with appropriate members of Congress. • Take special measures to preserve the integrity of the counterterrorism track and keep it separate from other dimensions of U.S. engagement on Sudan. • Devise a phased plan for expanded programmatic cooperation on counterterrorism with Sudan, should there be a peace settlement.

Introduction

The threat of terror to U.S interests in Africa is concrete, rising, and discernible. The probability of another attack on Americans on African soil is high. The United States has begun to recognize this reality and to give counterterrorism higher priority in U.S. foreign policy approaches to the continent. Still, American diplomats, aid workers, public health experts, and businesspeople live at a level of heightened risk. And the U.S. ability to carry forward its other core interests—in trade, HIV/ AIDS, peace operations, and diversification of secure energy sources—is at jeopardy. In the Horn of Africa, an enduring Al Qaeda network—responsible for the destruction of two U.S. embassies in 1998 and attacks on Israeli tourists in Novem- ber 2002—retains its capacity to strike, find haven and support on African soil, transit the abandoned netherworld of Somalia (and likely Comoros as well), and sustain linkages with the Middle East and South Asia. West Africa’s failed or failing states, replete with criminal networks skilled at laundering cash through illicit diamond trades, have given rise to a toxic bazaar that reportedly assisted Al Qaeda in sheltering its assets. The proliferation of small arms trafficking has resulted in significant caches of surface-to-air missiles in places like Charles Taylor’s former office. Nigeria, an oil-rich, corrupt, ramshackle goliath, riven sometimes violently along Muslim-Christian lines, is a target of choice in Osama bin Laden’s pro- nouncements of early 2003. South Africa saw the rise of violent, radical Muslim J. Stephen Morrison and Princeton N. Lyman 107 cells in the late 1990s, with ties to South Asia. They have been eradicated, but the motive, opportunity, and means to revitalize attacks on U.S. interests persist. As pressures upon Al Qaeda and other radical Islamic movements intensify in Kenya, North Africa, and elsewhere, many experts assert they will migrate to more accessible venues in West and southern Africa. Counterterrorism will become an ever-larger component of U.S. security calculations vis-à-vis Africa. To be effective, policymakers will have to contend seriously with the very factors that attract terrorists: weak state partners; deep economic marginality and alienation (or in the case of Nigeria and Angola, galloping oil wealth that feeds alienation); ethnic and religious fissures on a continent that is home to 300 million Muslims; and fragile governance with often weak protections of democratic and human rights. For this reason, the U.S. response cannot be driven by security programs alone; it also requires sustained attention to economic development, human rights, and democratization. Hostility within Arab and Muslim communities toward the United States continues to worsen, including among Africa’s 300 million Muslims and especially within the Arab-origin populations of East Africa and within northern Nigeria. The October 2003 report by the Advisory Group on Public Diplomacy for the Arab and Muslim World, “Changing Minds, Winning Peace,” chaired by Ambassador Edward P. Djerejian, documents the failure of U.S. public diplomacy to reverse this trend. It further calls for the replacement of a system that has “become outmoded, lacking both strategic direction and resources.” Although only a small proportion of Africa’s Muslim population is radicalized, U.S. diplomatic outreach to the majority of African Muslims is weak and fragmented. As the Djerejian report notes, it is essential that the United States better communicate its aims and values to Africa’s Muslim communities and not permit extremists to dominate in defining the United States. Washington also needs to overcome serious internal obstacles, for any counterterrorism policy to show results. Africa remains at the back of the U.S. foreign policy queue; counterterror programs for the region remain underfinanced; and a phobia runs strong against engagement in Somalia and, more generally, against nation building and deployment of U.S. troops in decayed African environments that invite terrorist influences. Counterterrorism responsibilities within the State Department are divided along archaic bureaucratic lines, and no U.S. diplomatic presence exists in several strategic locations. Long-term development imperatives are consistently eclipsed by short-term humanitarian crises. Institutionally, Washington has yet to articulate a coherent strategy that can be executed effectively across diverse U.S. agencies, build support among skeptical partner states, and reach complex Muslim populations that are poorly understood and weakly engaged.

The Horn of Africa To an exceptional degree, the Horn is both familiar with terrorism and receptive to engagement with the United States. Kenya and Tanzania share with the United States the tragedy of August 7, 1998, when Al Qaeda simultaneously bombed the U.S. embassies in Nairobi and Dar es Salaam. The attacks killed 224 individuals, 108 Rising U.S. Stakes in Africa including 12 Americans, and seriously wounded more than 5,000 Kenyans and Tan- zanians. Al Qaeda once again targeted Kenya on November 28, 2002, in the coastal city of Mombasa. The operatives bombed an Israeli hotel, killing 15, and simultaneously (and unsuccessfully) attempted to strike an Israeli passenger aircraft during takeoff. Had that strike been successful, more than 200 Israeli citizens would have perished. The November 2003 United Nations (UN) expert panel report on Soma- lia documented extensively how the Mombasa operation was planned and executed through Somalia-based cells. In the past year, U.S. counterterrorism activities have advanced: through the creation of the Combined Joint Task Force–Horn of Africa, in Djibouti; the launch of a $100 million package of counterterrorism programs announced by President Bush in late June 2003; and substantial progress in the U.S. terrorism dialogue with Sudan, the latter achievement highlighted in the administration’s most recent annual global review of terrorism. If sustained and properly led, these initiatives could become models of innovative diplomacy and partnership. The task force commander, General Mastin M. Robeson, in late November 2003 forcefully argued that the Horn is becoming day by day ever more critically important in the global war on terrorism, with increasing direct links to events in Iraq. “There are three issues here: there is transnational terrorist networking, at large, there are specific cells planning terrorist attacks, and there’s the recruiting, training and shipping of foreign fighters into Iraq . . . . They are down here training and recruiting. They are trying to create numbers and what we want to do is prevent them from creating numbers.” According to Robeson, the task force has killed or captured 25 senior Al Qaeda operatives. Of the hundreds of foreign fighters detained by U.S. troops in Iraq, 25 percent come from the Horn. The Horn remains home to multiple, interlocking, internal, and cross-border conflicts, weak or failing states, pervasive corruption, and extreme poverty. It is chronically vulnerable to drought (today more than 15 million of Ethiopia’s nearly 70 million citizens are at risk of famine), is gravely beset by HIV/AIDS, and struggles with widespread, illicit trafficking in weapons. For the past generation, Saudi Wahabist charities have across a range of Horn states provided scholarships and supported madrassas and related social service agencies. Following September 11, 2001, the Horn received increased attention as a possible new haven for Al Qaeda operatives that were driven from Afghanistan during Operation Enduring Free- dom. Although Somalia did not become a replacement, operational base for Afghanistan, the UN expert panel on Somalia documented that Al Qaeda used Somalia as a safe haven and training ground for the Mombasa attacks and continues to base its operatives there. Al Qaeda has also succeeded in creating a durable, indigenous infrastructure in coastal Kenya and the environs of Nairobi and has been able to transit in and out of Kenya via Somalia havens. It is suspected of having similar ease of access to, and protections within, Zanzibar, coastal Tanzania, and the Comoros Islands. Sudan, home to Osama bin Laden from 1991 to 1996, has had to account for that legacy in its dealings with the United States since the late 1990s. The United States sent cruise missiles into the al Shifa pharmaceutical factory in late August 1998 in a controversial retaliation for the Nairobi and Dar es Salaam embassy J. Stephen Morrison and Princeton N. Lyman 109 bombings. That decision focused Khartoum’s imagination on its acute exposure and the possibility of further U.S. action. An intensive counterterrorism dialogue between the two governments commenced in the spring of 2000 and accelerated dramatically after September 11, 2001, when the United States threatened additional very strong action even while promising, as an alternative scenario, to improve relations incrementally if Sudan cooperated expeditiously and extensively in turning over suspects, opening its files, and working toward a fair negotiated peace and the easing of humanitarian access. Several conditions favor U.S. counterterrorism initiatives in the Horn. The region’s leadership has demonstrated the political will to cooperate with the United States and is responsive to high-level U.S. engagement, bolstered by massive U.S. humanitarian relief, Washington’s commitment to the peace process in Sudan, President Bush’s $15 billion, five-year Emergency Plan for AIDS Relief, and years of activism within the region by the U.S. Central Command. The $100 million package of counterterrorism programs supports the “front line states” of Kenya, Djibouti, and Ethiopia and a second tier comprising Uganda, Tanzania, and Eritrea. More than half the funds will support Department of Defense coastal and border security programs. An amount of $10 million will support the Kenyan Anti- terror Police Unit. Other funds will support Muslim education and airport security. The initiative will be reinforced by a Horn Task Force, backed by the U.S. Central Command, comprising 11 East African states. The Combined Joint Task Force–Horn of Africa (CJTF-HOA), involving 1,800 U.S. soldiers based in Djibouti, began operations in October 2002. Its mission is to deter, preempt, and disable threats emanating principally from Somalia, Kenya, and Yemen. It is joined with the Coalition Maritime Task Force (TF-150) positioned off the coast of Somalia. According to the November 2003 UN experts panel on Soma- lia, the TF-150 presence has had some deterrent effect but currently lacks the mandate to enforce the UN arms embargo on Somalia. Increasingly, the CJTF-HOA is called upon to assist in training and provision of technical support, especially in Kenya and Ethiopia. Up to now, the task force has stirred no significant anti-American reaction within the region, nor has it conducted any overt counterterrorism operations in the Horn per se. Widespread opposition to the U.S. war against Iraq did not materialize in the Horn. Indeed, Ethiopia, Eritrea, and Uganda openly identified themselves as coalition partners in Operation Iraqi Freedom. Public terrorist alerts issued by Washington and London for Kenya and Tanza- nia in 2003, while highlighting the reality of Al Qaeda’s presence, also gravely disrupted international air traffic, undermined the recovery of the region’s tourist trade, and intensified internal debate within Kenya and Tanzania over the wisdom of partnering with Washington to combat terror. Vocal civil libertarians in Kenya worry that antiterrorist controls placed before Parliament, and backed by the United States, are repressive. Some Muslim clerics in both Kenya and Tanzania worry that these efforts are fundamentally anti-Islam. Success in the Horn is still distant. The United States has yet to overcome its phobia to engaging seriously in Somalia, which remains integral to sustaining Al Qaeda’s infrastructure inside Kenya. The CJTF’s mission is yet to be clearly defined, 110 Rising U.S. Stakes in Africa and its efforts are often poorly integrated with those of intelligence agencies. It will similarly be difficult for Washington to retire Sudan from the list of state sponsors of terror expeditiously, since within Congress and the administration there will be pressures and temptations to shift the benchmarks to issues related to the civil war there, whether or not a comprehensive peace settlement is reached. The United States, given resource constraints, lacks a resident presence in key locations, including Mombasa, Hargeisa, and Zanzibar, and has weak links to other Muslim communities in East Africa. Intelligence capacities remain seriously inadequate. More broadly, it remains to be seen whether Washington can provide sufficient political and financial leadership to its multiple, promising operations, given worsening budgetary pressures and competing demands in Iraq and Afghanistan.

West and Central Africa The United States has acknowledged the threat that terror poses to its interests in West Africa. The Bush administration’s 2002 National Security Strategy cites weak states, a major feature of this region, as being as great a danger to the United States as strong states. Head of the U.S. European Command, General James Jones, leads a security review that includes a reassessment of West Africa and the special terrorist threats it faces. He has openly suggested that NATO naval units spend half their time along the West African coast, because “that’s where the action is.” In the past two years, under his leadership, the United States has concluded seven new security access agreements in Africa: within West and Central Africa, these include Senegal, Gabon, and Ghana. São Tomé and Príncipe is under active consideration. (Other agreements have been concluded with Algeria, Namibia, South Africa, and Kenya.) Despite these gains, there is still a need for heightened and sustained U.S. leadership, the articulation of a clear and coherent vision, and sufficient resources commensurate with the threat. Diplomatic capacities remain weak, and initiatives are under-resourced, epi- sodic, and vulnerable to political pressures, old attitudes, and downward budgetary pressures. During the agonizing debate in the summer of 2003 over whether the United States should lead an international intervention into Liberia, the United States was at first poised to move forward with considerable strength and commitment. In the end, it abruptly pulled back, succumbing to the view that West Africa simply does not matter enough—it does not qualify as a critical part in a global antiterrorist strategy—to warrant the risks and costs of putting a significant number of U.S. troops on the ground, in a lead position, for more than a very brief period. West Africa is home to more than 100 million Muslims. States range from moderate, friendly democracies that can be helpful in global outreach to the Muslim world to states riven by religious tensions. It includes emerging democracies as well as failing political systems that are exploited by enemies of the United States. And it is a region that is increasingly important to U.S. energy policy. In the past decade, new offshore discoveries off the Gulf of Guinea have more than doubled proven reserves—to more than 60 billion barrels. By 2015, West Africa may, by some estimates, provide a quar- ter of America’s import requirements. U.S. and European corporate investments in the energy sector or West/Central Africa will exceed $40 billion. J. Stephen Morrison and Princeton N. Lyman 111

Although there is little evidence of terrorist cells or infiltration among the Mus- lim population, many observers have recently noted a worsening hostility toward the United States across Sahelian Muslim societies that could translate into increased future pressures upon governments. Two Muslim countries in this region, Senegal and Mauritania, have diplomatic relations with Israel. Senegal, Mali, and Niger, all predominantly Muslim, have evolved into functioning democracies and have close relations with the United States. Washington has engaged four such countries—Chad, Senegal, Niger, and Mali—in a $5 million pilot, the Pan Sahel Initiative, to bolster security and intelligence along the Sahara border. Currently, the program is too undersized to have any serious impact. A more realistic and credible budget would be in the $100 million–$125 million range. As now consti- tuted, the program is highly vulnerable. Much of the equipment designated for it was diverted to the crisis in Liberia in the summer of 2003. Special Forces trainers have been diverted to the Middle East.

Countering a Region in Decay The threat in most of West Africa emanates not just from militant Islam but also from failed or failing states, which terrorist organizations have already begun to exploit. West Africa is an exceptionally anarchic, ungoverned zone; its regionalized wars encompass Liberia, Sierra Leone, Côte d’Ivoire, and Guinea. The decay of states has given rise to a dangerous bazaar of criminal syndicates, acting in league with rogue leaders—Taylor, when he led Liberia, Campoare in Burkina Faso, Qaddafi in Libya—with alleged tie-ins to Hezbollah and Al Qaeda networks. Reportedly, Al Qaeda’s entry was motivated to protect and expand its finances following U.S. attacks on it in 1998 and after the invasion of Afghanistan in 2001. As documented by Global Witness, the Washington Post, and the UN, Al Qaeda reportedly began exploiting the marketing of gems through its networks in East Africa. Subsequently, it took advantage of the civil war and chaos in the Democratic Republic of Congo to extend these activities into that mineral-rich country. As Liberia and Sierra Leone fell into civil war in the late 1990s, Al Qaeda is reported to have colluded with the governments of Burkina Faso and Liberia to buy diamonds marketed by rebel forces in Sierra Leone. Extensive investigations within the U.S. government have not verified that Al Qaeda continues to use these channels. U.S. intelligence in this area remains weak, however, and more, not less, investigative work is warranted. The United Nations has outlawed the marketing of “conflict diamonds” and placed arms embargoes on Liberia and Sierra Leone. Encouraged by a joint U.S.- UK initiative, NGOs, and activists in the U.S. Congress, the major diamond-producing countries—most notably South Africa and Botswana—joined with the industry in establishing the “Kimberley Process” in 2000 to identify conflict diamonds and to curb their entry into legitimate market channels. The Bush administration signed the 2002 Interlaken agreement marking the formal launch of new international certification requirements for uncut diamonds. Much more could and should be done, through the Kimberley Process and UN investigative expert teams, to strengthen transparency and accountability in the marketing of 112 Rising U.S. Stakes in Africa

West African diamonds and build our knowledge of how terrorist groups use these channels to finance their operations. Equally critical is addressing the near anarchy and conflict engendered by failed states. Without that, enforcement of embargoes and sanctions will be difficult. But the United States remains deeply ambivalent in regard to West African crises. That ambivalence stems from the October 1993 Mogadishu debacle and the subsequent Rwanda genocide, when the Clinton administration, and the Congress, each in its own way, put the brakes on UN peacekeeping. Whether in Sierra Leone, Congo, the Central African Republic, or elsewhere, the U.S. position throughout the late 1990s was to support only the minimal UN effort in situations of instability and civil war—often too little to stem the violence. The backlash from Somalia also created a de facto ban on the use of U.S. troops in African peace operations and reinforced a phobic view of U.S. contributions to “nation building” in Africa. In the summer of 2003 debate over Liberia, President Bush had an opportunity to revise outdated policies with regard to U.S. interests in Africa, including the use of U.S. troops. Initially, just prior to his July trip to Africa, President Bush took a strong stand, demanding that Liberian president Taylor depart as a condition for a U.S.-backed peacekeeping intervention. For the first time in 10 years the U.S. countenanced the introduction of U.S. troops into an African crisis. But ultimately the White House chose not to commit. More than 2,000 American Marines were sent offshore to provide backup for a West African force, but kept from any significant land role, and departed altogether on October 1, 2003. The decision damaged U.S. credibility in Africa and sent the wrong signal to criminal and terrorist groups in the region. By painting U.S. interests in Liberia, and in the related civil unrest throughout the region, as strictly humanitarian, the administration lost the opportunity to con- vey to the American people that U.S. security interests in West Africa have grown significantly, post September 11. There is a strategic need, in conjunction with both the Africans and our European allies, to bring an end to the decay of state capacity and stability throughout this part of Africa, if U.S. counterterrorism policy in Africa is to be advanced. Radical Islam’s potential in Nigeria. Within West Africa, Nigeria is where radical Islam’s potential security impact is most profound. The Bush administration in the National Security Strategy singled out Nigeria as a country with significant sway and deserving of “focused attention.” Yet in the past few years, the United States has not invested anywhere near the resources and efforts consonant with the critical challenges there. With 130 million people, Nigeria is Africa’s most populous nation and has Africa’s largest Muslim population, with nearly 70 million Muslims. Nigeria now provides the United States with 7 percent of its imported oil, and new energy sector investments totaling in the tens of billions of dollars are planned by American and European oil companies. Among large oil-rich developing nations, Nigeria is arguably the most vulnerable and unstable. Internally, it is under an intense challenge from radical Islam as well as from armed, disaffected minority groups in the oil center of the southeast. Its per capita gross domestic product (GDP) declined by two-thirds in the past decade, immiserating tens of millions. Ethnic and religious violence has sharply J. Stephen Morrison and Princeton N. Lyman 113 increased. President Olusegun Obasanjo is a well-respected, democratically elected leader, but the challenges he faces are extremely daunting, and his control over executive agencies is uncertain. In his first term as president, from 1999 to 2003, 10,000 people died in ethnic or religious violence. A resurgent, more fundamentalist Islam in northern Nigeria stems in part from an internal debate, begun in the 1960s, over the purity of Nigerian Islam, a debate fed by scholars and preachers influenced and financed from Saudi Arabia. But equally important is the changing political and economic fortunes of northern Nigeria. In 1999, after nine years of particularly cruel and rapacious rule by Sani Abacha, a Muslim military leader, Nigeria restored civilian rule for the first time since 1983, electing not only a southerner, but a born-again Christian, retired general Olusegun Obasanjo. Obasanjo proceeded to cleanse the military of politically oriented officers, many of them inevitably northerners. He instituted a program to investigate past corruption and bring perpetrators to justice. Politically, militarily, and economically, northerners saw their positions declining. The first introduction of Shari`a criminal law came after the 1999 election, intended as a political challenge and embarrassment to Obasanjo by a northern governors of the opposition party. But no one expected the tremendous popularity of the move. To the people on the street, it offered order and stability and a response to crime and hopelessness. Within a few months, 12 of Nigeria’s 36 states had adopted Shari`a criminal law. Today it is a potent force, unsettling relations between Muslims and Christians and posing delicate and difficult challenges to Obasanjo. It also has created challenges for the United States. To many northerners, the United States is seen as a partner in their political and economic decline. When the United States, shortly after Obasanjo’s election, instituted a training program for the Nigerian military to improve its peacekeeping capacity, northerners saw it as aiding Obasanjo in cleansing the military of northern leadership. U.S. policies in the Middle East traditionally stir stronger anti- American feelings in Nigeria than elsewhere in West Africa. The war in Iraq aggravated these feelings. Tens of thousands of Nigerians flocked to rallies against the Iraq War. The situation is dangerous and volatile. Nigeria’s Muslim population is a potent force, for moderation or for radicalism. Increased tension in Nigeria that threatens civil war between north and south, or that takes on an anti-Western tone, would be deeply detrimental to U.S. security stakes in the region. To date, despite the trends described above, there is no evidence that terrorist cells or support for terrorist actions have penetrated northern Nigeria, nor that terrorist and criminal syndicates have linked up. But the United States is poorly positioned to address the anti-American attitudes in the north, even to be aware of trends in these more dangerous directions. The U.S. embassy lacks a single American Hausa speaker, has no consulate or other permanent representation in the northern part of the country, and until recently, had only a poorly staffed and unimaginative public diplomacy program. U.S. relations with the military remain bumpy. On the one hand, the United States is looking to Nigeria to carry much of the peacekeeping burden in West Africa, as it has done most recently in Liberia. And the United States provides some logistical 114 Rising U.S. Stakes in Africa support to Nigeria and other regional troop contributors to the Liberian operations. But Congress has greatly limited training of the Nigerian military because of human rights concerns, significantly limiting U.S. ability to reach out to a new generation of military officers from both north and south.

Southern Africa In South Africa a small radical Islamic group, the People Against Gangsterism and Drugs (PAGAD), emerged on the scene in the 1990s as a vigilante group combating the growing drug trade in the poor townships near Cape Town—activity for which it gained a degree of popularity. Openly critical of U.S. policies in the Middle East and of Israel, it staged several demonstrations against the embassies. In the words of South African officials, PAGAD was subsequently “hijacked” by more radical elements. Some suggest that this influence came in part through Saudi-financed imams, whose influence accompanied Saudi-financed mosques built throughout the Cape Muslim area. In any case, PAGAD was suspected of a series of bombings of bars and nightclubs that took place in the late 1990s. A threat on the life of the American consul general was uncovered and foiled. In response, South African police cracked down on the group and convicted and jailed several of its leaders, and the bombings have ceased. South Africa’s Muslim population, fewer than 1 million persons, is almost entirely concentrated among people of South and Southeast Asia origin, descen- dants of immigrants to South Africa during British rule. Outside of this one small radical group, PAGAD, there is little evidence of radical or terrorist sympathies among the Muslim population. But a few terrorists fleeing the United States and other countries have found protection, or at least anonymity, within this community. South Africa’s intelligence apparatus is sophisticated and sensitive to terrorist threats, but its capacities are currently modest with respect to transnational terror networks. Terrorist suspects from America found hiding in South Africa have been successfully extradited to the United States. Still, the threat in southern Africa war- rants close monitoring, and enhanced U.S.-South African cooperation can help contain it. The FBI is already cooperating with South Africa’s aggressive investigative police arm, the Scorpions. Although South Africa’s intelligence community has some resentment toward the United States (a residue of the anti-apartheid struggle) and thus some inhibition about close cooperation, the two countries share a clear common policy in containing any such threat, and cooperation has so far been productive.

Developing a Cohesive Strategy

President Bush’s trip to Africa in July 2003 affirmed Africa's place on the foreign policy agenda. Africa’s elevation stems implicitly from the growing recognition of how terrorism, combined with HIV/AIDS and rising U.S. energy stakes in Africa, has steadily come to influence U.S. foreign policy calculations. J. Stephen Morrison and Princeton N. Lyman 115

Africa may not rank with Iraq or Afghanistan as a front line in the war on terrorism, nor with the Middle East or Southeast Asia as a primary focus of U.S. antiterrorist programs. But it is impossible to have a worldwide strategy against terrorism without fully addressing the threat—and the opportunities for building new alliances—in Africa. The issue before U.S. policymakers is how systematic and nuanced the approach will be. If ad hoc, the approach will be predominantly reac- tive, reliant upon coercive strikes and patchwork programs lacking local support. If more coherent and sustained, the approach will build capacities with receptive partners, retire past state sponsors of terror such as Sudan and Libya, and establish an active dialogue with Africa’s essentially moderate Muslim communities. The Bush administration can and should undertake the following critical steps: ■ The administration should articulate a coherent, compelling vision for U.S. counterterrorism policy in Africa. An updated framework is required that defines the strategic context for the president’s multiple initiatives—on counterterrorism, the $15 billion Emergency Plan for AIDS Relief, the Millennium Challenge Account, enlargement of trade and investment opportunities, and the active reassessment of Africa’s place in global security now under way in the U.S. European Command. It should involve wider public disclosure of successes in counterterrorist efforts. It should take account of the special challenges—and opportunities—present in Sudan, Somalia, and Nige- ria. It should speak directly to raising Africa as an intelligence priority and include commitments to dramatic increases in human intelligence and language training, along with steps to close diplomatic gaps in important places such as northern Nigeria and the Swahili coast of East Africa. It should include a renewed focus on curbing the proliferation of surface-to-air missiles in Africa and should involve a reevaluation of U.S. policy on multilateral control of small arms trafficking, with a view to strengthening UN and African control initiatives. It should propose that the Kimberley Process be used to tighten controls over terror financing through diamond channels. It should move the Pan Sahel Initiative forward through a major increase in multiyear funding of $100 million or more, while simultaneously advancing a major U.S. Muslim outreach initiative of $200 million a year. ■ The administration should reorganize itself internally. It is essential somehow to overcome divided responsibility for Africa among the Department of Defense’s regional commands—EUCOM, CENTCOM, and CINC- PAC. Africa’s almost seamless borders and networks of both trafficking and conflict demand a more unified U.S. command structure for military training, intelligence and, as necessary, deployment. Similarly, an empowered antiterrorism task force is needed to overcome the internal divide in the State Department that separates North Africa from the Africa Bureau, links these more effectively with the Counterterrorism Coordinator’s office, and strengthens the place of public diplomacy. The languishing Pan Sahel Initiative, for instance, will not be truly effective until the recipients are engaged with their northern neighbors Algeria, Morocco, and Tunisia. Libya’s role in 116 Rising U.S. Stakes in Africa fomenting arms trafficking and instability in Africa needs to be a major focus of our post-Lockerbie relations. ■ The administration should propose to Congress a major continent-wide Mus- lim outreach initiative on a dramatically large scale. It should be a multiyear effort involving new additional funding of at least $200 million a year. With a Muslim population of well over 300 million, Africa provides a large pool for recruitment by Muslim extremists and at the same time provides a unique opportunity for the United States to engage the Muslim world. The majority of Muslims in Africa are moderate, yet pockets of extremism exist that could filter into moderate Muslim circles as these groups are alienated by domestic politics and are increasingly educated by Saudi-financed madrassas. The approach should emphasize constant engagement with Muslims representing the full spectrum of opinion, with special attention to small communities’ vulnerabilities. Where possible, the efforts should incorporate American Muslims. To carry out this strategy the United States should in 2004 and beyond: • Increase pressure on the Saudi government to regulate financial flows by Saudi charities to madrassas in Africa at the same time that the United States demonstrates its commitment to expand educational opportunities. • Pursue concerted engagement with Muslim leaders, with special priority to northern Nigeria, coastal communities of Kenya and Tanzania, and countries served by the Pan Sahel Initiative. • Expand humanitarian and development assistance to Muslim communities. ■ The administration should pursue a credible policy for ending Somalia’s role as a collapsed state that continues to provide a base of support and transit opportunities for Al Qaeda and its affiliates. It should systematically enhance incentives for Somalis to broker an enduring peace. In 2004, the administration should systematically test the feasibility of supporting a new multipronged, multilateral approach to Somalia. At the end of 2004, the administration should assess whether it has been possible to lay the foundation for such an approach and whether it is advisable to carry it forward in 2005 and possibly beyond. The principal policy aims in 2004 should be • The formulation of a three-to-five year road map for the restoration of civilian rule, the marginalization of armed militias, and the restoration of elementary social services. This will require a concerted multilateral diplomatic effort in 2004 to devise and build support around a unified international strategy. Most important, it will require winning agreement from Kenya and Ethiopia to a common approach; enlisting the active support of the regional body, the Intergovern- mental Authority on Development (IGAD), key European states, and the UN; increasing U.S. senior diplomatic engagement, including active outreach to nonarmed Somali interests; and increasing intelligence collection. The United J. Stephen Morrison and Princeton N. Lyman 117

States should revisit the use of a multination peacekeeper force to facilitate a peace process. • The imposition of enhanced pressure upon Somalia’s militias, making use of new instruments. This will require a multilateral strategy that strengthens naval interdictions and other means of enforcing an international arms embargo, including mandating the Coalition Maritime Task Force to enforce the UN arms embargo on Soma- lia. It should also bring the U.S.-led Combined Joint Task Force into a close dialogue with the newly formed regional task force and possibly IGAD on a joint strategy to reduce the capacity of Somalia’s armed militias; and that links U.S. support to Kenya and Ethiopia for border security to improvements in control and surveillance over cross-border arms trafficking from Somalia. A special focus on financing of militias, including khat trade, will also be warranted. The hawala informal banking system will require continued significant attention. • The creation of new channels of humanitarian and developmental assistance. These initiatives can test whether there are specific geographic zones and partners where international agencies can feasibly reengage inside Somalia and begin to build local alliances with nonarmed interests. The effective reentry of UN agencies and NGOs will be critical to rebuilding international confidence that a policy of reengagement is possible. The United States should engage in support of Somaliland without conferring recognition of Somaliland as a sovereign state. ■ The administration should systematically guard its ability to advance cooperation on counterterrorism with Sudan, with or without a peace settlement. Sudan is motivated to avoid retaliatory action by the United States and to win the removal of Sudan from the U.S. list of state sponsors of terror (under Section 620A of the Foreign Assistance Act). The U.S.-Sudan dialogue on counterterrorism, however, remains vulnerable to breakdown. It is subject to strong cross-pressures related to efforts to negotiate a peace settlement in Sudan and the influence of U.S. interest groups acting in support of the SPLM/A. The administration should aim in 2004 to consolidate the substantial gains achieved in 2002–2003 in the U.S. counterterrorism dialogue with Sudan. To carry out this strategy, it will be important in 2004 to • Clarify and reaffirm the specific conditions, expectations, and timeline for removing Sudan from the list of state sponsors of terror, incorporated into a precise action plan. The process by which states can be removed from the list is only vaguely defined. • Open consultations with appropriate members of Congress. 118 Rising U.S. Stakes in Africa

• Take special measures to preserve the integrity of the counterterrorism track and keep it separate from other dimensions of U.S. engagement on Sudan. • Devise a phased plan for expanded programmatic cooperation on counterterrorism with Sudan, should there be a peace settlement. chapter 6

Crisis Diplomacy and Peace Operations

Jeffrey Herbst and Princeton N. Lyman

Executive Summary

African conflicts are one of the most critical threats to U.S. interests. On no other continent is the question of order so problematic. Currently there are serious crises in nine countries, and potential crises loom in many others. Yet we are not staffed, resourced, or oriented to integrate African exigencies into our policies or our diplomatic structure. Hesitation, inattention, and timidity in some cases, diminish our capacity to capitalize on those opportunities. A special opportunity now presents itself with the opening to Libya, a major supporter of the wars in West Africa. Relations with Libya should not be normal- ized until it ends its interventions in West Africa.

Specific Recommendations

Early Warning The State Department should place a high premium on officers developing competency in the skills necessary to prevent and address long-term crises in Africa. All embassy staff in Africa should have training in crisis diplomacy and effective peace intervention.

Diplomatic Presence The State Department lacks a presence and relevant language skills in some of the most important places on the continent where instability is unfolding, and where terrorist infiltration or other foreign influences are working. The department must increase its physical presence, reversing years of closing posts and cost-cutting steps.

Active Peacemaking The department must engage with more diplomatic strength in peacemaking.

119 120 Rising U.S. Stakes in Africa

■ Core staff: The Africa Bureau should create a staff of 6 to 10 officers devoted to crisis diplomacy. This staff would supplement regional offices where significant conflicts are being addressed. They would also provide support to special envoys, to joint allied efforts of conflict resolution, and to embassy-directed peace efforts. ■ Multiplying capacity: The Africa Bureau should develop the means to draw more directly on existing resources external to the department, such as expertise within organizations such as the International Crisis Group, the U.S. Institute of Peace, the Center for Strategic and International Studies, the Wood- row Wilson Center, and others. ■ More flexible use of U.S. Agency for International Development resources: The United States needs to utilize its assistance programs, both traditional humanitarian assistance and special programs such as the U.S. Agency for International Development’s (USAID) Office of Transitional Assistance (OTI), with greater flexibility, over longer periods of time, and with attention to issues such as police and security-related training.

Peace Intervention ■ Building African capacity: The United States should abandon its allergy to direct military assistance. Funding for military training in Africa should be increased from the $10 million allocated in FY 04 to $100 million. Assisting African armies need not require us to abandon human rights concerns either. Furthermore, the training has to reflect the reality that in most cases, peacekeeping in Africa will be closer to the requirements of chapter VII than chapter VI of the UN Charter. ■ UN peacekeeping: U.S. efforts to fund UN peacekeeping in Africa are among the highest priorities that we have on the continent. The administration and Congress must overcome current budget restrictions that do not address unanticipated crises and demand unrealistic exit strategies. ■ Assisting African peace intervention: Funding for this purpose has dropped dramatically in the last few years, with roughly a 40 percent cut for African programs from FY 03 to FY 04. This fund should also be raised to $100 million.

U.S. Involvement with Peace Intervention Timely and forceful U.S. military presence, even on a limited basis where the United States has a special interest, would promote an enhanced security environment for follow-on work by UN peacekeepers, as well as post-conflict reconstruction efforts.

Small Arms and Light Weapons These weapons have proliferated throughout Africa—5 million in East Africa and the Horn alone. The United States must reassess its resistance to stronger UN or other international controls over this trafficking. Jeffrey Herbst and Princeton N. Lyman 121

Introduction

African conflicts are among the most critical threats to U.S. global interests. Col- lapsed, failed, and failing states risk penetration by terrorist groups. Political instability and violence undermine fundamental U.S. values and interests in promoting democracy and human rights, strengthening market economies, curbing global infectious disease, eliminating transnational threats such as money laundering and narcotics trafficking, and maintaining reliable and diverse sources of oil and mineral supplies. In recent years, a number of African states have made promising strides toward democratization, improved economic policies, and regional responsibility. The recent opening by Libya also raises the possibility that its interventions in West Africa—a major source of destabilization in that region—will diminish. But crises, unfortunately, will likely remain endemic to Africa for many years. And while there appears to be growing recognition in successive U.S. administrations of the threat these crises pose, the United States is not staffed, resourced, or oriented to fully integrate African exigencies into its policies or diplomatic structure. On no other continent is the fundamental question of order so problematic or are conflicts so much a part of the scene. For this reason, crisis diplomacy must be integral to overall U.S.-Africa policy and policy organization. When countries cross from crisis into conflict, the processes of reconciliation, reconstruction, and economic recovery become far more difficult, costly, and time consuming and, in most instances, are accompanied by escalating humanitarian costs. Anticipating and preventing conflicts therefore must be a cornerstone of U.S. crisis diplomacy and should receive commensurate staffing, training, resources, and senior-level attention. Fundamental responsibility for peace and progress rests primarily with Africans themselves. Yet, the United States has every interest in playing a strong and active role in assisting and enabling Africans to carry out that responsibility. It need not do it alone. U.S. allies and the United Nations are willing—even eager—partners. The peace negotiations in Sudan have demonstrated that where the U.S. administration has taken a proactive leadership role and worked in concert with African and other allies, it can have extraordinary impact. By contrast, hesitation, inattention, and timidity, will diminish U.S. capacity to capitalize on important opportunities to promote peace.

Make the Case for U.S. Engagement in African Crises It is incumbent on the secretary of state, other senior members of the administration, and concerned members of Congress to consistently articulate the strategic and political interests that the United States has in Africa and the danger to these interests that conflict and crises present. In its National Security Strategy of September 2002, the Bush administration signaled a growing awareness of the links between conflict and instability in Africa and core U.S. interests and values. Yet there remains a tendency in U.S. foreign policy decisionmaking to treat U.S. interests in Africa—especially crisis situations—as 122 Rising U.S. Stakes in Africa largely humanitarian problems. And while this translates into substantial humanitarian assistance, a focus on the humanitarian dimension alone inevitably limits the depth and extent of U.S. engagement and, therefore, its long-term impact. Only by changing this basic misperception can the United States begin to mobilize the necessary human and material resources to protect what are growing strategic concerns. Africa is becoming steadily more important to the United States. The continent is on track to supply up to 20 percent of U.S. oil imports and, very likely, significant amounts of natural gas. With one-third of the votes in the World Trade Organiza- tion (WTO), African states constitute an increasingly influential voting bloc in trade negotiations, as demonstrated at Doha in November 2001 and, to U.S. dis- may, in Cancun in September 2003. Africa’s importance is unfortunately enhanced by its weakness. With weak states and frequent conflicts, Africa is open to terrorists seeking platforms to attack U.S. interests, as demonstrated in the bombing of U.S. embassies in Kenya and Tan- zania, the attacks in Mombasa, Kenya, and Al Qaeda’s exploitation of resources in the failed states of Central and West Africa. The problem is aggravated by the proliferation of small arms and light weapons, feeding both rebellions and crime. Some 5 million such weapons are estimated to be in the region of East Africa and the Horn and 7 million in West Africa. The enormous number of young men as a percentage of the total population also makes African countries more prone to conflict because young populations pose many demands on governments—particularly governments ill-equipped to meet those demands—and young men are most likely to engage in armed conflict. Poverty and disease further compound the problems of governance and development to the extent that much of the world’s aid and humanitarian assistance must be spent in Africa, with limited returns. Spillover effects of conflict abound. For example, Liberia, Sierra Leone, and Côte d’Ivoire are currently at the center of instability in West Africa. But the conflict threatens to undermine the political and economic achievements of countries like Mali and Ghana, exacerbate the weaknesses of countries like Guinea and Nigeria, and overall generally destabilize a region of major importance to U.S. energy supply, while expanding possibilities for trafficking in drugs and other illicit commodities and for terrorist operations targeting U.S. interests. War between Ethiopia and Eritrea divides and weakens two important allies of the United States in the war on terrorism, threatens to reverse the significant development gains those two countries have made, and has potentially destabilizing spillover effects in Somalia and Sudan. Only when these strategic interests are forcefully and consistently articulated will the necessary resources for prevention and for active peacemaking efforts be made available. Indeed, the United States will be unable to react to African crises unless the foundation for U.S. involvement has been set by U.S. leadership that consistently reiterates U.S. interests in African peace and its willingness to act to build, protect, and nurture peace to the best of its ability. At the same time, pledges of increased involvement must be fulfilled by garnering new resources and developing innovative policies to address the complex problems that African conflicts pose. Rhetoric without commitment will merely generate cynicism. Jeffrey Herbst and Princeton N. Lyman 123

A smart, proactive new U.S. policy toward African crises is possible. Few Afri- can crises will generate partisan rancor, except perhaps in the areas of military and police training. In a few cases, African crises will mobilize a strong, broadly based coalition, as in the case of Sudan, where Christian activists, human rights groups, and the Congressional Black Caucus found common cause in demanding active U.S. engagement. Nigeria could produce a similar mobilization, especially if religious clashes intensify. Elsewhere, there is generally broad support for generous humanitarian response to crisis countries, but much more limited support for U.S. military engagement in peace intervention and, at best, benign interest in U.S. crisis diplomacy. It is in these latter areas where strong leadership from the administration is needed.

Emphasize a Multilateral Approach The United States should strengthen African capacity politically, militarily, and economically to address crises. But at the same time it should actively engage and coordinate with European partners and become more aggressive in taking initiative and donating resources of its own to conflict resolution. There is much for the United States to do in Africa, but it need not do it alone. Crisis diplomacy across the continent inevitably involves burden-sharing among major Western countries. The United States has been willing to cooperate with other donors, and a significant number of European countries, in addition to Brit- ain and France, want to play a role in Africa. It should look to partners with whom it shares interests and who look to the United States for significant assistance. When appropriate, it should take a lead role and contribute substantial resources of its own, lest it be perceived as a “free rider” rather than a partner. Reluctance to intervene in Liberia, discussed in more detail below, undermined U.S. interests and will make it more difficult to recruit assistance from other important powers in the future. Africans themselves should be increasingly at the center of peace negotiations and, where possible, peace interventions. Only then will the agreements hold and the potential for crises recede. But most African countries do not yet have this capacity. African countries themselves have demonstrated increasing willingness to intervene in humanitarian crises. The charter of the newly formed African Union (AU) is explicit on this point, in contrast to its predecessor, the Organization of African Unity (OAU), in which state sovereignty was seen an impermeable barrier. Africans have stepped up their commitment in addressing more complex conflicts as well.1 It is therefore critical to fully engage African partners during crises and as demands for peace intervention arise.

1. African leadership, largely South African led, is evident in the promising negotiations to end the war in the Democratic Republic of Congo and the civil war in Burundi. The Economic Commu- nity of West African States (ECOWAS) provided the forum and political leadership for the negotiation of an interim government in Liberia following former president Charles Taylor’s departure. Kenya is struggling to bring about an end to anarchy in Somalia and has been a major player in the Sudan peace negotiations. The African Union committed its own peace intervention force in Burundi, and ECOWAS has three times sponsored such military intervention in West Africa. 124 Rising U.S. Stakes in Africa

At the same time, it is also an inescapable reality that the capacity of most Afri- can countries and subregional organizations remain weak in the areas of crisis negotiation and peacekeeping. Many African countries have both limited diplomatic capabilities and extremely problematic militaries. In particular, most African countries cannot project force very far beyond their borders and often have militaries that cannot accomplish fundamental tasks of combat, much less the challenging tasks associated with peace intervention. In almost every instance, African peace interventions outside the UN have depended on substantial outside funding. Fur- ther, the deeper origin of some of these conflicts—ethnic ties across borders, a history of discrimination against one group or another, interference from neighboring states—may demand steady, patient, and long processes of building confidence and trust, clarifying deeper issues, and moving the parties gradually toward agreement. Finally, many African countries are intimately involved in the crises of their neighbors. It is therefore sometimes risky to rely on the neighbors of a particular country in crisis for help in an intervention, since they may not be disinterested observers. This is not to say that the Unites States should refuse in all cases to engage with neighbors of a country in crisis; in many cases, such countries may be the only ones who care enough to become involved in the first place. Nonetheless, the United States should be aware and wary of possible political and regional ambi- tions of those states it chooses as partners. For all these reasons, even African-led mediation has required political support, expert input, and frequent financing from Western countries and the UN. This model to one extent or another has been applied to Somalia, Liberia, Sierra Leone, the Democratic Republic of Congo (DRC), and elsewhere. Unfortunately, the extent of U.S. support has been uneven and limited more often by resources and staff than by a careful assessment of U.S. strategic interest. Nongovernmental organizations too are becoming more involved in peace negotiations. Though many may have their own agendas, they often are extremely knowledgeable about local situations, flexible, and have some outstanding personnel. The State Department should give considerable thought to how to systematically engage NGOs during crisis situations. This includes African NGOs, which are becoming more numerous, more deeply concerned with conflict, and have a reach into the parties and the culture that outsiders lack.

Prepare for Smart Crisis Diplomacy and Preventive Action The State Department should be structured with enough flexibility to move its human and financial resources quickly to where they are needed most within Africa to prevent and address crises. Further, it should be able to mobilize resources from outside its own ranks and outside the government to meet African crisis situations with appropriate levels of engagement and analysis. Not every crisis can attract the levels of attention from the United States that South Africa in the 1980s or Sudan in the last three years have garnered. But the Africa Bureau should be able to alert senior levels of the administration to situations that may explode into major crises even where initially the country in question was not high on the policy radar screen. Jeffrey Herbst and Princeton N. Lyman 125

Once countries descend into wholesale warfare, with ethnic attacks and brutal- izing of the population, as occurred in the Democratic Republic of Congo, Liberia, and Sierra Leone, the entire political situation changes. Reconciliation, reconstitu- tion of government, and economic recovery become far more complex, expensive, and time consuming. The opportunities for exploitation of the situation by criminal and terrorist networks increase. Thus, special preventive attention needs to be focused on countries threatened with such violence, for example, Nigeria, Zimba- bwe, Central African Republic, Chad, Guinea-Bissau, and on the threat of resumption of war between Ethiopia and Eritrea. Adequate human and financial resources, as well as high-level attention, must be readily available, both for smart crisis diplomacy and preventive action, and for effective peace interventions, be they led by Africans, Europeans, the UN, or the United States itself. To that end, we recommend that the State Department: ■ Encourage and expand diplomatic competency to anticipate and address long- term crises in Africa. The State Department should place a high premium on officers developing competency in the skills necessary to anticipate and address long-term crises in Africa. The organization must signal that it is to the career advantage of Foreign Service personnel to devote significant amounts of time to African crises. Every U.S. embassy official in Africa—ambassadors, deputy chiefs of mission, political officers— should have training in crisis diplomacy and effective peace intervention. There are many ways now available to anticipate crises, including regular intelligence reports and analyses available to the State Department, reporting and analysis from groups like the International Crisis Group, Refugees International, among others, and routine embassy reporting. Indeed, most of the conditions leading to crises are well known to embassies. The State Department is experimenting, as is the North Atlantic Treaty Organization (NATO) with the Fund for Peace’s diagnostic for predicting internal conflict, the Conflict Assessment Systems Tool (CAST). Valuable as this tool may be, it requires a fairly intense staff effort and a level of computing and analytical skill that few embassies have. Limited staff means that judgments about the intensity of potential conflict, the intentions of key actors, and the varying forces acting on the situation may be inac- curate or simply uninformed. In Sudan, the unusually large staff provided to the special envoy and the high-level attention devoted to the negotiations have allowed the United States to play an important role in an unusually complex set of peace negotiations. Few other crises in Africa receive the same levels of State Department staff. In Rwanda, for example, insufficient analysis, a lack of internal debate—in addition to “a will to believe”—led diplomats to focus disproportionately on the signing of a formal accord and miss signs of an imminent genocide. “Even when Rwandan society became polarized around the extremes, as was the tendency in the nine months before the genocide,” writes Joyce Leader, deputy chief of mission in Kigali when the genocide occurred, “we thought implementation of the Arusha Accords could restore sanity to the process. We were, of course, wrong.” The National Foreign Affairs Training Center should develop specific courses for crisis diplomacy and conflict resolution, with an emphasis on Africa. This train- 126 Rising U.S. Stakes in Africa ing should be required before assignment to the field and for desk officers new to the continent. Training in the use of sophisticated techniques such as the Fund for Peace diagnostic or other tools, should be included. Most importantly, there should be studies of past cases where State Department reporting and analysis were either on target or missed important indicators. Studies of successful peacemaking should be included; there are many such studies available, for example, from the U.S. Insti- tute of Peace and elsewhere. ■ Expand diplomatic presence in key regions. The State Department should increase its diplomatic presence on the continent, reversing years of closing posts and other cost-cutting steps that have reduced U.S. ability to anticipate, understand, or react to conflicts. The State Department should develop flexible staffing positioning practices to replace the costly infrastructure and heavy footprint of the traditional “post.” Currently, the United States lacks a diplomatic presence in some of the most important places on the continent where instability is increasing, where conditions of conflict are brewing, and where terrorist and other foreign influences are working to worsen the situation. The State Department lacks presence in the Muslim north of Nigeria, where radical Islam is threatening to exacerbate religious conflict, destabilize the federation, and undermine the viability of the reborn democracy. Neither does the department have a presence in the Delta region of Nigeria, where an active insurgency is taking place against both the government and foreign oil companies. There is no consulate in Mombasa, Kenya, where terror networks are known to exist, nor in Zanzibar, Tanzania, where Arab and African interests inter- sect. For years as the Congo crisis unfolded, the State Department had no presence in the eastern Congo, where much of the unrest began and where it continues today. Finally, the United States has no diplomatic presence in Somalia or Somali- land, despite considerable progress in developing a democratically elected government in Hargeisa and despite the possible presence of U.S. enemies in Somalia. The department should increase language training in Hausa, assign Swahili- speaking officers to East Africa and Arabic-speakers in the Horn, and develop specialized language capability for troubled areas of the Congo, Burundi, southeastern Nigeria, and other likely trouble spots. Even a handful of such specialists would add enormously to the department’s prevention and anticipatory capacity. ■ Ensure adequate staffing for active peacemaking. The Africa Bureau should create a staff of 6 to 10 officers, perhaps in the Regional Affairs Office, devoted exclusively to crisis diplomacy. Capacity within the Africa Bureau should correspond to the high stakes and complexity of crises facing Africa. A standing, core staff would supplement regional offices where significant conflicts are being addressed. They would also provide support to special envoys, to joint allied efforts of conflict resolution, and to embassy-directed peace efforts. In the absence of major diplomatic efforts to which they could be assigned, they would undertake analysis both in the field and in Jeffrey Herbst and Princeton N. Lyman 127

Washington, D.C., of potential crisis situations and recommend early action. They would provide training in crisis negotiation and early warning to embassies. In situations where more staff is needed, the secretary should make it a priority for staff to be assigned from other bureaus, from training assignments, or from the field to such diplomatic undertakings. As Secretary of State Colin Powell has recognized, the naming of special envoys can often be a substitute for serious diplomacy rather than its manifestation. Even the most competent of envoys will be incapable of making a significant impact without adequate backup staffing within the Africa Bureau, in relevant U.S. embassies in Europe and other allied countries, and relevant State Department bureaus (for example, the Bureau of Political-Military Affairs or International Organiza- tions) working on possible peace intervention scenarios. It is unrealistic to think that such backstopping can be accomplished with existing staffing levels at the country desk or subregional office level. ■ Multiply capacity using nongovernmental sources. The Africa Bureau should develop the means to draw more directly on nongovernmental expertise and to develop complementary peacemaking strategies. The State Department should take greater advantage of the expertise of organizations like the International Crisis Group, the U.S. Institute of Peace, the Center for Strategic and International Studies, the Council on Foreign Relations, the Woo- drow Wilson Center, major public policy schools, and other institutions. Closer collaboration with experts in such organizations that are actively engaged in Afri- can crises, either as observers and analysts or in “second-track” diplomacy, would serve as a stimulus and challenge to the thinking of the department’s own staff. This would quickly multiply U.S. expertise focused on the problem. ■ Increase flexibility of USAID resources. The State Department and the U.S. Agency for International Development need to make a stronger case with the Office of Management and Budget (OMB) and with the U.S. Congress for more resources devoted to reconstruction, strengthening military and police capacity, and other aspects of crisis management. Even absent significantly increased resources, the State Department should advocate for more flexible and effective use of available resources. Senior department officials in charge of peacemaking should be given authority over the use of at least some emergency and other U.S. resources, just as UN special representatives in the field are occasionally granted such authority over UN resources. USAID developed the Office of Transitional Assistance (OTI) to provide rapidly disbursable, politically oriented assistance in post-conflict situations. But OTI is under pressure from Congress to operate for no more than two years in post-conflict countries. The result is that the innovation, flexibility, and diversity of its programs are soon lost. For example, in Nigeria after the 1999 election, OTI opened offices in the delta and elsewhere in the country where there was no other official U.S. presence, began an analysis of police reform and initiated some assistance in this direction, and engaged a wide variety of civil society structures and other programs in support of democracy. But after only two years, OTI was forced to close 128 Rising U.S. Stakes in Africa these field offices, end its police program, and turn over its other programs to a short-staffed, more heavily bureaucratic USAID mission. OTI and similar programs should be mandated to work in Africa with greater flexibility in the duration of their programs. Indeed, some of that flexibility and emphasis on innovation should be incorporated into regular USAID programs once OTI departs.

Strengthen Peace Interventions Not all crises will require peace intervention, but armed humanitarian intervention, with all the problems and costs that it entails, will inevitably be a part of the effort to end many wars in Africa. Some of the largest UN peacekeeping operations in the world are or have been in Africa, including Sierra Leone (17,000 at its peak), Liberia (15,000), and the Congo (11,000). The United States is particularly poorly structured to anticipate and fund new peacekeeping operations, often leading to U.S. pressure for delays or for the deployment of minimal levels of forces. Inade- quate provision of peacekeeping resources fails to stem violence, hurts the credibility of the UN or other providing institutions, and leads afterward to the necessity for increased resource levels. ■ Train African militaries. The United States should overcome its allergy to direct military assistance, increasing funding for training programs to $100 million, directing assistance primarily to those countries most likely to lead interventions, and adding a police training component. Training should be for peace enforcement missions (UN chapter VII interventions) because Africans who intervene will almost certainly find complex situations where they often need to fight to ensure the peace. These initiatives should be part of an overall U.S. effort to improve security in African countries. The United States can best contribute to peace intervention efforts in Africa by reinvigorating efforts to train African militaries for peacekeeping. African troops cannot take the place of European or U.S. troops in an intervention’s early stages unless they have adequate training in peacemaking and basic combat. U.S. direct military assistance largely disappeared with the end of the Cold War, at almost pre- cisely the time when many African countries were facing new internal security threats and when demands that African countries take over peace intervention responsibilities were increasing. Among the most important ways that African countries can prevent conflict from spreading is by maintaining strong police, intelligence, and military forces. Insurgents spread in Africa, in part, because rebels have access to large swaths of territory uncontested by the state. African states also tend to respond to security threats with brutal repression because they lack sophisticated security forces that can respond to small threats with a comprehensive military- political strategy. Helping African armies need not entail abandoning human rights concerns. The United States should not aid militaries that are devoted to repressing their own citizens. However, it should recognize that weakness, incompetence, and poor organization among militaries can in themselves be a profound human rights threat to a country’s citizens. And rebuilding the police and other security agencies can often be a first step in reinvigorating entire legal systems. Jeffrey Herbst and Princeton N. Lyman 129

The African Crisis Response Initiative (ACRI) was a good beginning but often did not provide African countries with the kind of training needed to actually engage in peace intervention or peacemaking. Currently, $15 million is slated for African Contingency Operations Training and Assistance (ACOTA), the primary U.S. program to train and equip selected African militaries to conduct peace support and humanitarian relief programs, including lethal training. This account was funded at $10 million in FY 04. The State Department should urge that funding for this program be increased to $100 million immediately. Such an investment would have dramatic returns, as well-trained African peacekeepers will substantially reduce the bill presented to the international community in the future. For different foreign policy reasons, ACRI assistance to Ethiopia, Kenya, and Nigeria was prohibited at different times in the 1990s, even though those three states are likely to be the lead countries in many interventions. Military assistance to Malawi may be less controversial, but even well-trained Malawian troops are unlikely to be as helpful in critical peacekeeping situations as those of major African countries. The United States should not abandon the democracy and human rights concerns that made it hesitant to engage with some of Africa’s most potent armies, but it must find ways to help those most likely to fight to do so in an effective and sustained manner. Assistance to train police in Africa should be given a very high priority, in collaboration with U.S. allies with extensive experience in this area. No U.S. funds currently go to police training in Africa. Yet in many crisis situations—Nigeria, for example—it is the lack of adequate policing capacity that leads to greater violence, introduction of military units poorly trained for riot control and prone to human rights violations, and to a general feeling of insecurity on behalf of the population. In Iraq, the United States has made police training one of its highest priority efforts. It should do no less in Africa. For reasons explained below, interventions in Africa will often have to be justi- fied under chapter VII of the UN Charter. Potential peacekeepers must be trained accordingly. ■ Assist African peace interventions. The United States should fund African peacekeeping on a more consistent basis, raising such funding to $100 million, preferably in no-year funds, to provide the administration with maximum ability to respond to unanticipated requirements and targets of opportunity. The United States and its Western allies will be less frequently called on to lead peacekeeping in the future if there is greater African capacity to intervene. Primary U.S. funding for support to African-led peace intervention is through the State Department’s Peacekeeping Operations Account, a discretionary fund that supports U.S. voluntary contributions for multinational peacekeeping activities outside of UN-run operations. Funding is provided through the State Department’s Military Assistance Account and administered primarily by the Political Military Bureau and appropriated by the Foreign Operations Appropriations Subcommittees. Funding for this account, however, has dropped dramatically in recent years, with roughly a 40 percent cut for African programs from FY 03 to FY 04. For FY 04, 130 Rising U.S. Stakes in Africa the administration requested $95 million for the account, with only $24 million planned for all of Africa. (Afghanistan is allocated $20 million for army training.) Of the $24 million, $9 million is budgeted for “Africa Regional Peacekeeping Oper- ations,” which includes aid to African forces in upholding cease-fires and peace agreements, disarmament and demobilization of combatants, and efforts in the Mano River region, DRC, Sudan, and elsewhere. This is the primary account from which U.S. support to ECOWAS has been funded. ■ Bolster assistance for UN peace intervention efforts and anticipate contingencies. U.S. funding for UN peacekeeping in Africa should be more generous, and the administration and Congress should agree to a contingency fund or other mechanism for unanticipated UN peace interventions. Moreover, the United States should be realistic in planning exit strategies, since premature exits can be counterproductive and dangerous. The State Department, at the urging of Congress and the OMB, budgets only for existing, approved, or nearly approved peacekeeping operations for the subsequent fiscal year. As a result, there are no funds available for new unexpected UN peacekeeping requirements. For example, for FY 04, the administration requested $550 million for the relevant account, down from $726 million in FY 03 and down from $825 million in FY 02. Reduced funding was partly in line with reductions in UN operations in the Balkans, East Timor, and Sierra Leone. But it also presumed reductions in the UN mission to the DRC, where, in fact, increases have been necessary, and it made no allowances for any new or expanded operations in Africa, or elsewhere. Nor did it provide any added cushion to support initiatives that improve the UN’s capacity to plan, organize, and manage such operations. The funding for the emergency UN mission to Liberia was fortunately covered, at the initiative of Congress, in the president’s $87-billion request for Iraq. Rarely, however, do such fortuitous legislative vehicles arise in time. Given existing budgetary procedures, the United States often delays approval of proposed peace operations until funds can be found or, worse, negotiates downward the size of the peacekeeping operation and reduces the length of its stay for purely budgetary reasons. The United States is thus often responsible for delays in the UN’s peace intervention response, as it was in Côte d’Ivoire, Sierra Leone, the Democratic Republic of Congo, and Angola. Those delays weaken the peace process and in many cases allow continued violence. The current U.S. budget procedures also often force an early end or downsizing of UN peacekeeping forces. The rush to exit contributed to instability in the Central African Republic and to the inability of the UN to hold parties to the Lusaka peace agreement in Angola. Currently, there is strong pressure to downsize the UN operation in Sierra Leone, in order to finance the operation in Liberia—a reduction that ultimately would be counterproductive. ■ Recognize costs of U.S. nonintervention. In considering whether a U.S. military presence is warranted, the State Department should articulate the costs of intervention, but equally important, the broader costs of not intervening. Jeffrey Herbst and Princeton N. Lyman 131

It is unlikely that the United States will be called on to provide large numbers of peacekeepers to any African conflict in the near future. However, there may be cases, where some U.S. presence on the ground will mobilize elements of the Afri- can and international communities to take a much more activist stand and, further, will advance more global U.S. interests in the broader international community. The United States broke the “Somalia Syndrome” by agreeing to deploy some troops for a short period of time in Liberia. This operation was important because it showed that the United States was again at least willing to consider being a player in African peacekeeping operations. Indeed, some critical members of Congress changed their minds about the wisdom of deploying U.S. troops in Africa. Still, the U.S. intervention was late, extremely limited, and not nearly enough to ensure that the operation would be credible to Liberians or others that we were asking to intervene. The U.S. reluctance to commit significant troops to Liberia, despite its unique ties with that country and despite the deployment of British and French troops in the region in related peace operations, hurt U.S. interests, diluted the core message of President Bush’s Africa trip and undermined the cause of peace in Africa. The United States is likely to pay a price for its hesitation in the future, when other countries parry U.S. calls for peacekeepers by pointing to the low U.S. profile in Liberia. Already, likely deployments are not in congruence with the U.S. role as a superpower. If the United States avoids deploying its own soldiers, serious questions will be raised about U.S. credibility in the future. The United States must avoid a repeat of the situation in Liberia, where its aversion to direct intervention was so great that it substantially slowed the international response to that emergency. ■ Recognize that UN chapter VII mandates will often be necessary. Finally, it must be recognized that interventions promoted under chapter VII of the UN Charter are most likely to be effective, and training must be adjusted accordingly. The conditions that allow for chapter VI interventions—where peacekeepers are to be an interpositional force between armies that have already come to a cease- fire—are seldom found in Africa. Rather, those who intervene are likely to find themselves in complex, violent situations where the battlefield is dynamic and the combatants constantly changing. It will occasionally be necessary—as the British demonstrated in Sierra Leone—for peacekeepers to fight in order to defeat spoilers and to demonstrate their intent to change the situation on the ground. Similarly, this panel’s commissioned study of post-conflict reconstruction needs in Sudan notes that a quick reaction force will be necessary to ensure the peace. ■ Address the threat posed by small arms and light weapons. Much of the weaponry, literally millions of arms, that feeds and amplifies conflict on the continent comes from weapons left over from Cold War shipments. But illegal arms sales, especially from countries of the former Soviet bloc (e.g., Bulgaria, Ukraine, and Slovakia) now add significantly to the crises. Widespread availability and cheap prices for such arms have emboldened rebel groups and banditry and multiplied the human cost of even traditional conflicts such as cattle rustling, turning them into incipient rebellions and ethnic warfare. Both East and West Africa 132 Rising U.S. Stakes in Africa have developed preliminary efforts to control such traffic, and the UN has a program and plan of action. But each of these efforts relies purely on voluntary actions by governments. There is no enforcement or even close monitoring. Funding is very limited. The United States has been hesitant to support more aggressive international action (e.g., by the UN). But the United States has a double stake in greater control over such arms—that is, the reduction of conflict and the danger of terrorism. Shoulder-fired missiles, part of this traffic, were used to attack an Israeli airliner in Mombasa, Kenya, in November 2002. Only an international control regime that addresses both small arms suppliers and recipients and bolsters African intelligence and border control will address this issue. The United States should reassess its position in this area and develop a major international approach to bring this illegal trafficking under control.

Areas of Focus

Regions of Concern for the United States Africa’s different regions pose very different challenges to the United States, in part because of their unique histories and in part because there are significant contrasts in regional balances of power. The United States can and should be involved in all areas of Africa, but that involvement is of necessity likely to vary. Southern Africa. In Southern Africa, the overarching political fact is that South Africa, as the regional hegemon, will be involved in all crisis diplomacy and peace intervention challenges. When its senior leadership is focused, South Africa has enough diplomatic resources to confront most regional problems as the lead country. It has also been willing to deploy limited numbers of peacekeepers, although it has not invested enough in its own military to be able to deploy large numbers of soldiers for a sustained period of time. However, it is likely that South Africa will be a necessary partner in any operation in Southern Africa. South Africa’s uniquely important role in Africa does pose challenges, especially when it effectively blocks or deflects international action on an important crisis, as it has done in Zimbabwe. Public and private pressure must be exerted on the South African government to become more proactive on Zimbabwe, to avoid at all costs even appearing to be an apologist for the regime, and to deliver on their repeated promises of an imminent agreement. West Africa. In West Africa, Nigeria is the subregional hegemon. But unlike South Africa, it is so weak and its own internal politics so unsteady that it is unlikely to be a reliable partner in West African crises. With the return to civilian rule, involvement in regional crises has also become more difficult for the regime. Only with significant U.S. pressure did Nigeria agree to take the lead in the recent crisis in Liberia. And it is perfectly plausible that Nigeria will itself be the subject of crisis diplomacy in the near future. The West African security community is largely based on close personal contacts among leaders and militaries in the region—demonstrated in the recent crises in Guinea-Bissau and São Tomé and Príncipe—and the joint experiences in operations in Liberia and Sierra Leone. ECOWAS is struggling Jeffrey Herbst and Princeton N. Lyman 133 to institutionalize this capacity. However, the Liberian experience suggests that this regional architecture is weak, forcing the United States and other Western countries to take the lead in putting together the necessary coalitions, and in providing strong political backing to the diplomatic undertakings. Investment in building ECOWAS capacity however is worthwhile, especially because of the uncertainty of future Nigerian leadership. The recent opening by Libya could herald a new era in West Africa because Tri- poli’s adventurism has been a major source of destabilization in that region. The United States and its allies should not normalize relations with Libya until it ends its destabilization of West Africa. Sanctions against Libya should not be lifted unless its government stops funding rebel movements in West Africa. Peace operations in Sierra Leone are in an advanced stage, and there are areas where the United States can help its British and African allies. The situation is much more unsettled in Liberia, where the United States will need to become far more energetic, given how dangerous a newly destabilized Liberia might become. In particular, attention must be given to how to finally neutralize Charles Taylor’s influence and to convince Liberians that their leaders will no longer come to power through war. Central Africa. There is essentially no regional organization that governs Central Africa. Here the United States must confront much more naked power politics. Again, the largest country in the region, the Democratic Republic of the Congo, is much more likely to be the destination for peacekeepers in the near future than it is to have any ability to provide assistance of even the most modest kind. There are no regional norms of behavior, and outsiders who intervene must establish ground rules and an environment for negotiations. There has been considerable progress in the negotiations surrounding DRC, although peace is by no means assured. For the negotiations to succeed, the United States will have to devote constant attention and energy to prodding the many different players to act constructively. The United States must therefore gird itself for a sustained commitment to conflict negotiations in Congo and not be too eager to downgrade the energy or resources that it devotes to ending one of Africa’s most complex crises. Horn of Africa. In the Horn of Africa, large countries again have caused many of the region’s problems. The Intergovernmental Authority for Development (IGAD) forms the basis of a regional architecture, but on its own it has proven to be exceptionally weak. Diplomatic mechanisms have had to be reinvented for each regional conflict. The Horn is the only area of Africa where there is a regular deployment of U.S. troops, with the Djibouti-based Combined Joint Task Force. On the other hand, the experience in Somalia in the early 1990s makes it particularly unlikely that U.S. troops will be deployed as peacekeepers in this region. The Horn also poses the greatest opportunity to the United States, with the peace negotiations in Sudan headed toward what appears to be a successful conclusion. Ending the Sudanese war on negotiated terms will be a significant achievement. If the peace endures, the United States will have demonstrated that it can focus on an important crisis and be constructively involved in peace negotia- 134 Rising U.S. Stakes in Africa tions; a Muslim government previously linked with terrorists will have made peace with its non-Muslim citizens; and attention can finally be focused on the enormous problems and potential of the Sudan. The United States should get the appropriate credit for its role in the negotiations. However, the peace over the next several years will be fragile, and sustaining it will require constant attention by the United States.

Countries Most Likely to Pose Challenges in the Future: A Preliminary Watch List A number of African countries currently pose challenges to U.S. crisis diplomacy and represent an existing or potential need for peace intervention. These include Somalia, Sudan, Burundi, Democratic Republic of Congo, Madagascar, Congo- Brazzaville, Central African Republic, the Liberia–Sierra Leone–Côte d’Ivoire– Guinea constellation, Angola, and Zimbabwe. Some of these countries have been in conflict for years and would have undoubtedly made a similar list 10 years before. But it is also important to note the surprises. In 1995, Côte d’Ivoire and Zimbabwe would have been on many lists of African countries most likely to succeed, not fail. Other countries, not currently in crisis, will undoubtedly pose significant problems in the future. For analytic purposes, it might be best to divide Africa’s future failures into big and small countries. Although the failure of even very small countries can have regional implications, as Liberia clearly demonstrated, crises in big countries can be especially destabilizing. The obvious case in point is Nigeria. Fur- ther significant destabilization of this failing giant will have immense implications for West Africa. In Nigeria and some of Africa’s other large countries, it is doubtful that the world will be able or willing to provide the same proportion of peacekeepers as in operations in Sierra Leone and Liberia. Meltdown in Nigeria would require a different model for peace intervention, one that perhaps stresses police and constabulary forces more than military and puts more emphasis on rapid development of indigenous capability and other means of enforcing the peace process. It might also be possible to try to insulate some of the countries in the region from some of the worst spillovers from destabilization in their large neighbor. Over the medium term, another large country that could enter the list of troubled nations is Ethiopia, where internal fissures based on sharp regional differences and lingering Amharic resentment over domination by others could be destabilizing. The list of small countries that could be destabilized is longer and will undoubtedly challenge U.S. diplomatic and military resources. Potential problems include Rwanda (given that a small minority continues to rule the country), Malawi (as its economy has all but collapsed), Madagascar (where recent turmoil highlighted splits within the country), Burkina Faso (in light of its continuing crisis of governance), Guinea (facing serious internal rifts and enmeshed as it is with Liberia, Sierra Leone, and Côte d’Ivoire), and all of the small countries in the West African littoral that are becoming oil producers and that face extraordinary challenges in managing sudden inflows of cash. At some point, the United States will need to reengage with Somalia, if only because successful attempts at institution building in Somaliland will be impossible to ignore. On the other hand, the United States should feel no compulsion to join the endless, and largely dysfunctional, negotia- Jeffrey Herbst and Princeton N. Lyman 135 tions among warlords in southern Somalia who with half-hearted seriousness continue to try to forge a government.

Conclusion

Crisis diplomacy is a matter of life and death in Africa. Done correctly, preventive action and peace intervention can save many thousands of lives and promote the fundamental U.S. interest of greater order and stability in Africa. In addition, successful diplomacy in this area can set the stage for restabilization of entire countries, with subsequent important economic and strategic benefits for the United States. Done poorly, crisis diplomacy and peacekeeping can make situations considerably worse and dampen enthusiasm for future operations. The United States should do more in this area and get it right more often. It is therefore time for an important new U.S. commitment to address African crises and improve peace interventions. This chapter advocates for new investments and new ways of operating, and these initiatives will certainly cost money. However, the money that is needed to fund these initiatives pales in comparison to what will certainly be spent if crisis diplomacy fails. The stakes are high, not only for Africa but also for the United States as we seek to protect our growing interests in the world’s most challenging continent. chapter 7

Continuing U.S. Leadership to Combat HIV/AIDS in Africa and Globally

Todd Summers

Executive Summary

The establishment by President Bush of the Emergency Plan for AIDS Relief (PEP- FAR) marked a critical increase in U.S. engagement on the global HIV/AIDS epidemic. With new resources, political commitment, supporting legislation, and public support, there is an historic opportunity to turn the tide on an epidemic that grows stronger by the hour. Many have come to join the effort, including many different U.S. government entities: the Department of State; U.S. Agency for International Development (USAID); Centers for Disease Control and Prevention (CDC); National Institutes of Health (NIH); Health Resources and Services Administration (HRSA); and the Departments of Defense, Agriculture, and Labor. For policymakers, this is a “multi- sectoral approach,” while for pundits it is a clamorous and at times chaotic effort ill prepared to face a monstrously complex epidemic. In truth, it is both. The responsibility for sorting it out, moving it forward, and making it succeed has been laid at the door of the Department of State. PEPFAR established a new coordinator for global HIV/AIDS activities reporting directly to the secretary of state, presenting the department with an exciting opportunity to expand significantly its leadership role on global HIV/AIDS and to improve communication and coordination within the U.S. government and among the many nongovernmental groups working at its side. Because there is already a strong commitment to addressing the global epidemic, a willingness to act is assumed, and instead the Africa Policy Advisory Panel focused on providing specific recommendations to support the department in this effort to improve and expand U.S. leadership against HIV/AIDS. The recommendations focus on Africa as the epicenter of the epidemic, while at the same time acknowledging the need to engage in other countries that face burgeoning epidemics. They are based on five core principles:

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■ First, U.S. leadership has been, and will continue to be, central to global efforts on HIV/AIDS. President Bush, Secretary of State Colin Powell, Ambassador Randall Tobias, and others within the administration must continue their efforts to raise awareness of the threats posed by HIV/AIDS and to support increased U.S. engagement to respond to those threats. ■ Second, the full armamentarium of U.S. resources should be brought to bear on the global war on HIV/AIDS. Only through a truly multi-sectoral approach, in which the strengths, expertise, and resources of various federal agencies are strategically mobilized, will the president’s objectives be achieved. This is particularly true with respect to increasing our understanding of, and response to, the implications of the growing epidemic on U.S. national security interests. ■ Third, despite its considerable financial generosity and global engagement, the United States cannot succeed in its efforts without partnering with other governments, international organizations, nongovernmental organizations, faith- based groups, civil society, and affected communities. Building effective partnerships will allow the U.S. government to concentrate its people and resources where they are most needed and leverage the capacities of others to complement and strengthen its efforts. ■ Fourth, the new Office of the Coordinator of Global HIV/AIDS within the Department of State offers an incredible opportunity to strengthen and lead U.S. efforts and to build more effective communication among U.S. agencies and nongovernmental counterparts engaged on the global epidemic. This office should focus on coordination, communication, and strategy, and not seek to replicate capacity that already exists within the U.S. government, and in particular, within USAID and the Department of Health and Human Services (HHS). ■ Finally, the United States must promote an approach to HIV/AIDS that reflects a comprehensive, balanced approach of prevention, care, treatment, and research that complements and supports local needs, conditions, and priorities. The United States must tailor its assistance country by country, and in some cases village by village, tempering its authority and responsibility to coordinate with appreciation and respect for the diversity of approaches that exist. It must also focus its efforts on programs that are proven to be effective and avoid diverting precious resources to approaches based not on science but on political or religious ideologies.

Specific Recommendations

■ The secretary of state should continue and expand his personal engagement on HIV/AIDS. ■ The coordinator, working closely with the Department of Defense and various intelligence agencies, should conduct a serious and comprehensive analysis of the implications of HIV/AIDS on U.S. national security interests and integrate a response within its broader HIV/AIDS strategy. 138 Rising U.S. Stakes in Africa

■ The State Department should use its authority, especially of its new global HIV/ AIDS coordinator, to improve communication, cooperation, and synergy with USAID, and between USAID and HHS agencies involved (CDC, NIH, HRSA, and the Office of the Secretary). ■ The secretary of state should ensure that the department’s operations reflect his prioritization of HIV/AIDS by establishing mechanisms to systematically monitor and evaluate achievements throughout the department. ■ The secretary of state should build and encourage diplomatic activism and competency on HIV/AIDS and related issues throughout U.S. embassies. ■ The United States should build partnerships with foundations, nongovernmental organizations, faith-based groups, schools of public health, private-sector groups, and people living with HIV/AIDS. Best practices from existing partnerships should be identified and circulated to other partnerships. ■ The United States should systematically make multilateralism a central feature of its global HIV/AIDS efforts. With State Department leadership, it should help mobilize UN assets and ensure the success of the Global Fund to Fight AIDS, TB, and Malaria. ■ The U.S. government should devise a systematic approach for determining and coordinating its positions relative to non-U.S. agencies, most importantly toward UNAIDS and the Global Fund. ■ The U.S. government’s strategy on global HIV/AIDS, under development by the coordinator as mandated by Congress, should identify and respond to challenges in scaling up prevention and treatment programs.

Introduction

States also provide significant support to Africa, including the Global Fund to Fight AIDS, Tuberculosis, and Malaria (Global Fund) and the World Bank. Both Secretary of State Colin Powell and the Department of State have demonstrated a strong commitment to the global fight against AIDS in Africa, while at the same time recognizing that it is a global threat demanding global action. Other U.S. government entities also have significant international HIV/AIDS programs, including the U.S. Agency for International Development (USAID), Centers for Disease Control and Prevention (CDC), National Institutes of Health (NIH), Health Resources and Services Administration (HRSA), and the Departments of Defense, Agriculture, and Labor. In addition, hundreds of U.S.-based businesses and foundations, civil rights and religious organizations, academic and research institutions, and nongovernmental service and advocacy organizations are actively engaged across the globe. Supporting this work are dozens of multilateral institutions providing guidance, coordination, and technical assistance services at the international, regional, national, and local levels. For policymakers, this is just the kind of “multi-sectoral approach” needed to address the many different aspects of a dynamic public health, humanitarian, and international security challenge. For pundits, it is a clamorous and at times chaotic effort that seems ill prepared to face a monstrously complex epidemic. In truth, it is both. The responsibility for sorting it out, moving it forward, and making it succeed has been laid at the door of the Department of State. PEPFAR proposed, and subsequent enabling legislation confirmed, the establishment of a new coordinator for global HIV/AIDS activities reporting directly to the secretary of state. This presents the department with an exciting opportunity to expand significantly its leadership role on global HIV/AIDS. Because there is already a strong commitment to addressing the global epidemic, a willingness to act is assumed and instead the Africa Policy Advisory Panel focused on providing specific recommendations to support the work within the State Department, with other U.S. government agencies, and with the broader array of organizations and institutions with which it must partner. Indeed, though the increased funding and new coordination mechanisms are critical, U.S. success will depend on the degree to which it is an effective and strategic partner with the wide array of governmental and nongovernmental organizations working at the international, national, and local levels. The recommendations presented here are predicated on a belief that the U.S. government must integrate and coordinate its work on HIV/AIDS with others if the objectives established in the president’s plan are to be achieved. This is in itself a daunting challenge. There are many powerful interests at play, groups unaccustomed to coordinating with government and holding widely divergent opinions on how best to prevent and treat HIV/AIDS. Only by adding value to the effort will the department succeed in bringing these partners to the table and engaging them in a systematic and strategic manner. The recommendations assume an approach that is comprehensive and complementary, promoting a balanced strategy of prevention, care, treatment, and research that complements and supports local needs, conditions, and priorities. They also seek to retain the focus on HIV/AIDS while recognizing important connections to other health, development, and security issues. There is no “one size fits 140 Rising U.S. Stakes in Africa all” strategy for HIV/AIDS, and so the United States must tailor its assistance country by country, and in some cases village by village. The department must temper its authority and responsibility to coordinate with appreciation and respect for the diversity of approaches that exist.

Recommendations

The secretary of state should continue and expand his personal engagement on HIV/AIDS. The secretary enjoys strong personal and political credibility on global HIV/ AIDS across a broad spectrum of constituencies, including the general public, key legislators, the president, and political leaders across the globe. He is clearly informed and passionate and has tremendous influence when he engages others on confronting HIV/AIDS—more perhaps than is appreciated at the moment. This credibility is a valuable asset to the United States in its efforts to mobilize political commitment and resources and to engage reluctant leaders and, because of competing demands on the secretary’s time, must be used strategically. Therefore, we also recommend: ■ Opportunities to engage publicly or privately should be evaluated carefully to assess relative benefits. In general, invitations should be accepted or sought out that reach groups or leaders yet to fully engage on HIV/ AIDS but whose support is needed. Criteria should be established against which opportunities to speak about HIV/AIDS are prioritized. Using these criteria, the secretary’s scheduling personnel and the coordinator’s office should regularly review opportunities, decide if they should be accepted or declined, and determine which department or government official should speak. The secretary and the coordinator should also identify groups or issues of particular importance and seek out invitations rather than wait for them to appear. ■ The secretary, with support from the coordinator, should establish “pre-cleared” talking points on HIV/AIDS. There will be only limited opportunities to discuss HIV/AIDS issues at length. Therefore, it is recommended that a series of talking points be developed on a variety of issues that can be woven into a wider range of comments delivered at public and private engagements. Taking time in advance to develop these talking points will allow the secretary, working in partnership with the coordinator, to support the government’s overall global HIV/AIDS strategy. It will also help ensure that the secretary, the coordinator, and other senior department and administration officials are in general alignment on their comments and committed to include reference to HIV/AIDS in their public and private engagements. ■ The secretary, joined by the new coordinator, should speak at the International AIDS Conference in Bangkok in the summer of 2004. With the United States having stepped up its leadership on global HIV/AIDS, there is wide interest in the international AIDS community about how that leadership will be manifested. The biannual international AIDS conferences Todd Summers 141

have historically focused public and media attention on the epidemic and provided an important opportunity to build and improve partnerships among a broad range of government, business, provider, and advocacy group representatives. This would be a great opportunity for the secretary to introduce the new coordinator, reiterate U.S. commitment to a heightened global response to HIV/AIDS, call on other global leaders to step up their efforts, and make clear that the new coordinator is charged with supporting the work already underway by so many. The coordinator will then have the opportunity to discuss details of the new U.S. strategy and to seek support for making that strategy successful. Both the secretary and the coordinator should include public interactions with persons living with HIV/AIDS in their Bangkok activities (and with future engagements addressing HIV/AIDS) in order to fight stigmatization and discrimination. ■ The secretary of state, in partnership with the secretary of health and human services, should work together to keep U.S.-supported HIV-prevention strategies and funding focused on proven programs. The secretaries’ considerable credibility should be used to resist pressures to inject religious or political ideologies into HIV/AIDS strategies. Although religious and conservative constituencies are important allies in the fight against AIDS, U.S. global AIDS policy should not become a vehicle for ideological and philosophical agendas. Strategies should be based solely on public health and evidence-based criteria. If the president’s objectives for PEPFAR are to be achieved, energy and resources cannot be diverted to programs lacking scientific credibility or merit. The coordinator, working closely with the Department of Defense and various intelligence agencies, should conduct a serious and comprehensive analysis of the implications of HIV/AIDS on U.S. national security interests. Many highly affected countries had already learned of the serious impact of HIV/AIDS on their own forces. Ugandan leaders, for example, were startled to learn from Cuban officials that Ugandan troops in Cuba for training were testing positive for HIV at alarming rates. South Africa labeled HIV/AIDS a serious threat to its military, as have several other nations. Similarly, several leaders of countries in distress have resisted accepting peacekeeping troops out of concern that the troops would bring HIV/AIDS with them. (Burundi’s leaders, for example, have said that they would rather have conflict than import HIV/AIDS from South African peacekeeping forces.) In July 2000, the United Nations Security Council held an historic meeting to discuss the security implications of the HIV/AIDS epidemic culminating in adoption of a resolution (1308) recognizing its impact and exhorting further analysis and response, particularly with respect to peacekeeping forces. Focus by the Secu- rity Council on a health issue was unprecedented and helped underscore the unique and significant threat of HIV/AIDS to global security. At the same time, the National Intelligence Council issued a report that made a case for considering major infectious diseases, especially HIV/AIDS, as national security issues for the United States.1 142 Rising U.S. Stakes in Africa

However, not enough has been done since then to increase understanding of broader security implications of HIV/AIDS or to develop strategies for a comprehensive response, and many within the military (both in the United States and other countries) still consider HIV/AIDS as a health or social issue and resist efforts to classify the epidemic as a security and strategic threat. This is a mistake. There are important questions within the purview of military and national security experts that deserve attention, including: What are the destabilizing impacts of millions of children orphaned by HIV/AIDS and potentially disenfranchised through lack of adult support or economic opportunity? How will rising rates of infection, illness, and death among young men affect conscription and combat readiness of domestic or peacekeeping forces, and how will that affect demands on U.S. or allied forces? How are military forces serving as vectors for spreading—or mechanisms for addressing—the epidemic? What are appropriate testing, retention, prevention, and treatment policies for military personnel? These are important questions not only for those from the affected countries but for those concerned about U.S. security and strategic interests. The Depart- ments of State and Defense must work together to establish a research agenda that assesses the military and security implications of HIV/AIDS and based on the results of that research devise a strategy for response. We further recommend: ■ The United States, with support from the coordinator, should regularly assess HIV prevalence among African military personnel. The Africa Center for Strategic Studies (ACSS) is working to commission studies in this area and augment and enhance information currently available, but it will likely need support from both the State and Defense Departments as data are difficult to obtain. Often, HIV testing is not conducted so prevalence isn’t known. Even when data are available, officials may be reticent to release them if HIV is found to be a potential or real source of military weakness. The State Department should use its authority, especially of its new global HIV/ AIDS coordinator, to improve communication, cooperation, and synergy with USAID and between USAID and the Department of Health and Human Services (HHS) agencies involved (CDC, NIH, HRSA, and the Office of the Secretary). The establishment of the new coordinator for U.S. global HIV/AIDS efforts offers an exciting opportunity to unify a sometimes fractious and uncoordinated effort by many different governmental entities. Given the enormity of the challenges ahead and the stakes involved, there can be little tolerance for wasting time, effort, or money. In some cases U.S. government agencies involved in global HIV/ AIDS activities work well together in Washington, D.C., and at the country level, yet there remain too many anecdotal stories of poor communication, lack of coordination, competition, and even bureaucratic wrangling. There is clearly an expectation by the president and Congress that the coordinator will work aggressively to improve coordination and communication among U.S.

1. National Intelligence Council, The Global Infectious Disease Threat and Its Implications for the United States (NIE 99-17D) (Washington, D.C.: Central Intelligence Agency, January 2000). Todd Summers 143 government agencies working on global HIV/AIDS. This should receive the full support and backing of the secretary, particularly for interagency challenges and for intra-agency issues outside the Department of State, so that the broad authority of the coordinator is unambiguous. At the same time, the department should strongly resist the temptation to replicate capacity that already exists within the U.S. government or its partners, especially at USAID and HHS. We further recommend: ■ The coordinator should conduct a thorough assessment of the various capacities, authorities, and skills available throughout the U.S. government as the basis for a truly multi-sectoral strategy and response. Although efforts at USAID and HHS remain the mainstay of the U.S. response to the global epidemic, other agencies have been increasingly involved, including the Departments of Agriculture, Labor, and Defense. Still, much capacity remains untapped or underutilized. The coordinator should invest considerable energy into harnessing this capacity to its fullest. For example, the Department of Defense could play a larger role in assessing and responding to the spread of HIV/AIDS among and by peacekeeping troops in Africa, which are expected by the United States to play a greater role in responding to conflicts on their continent; the Department of Education could be utilized to respond to children orphaned by AIDS and to the disproportionate impact of AIDS on teachers; and the Departments of Justice, Commerce, and State could work together to promote the legal and economic empowerment of women, which is critical to reducing their vulnerability to HIV. ■ The coordinator should convene a high-level interagency coordination group. A constructive step to improving communication and coordination would be to establish regular, high-level meetings among the various agencies to discuss efforts, resolve differences, and develop future strategies. There have been many different interagency coordination efforts on HIV/AIDS, including a cabinet-level group previously announced by the administration. However, these groups do not meet regularly and lack top-level participation. In order to be successful, coordination should be regular, focused, and inclusive of senior people with programmatic authority. In addition, smaller, issue-based meetings can go a long way to improving coordination and communication. An example is an interagency group established by the Office of AIDS Research at the NIH that brings together AIDS vaccine researchers from NIH, CDC, USAID, and Defense. Collegiality and mutual respect are improved by rotating the location of the meetings among participants. ■ The coordinator should continue to support studies on the broad, long-term impacts of AIDS on economies, governance, and societies, and reflect the findings of those studies in U.S. strategies and priorities. Although there is increasing knowledge on the current status and trajectory of the epidemic, too little is known about its broader societal impacts in the years to come. So many becoming ill or dying in midlife and so many becoming orphaned in childhood will have significant, long-lasting implica- 144 Rising U.S. Stakes in Africa

tions for highly affected nations. Even the implications of having millions on lifelong regimens of antiretroviral therapy are not well understood. To inform its longer-term strategies, more information, modeling, and analyses are needed, and the United States is well positioned to support that research. ■ Do not isolate work of the HIV/AIDS coordinator from broader global health and development efforts. Although a focus on HIV/AIDS is the president’s primary objective for the office, it is also important to respect the role that other international health and development initiatives will have on the success of the HIV/AIDS effort. The coordinator should integrate its policy objectives and work with other related activities at the State Department and USAID (e.g., education, maternal and child health, human rights). ■ Within PEPFAR’s 14 priority nations, focus particular attention on the “next wave” states of Nigeria and Ethiopia. The emerging epidemic in these two heavily populated states (about 200 million people combined) will have serious regional and global implications, and they both lack current capacity to forestall major epidemics. Coordinate this effort with the Africa Bureau. ■ Do not limit the U.S. global HIV/AIDS effort to 14 countries. Although focusing on the priority countries identified by PEPFAR is an important step to gaining a foothold on the epidemic, other countries cannot be ignored. The coordinator should craft a strategy that more broadly reflects the needs and challenges of other acutely affected countries, particularly China, Russia, and India (also identified as “next wave” states by the National Intelligence Council) without diverting significant resources from Africa. The needs of Africa relative to HIV/AIDS are long term and should not be jeopardized by shifting political priorities; funding should be expanded, not shifted, to address emerging needs of other regions. The secretary of state should ensure that the department’s operations reflect his prioritization of HIV/AIDS by establishing mechanisms to systematically monitor and evaluate achievements throughout the department. There are multiple offices in both regional and functional bureaus in the department that are currently or potentially engaged on HIV/AIDS. Coordination among and between these offices and other parts of the U.S. government engaged in HIV/AIDS programs should be strengthened. Coordinating them, and ensuring that the secretary’s prioritization on HIV/AIDS manifests itself in meaningful actions throughout the department, will require that more substantial systems be developed for monitoring and reporting. HIV/AIDS efforts must be “main- streamed” within the department so that its work can continue even after the political spotlight has dimmed. We further recommend: ■ The secretary, in conjunction with the new coordinator, should task the department’s regional bureaus to develop an interagency AIDS action plan that includes verifiable progress indicators and that integrates the full range of potential U.S. actions that can be taken to combat the pandemic. One important step to systematically monitoring Todd Summers 145

and evaluating departmental progress on this plan is to include responsibilities within the bureau program plans (four-year plans for each department bureau that includes specific benchmarks for assessing progress). ■ The department should commit to deepening knowledge and capacity of offices and personnel engaged in HIV/AIDS policy by providing short-term targeted training opportunities for appropriate personnel. As responsibilities for addressing HIV/AIDS are identified in the plan, it will also be important to assess training and staffing needs, both in Washington, D.C., and in overseas missions. The coordinator has already identified our ambassadors as particularly important to implementing the president’s initiative. Some have strong capacity, and others will need training and technical personnel in order to be effective. This will be especially important in particularly challenging countries where U.S. engagement may need to be more intense than in others. “Peer to peer” support and encouragement can be particularly effective. Deputy chief of mission and chief of mission meetings with a focus on HIV/AIDS, already held in several key regions, should continue and expand. Also important are USAID’s mission directors meetings, which bring together their top-level mission staff. Overlapping the State Department and USAID regional meetings might promote enhanced coordination and commitment within missions and highlight opportunities to develop and share capacity across missions. The secretary of state should build and encourage diplomatic activism and competency on HIV/AIDS and related issues throughout U.S. embassies. Though much remains to be done in Washington to mobilize resources, sustain and expand commitment, and develop comprehensive and strategic plans, the most difficult work is done at the country and local levels. U.S. missions are uniquely positioned to provide leadership and guidance, to support and encourage political leadership, and to identify and surmount bureaucratic challenges. Although many missions in highly affected countries have mobilized, others have not. Competing interests, lack of personnel and resources, and lack of personal engagement can reduce the effectiveness of the missions in providing assistance. Our missions must appreciate that active engagement on HIV/AIDS is not optional. We further recommend: ■ U.S. missions in high prevalence countries must be required to make combating the pandemic a key objective of their mission program plans. Chiefs of mission must be personally engaged in developing interagency plans to make the best use of U.S. resources. There must also be a direct line of communication between the coordinator and chiefs of missions. ■ The department should make better use of its public affairs, international visitors, and cultural exchange programs. These could be used to combat stigma in affected countries and support local leaders who can mobilize communities in the fight against AIDS. Examples of political leadership, both at the national and local levels, are still far too limited, even in the most heavily affected regions. Using U.S. assets to support those who step forward to lead may encourage others. These actions could prove especially 146 Rising U.S. Stakes in Africa

important in fighting the type of gender discrimination that has frequently impeded women’s access to services. ■ Overtly reward performance and innovation by embassy staff on HIV/ AIDS and related health issues. The secretary should seek out opportunities to identify and support embassy personnel that excel in meeting their responsibilities on HIV/AIDS. ■ The coordinator should work with HHS to increase the number of regional health offices and the number of (trained) health officers assigned to hard-hit countries. Access to strong technical personnel with training on HIV/AIDS prevention, care, and treatment will help ensure that the work of U.S. missions focuses on technically sound programs and strategies. ■ Policies for hiring and supervising local staff for HHS programs should be reviewed and improved. Embassies are responsible for hiring local staff of HHS programs. If newly hired personnel lack skills and compe- tence, programs suffer. Supervision responsibilities for these programmatic personnel should be delegated by the missions to the HHS country directors so that they can more effectively manage their programs. The United States should build partnerships with foundations, nongovernmental organizations, faith-based groups, schools of public health, private-sector groups, and people living with HIV/AIDS. Best practices from existing partnerships should be identified and circulated to other partnerships. With more funding and coordination, these groups can help expedite delivery of services. Although UNAIDS, World Health Organization (WHO), and others provide important coordination and technical support services, in some circumstances—particularly in countries with weak governmental responses to HIV/ AIDS—the United States may be better situated to bring groups together. High- level donor coordination groups, modeled on the donor and recipient coordination groups that worked in the Balkans and elsewhere, should be in place in every country. Perhaps the U.S. government could share responsibilities for ensuring donor coordination with other major donors such that in each country, there is one clear “lead” on getting donors together on at least a quarterly basis to address bottle- necks, discuss progress, and identify programmatic redundancies and gaps. This coordination should include nongovernmental donors, though mechanisms that are informal, incomplete, and staffed largely by governments with inadequate resources or interest will fail to engage civil society. By emphasizing partnerships with these nongovernmental groups, the department would take advantage of USAID reorganization. It would also allow the U.S. government to design partnerships meeting local priorities and interests, maintain multiple partnerships within countries, and avoid partnerships that may be unsustainable. We further recommend: ■ The coordinator should make it standard practice to involve these groups in its planning activities and its delegations. The United States regularly cites the importance of a multi-sectoral approach to HIV/AIDS and has been a lead proponent of country-driven processes such as those utilized for Todd Summers 147

the Global Fund. It should “practice what it preaches” by regular and meaningful involvement of these constituencies in its work. This modeling can be particularly important in supporting the inclusion of affected communities in decisionmaking processes, helping to reduce stigmatization and discrimination. ■ The coordinator should bring these groups together, joined by representatives of relevant U.S. agencies. Currently, there are no platforms for broad discussions and information dissemination among the different U.S.- based groups involved in addressing the global HIV/AIDS epidemic. There is growing awkwardness as liberal and conservative groups alike join the effort, many of which have not worked together before, have no natural opportunities for meeting, and hold quite different perspectives on approach and practice. The coordinator could play an important role in using its offices to bring them together on a regular basis, thus encouraging communication and coordination both among the groups and between the groups and the U.S. government. ■ To promote active engagement by businesses, the secretary should convene a process to establish a set of voluntary principles for businesses operating in highly affected countries. These could be modeled after the Voluntary Principles on Security and Human Rights, voluntary principles to guide companies in ensuring respect for human rights and fundamental freedoms. A similar set of voluntary principles, developed and promoted with Department of State assistance, would help encourage companies with many employees and/or business interests in affected countries to engage more actively in promoting HIV prevention and caring for those already living with HIV/AIDS. This could be done in partnership with other governments, with the World Bank and World Economic Forum, and with other nongovernmental groups like the Business Coalition on HIV/AIDS. The United States should systematically make multilateralism a central feature of its global HIV/AIDS efforts. With State Department leadership, it should help mobilize UN assets and ensure the success of the Global Fund to Fight AIDS, TB, and Malaria. Though the initiation of the president’s new global HIV/AIDS initiative reflects a critical expansion of U.S. efforts on HIV/AIDS, the challenges of the epidemic are also expanding rapidly. To achieve the goals articulated by the president, the U.S. government must work in cooperation with many other stakeholders. This includes UN agencies, represented collectively through UNAIDS, and the Global Fund; other nations and their bilateral efforts; and national leaders of affected countries. These groups add additional financial and human resources, local knowledge and credibility, and on-the-ground capacity that the United States cannot replicate. We further recommend: ■ The United States should establish a statement of policy that clearly establishes its support for its multilateral partners. The coordinator should develop and distribute a government-wide statement of policy that makes abundantly clear that the approach of the U.S. government to 148 Rising U.S. Stakes in Africa

global HIV/AIDS is one that promotes and leverages the capacity of its multilateral partners. This should be communicated by the secretary and coordinator publicly and privately. ■ The United States should use its own assets and those of the UN system to win higher contributions and greater engagement from other wealthy nations. Although many nations have stepped forward to provide significant bilateral support and multilateral contributions to support HIV/ AIDS programs, others have done too little. The United States must include in its bilateral relationships with other wealthy nations strong encouragement for increased HIV/AIDS giving. Oil-rich states of the Middle East, for example, have committed collectively about $10 million to the Global Fund. If efforts to expand access to prevention and treatment programs are to succeed, a lot more funding will be needed for the foreseeable future. The UN secretary general has already made significant progress and deserves praise for his critical role in establishing the Global Fund and otherwise galvanizing greater global action on the epidemic. Working more closely with the United States, that effort must focus on countries with the capacity to do more. ■ The United States should use the UN’s special in-country coordination and technical capacities to complement and enhance U.S. policy aims in acutely affected states. There is simply too much work to do for the United States to replicate capacity that already exists. In many acutely affected African states, the UN has special in-country coordination and technical capacities, while in others the UN is marginalized or rendered ineffective (particularly because of its dependence on willing host governments). The U.S. government, through the coordinator and its overseas missions, should include as part of the PEPFAR planning processes an assessment of UN capacity and should prioritize building on that capacity over developing its own. The U.S. government should devise a systematic approach for determining and coordinating its positions relative to non-U.S. agencies, most importantly toward UNAIDS and the Global Fund. The United States will be more effectively positioned to influence and interact with bilateral and international partners if its policy stances across agencies are coordinated and coherent. Currently, there is no clear system for developing and coordinating its interactions with these agencies. This is a particular challenge because personnel from multiple U.S. agencies are involved, including HHS, USAID, and the State Department. We further recommend: ■ The United States should use it substantial influence over UNAIDS cosponsors to promote greater cooperation and coordination, especially at the country level. A recent independent review of UNAIDS found that its cosponsoring agencies (eight UN agencies and the World Bank) were not always supportive or coordinated, particularly at the country level. This diverts precious energy and resources. The U.S. government provides significant financial support to all of the cosponsors and to UNAIDS and participates Todd Summers 149

in many of their leadership bodies. It should use its access and influence to strengthen UNAIDS and to insist that UN coordination and cooperation at the country level be the norm and not the exception. To that end, there should be regular meetings of all senior U.S. government personnel working with these organizations to establish coordinated cross-agency policies and strategies. Embassy personnel should be encouraged to report to the coordinator cases where UN cooperation is ineffective so that remedial actions can be taken. ■ The United States should recommit itself to the Global Fund to Fight AIDS, TB, and Malaria. Although the United States was one of the ear- liest supporters of the Global Fund, played a key role in its establishment, and remains its largest funder, there is a growing perception that support from the United States is waning. Efforts to reduce annual contributions to $200 million per year, well below previous funding levels, fueled this perception. This seems contrary to U.S. interests. A successful Global Fund is essential to mobilizing the global resources needed to turn the tide on HIV/AIDS. Bilateral assistance from the United States is not likely to attract giving from others whereas the Global Fund offers an opportunity both to expedite U.S. funds to needy countries and to encourage proportionate contributions from others. The Global Fund also utilizes country-driven planning and results-based disbursement mechanisms, both of which received strong backing from the United States and which deserve continued backing. The U.S. government should continue and enhance its financial and political support of the Global Fund, an important partner in global efforts to mobilize and disburse the large funding amounts needed to impact the epidemic. It should also deploy additional highly skilled and experienced legal, managerial, and public health professionals to support the work of the Secretariat, which is still in its formative stages. The U.S. strategy on global HIV/AIDS, under development by the coordinator as mandated by Congress, should identify and respond to challenges in scaling up prevention and treatment programs. “Absorptive capacity,” the amount of U.S. government assistance that can be effectively used, is often cited as a reason to slow growth in spending on HIV/AIDS. Yet there has been little thoughtful analysis of what that capacity actually is and how best to increase it. The discussion usually focuses on recipient countries, but should be broadened to include mechanisms used by donors to deliver assistance. The coordinator, working with all involved U.S. agencies and with representatives of nongovernmental sectors, should seek to identify barriers to effective delivery and use of U.S. assistance on HIV/AIDS and develop specific strategies to overcome them. We further recommend: ■ The coordinator should evaluate various existing U.S. government mechanisms designed to expedite international assistance in response to political crises and natural disasters. Support for East European Democracy (SEED) and Freedom Support Act (FSA) coordinators, the Office of Transition Initiatives (OTI) at the Department of State, and the Office of Foreign Disaster Assistance (OFDA) at USAID are innovative programs for expediting targeted assistance that should be reviewed to determine if 150 Rising U.S. Stakes in Africa

their authorities, methodologies, and/or skills could be used to augment current global HIV/AIDS efforts. ■ The coordinator should provide funding to increase absorptive capacity of aid recipients, including development of basic public health and medical infrastructure. This should include steps to strengthen public institutions and improve the quality of governance. It should also identify ways to reduce the burden on recipients, such as harmonizing donor reporting and evaluation requirements. ■ The United States should seek to identify, collect, and distribute best practices for addressing HIV/AIDS among military personnel. Working with UNAIDS, which may have gathered some of this information already, the Departments of Defense and State should build their capacity to provide information and training materials to militaries in affected countries that promote responses that are effective and are respectful of human rights. This should include policies (e.g., promoting regular voluntary counseling and testing), prevention (e.g., how to help deployed forces avoid infection), and treatment (e.g., responding with treatment and support to recruits or troops found to be HIV positive). One program that would be a particularly useful outlet is the International Mil- itary Education and Training (IMET) program at the State Department. ■ Secretary Powell, who has unique credibility as a top military officer and diplomat, should continue to speak out on the military and security implications of HIV/AIDS. The secretary has the ability to access and influence top-level military personnel with the United States, its allies, and many of the affected countries and to help them appreciate that a military analysis and response to HIV/AIDS is appropriate and necessary. By speaking out, the secretary adds credibility to the argument and helps overcome the misperception that the epidemic is solely an issue for civilian services. appendix a

West Africa Petroleum Sector Oil Value Forecast and Distribution

Executive Summary

West Africa has long been a major source of oil production, and currently ranks among the world’s leading regions with respect to offshore production and development opportunities. In terms of future global oil wealth, the region is likely to maintain its strong ranking in reserves and government oil wealth, driven in large part by a string of major deepwater discoveries, particularly in Angola and Nigeria. The following overview examines the region’s historical and projected oil production and the value streams associated with those volumes, both to the host governments and international oil companies (IOCs) operating in the sector. In assessing regional volume- and value-driven profiles, we group oil production from shallow and deepwater water fields; where possible, country-specific analyses examine shallow and deepwater production separately. This analysis looks specifically at Angola, Cameroon, Congo, Equatorial Guinea, Gabon, Chad, and Nigeria. This report and the detailed country analyses are available on the CSIS Web site.

Production Is Projected to Increase Substantially Production in West Africa is projected to increase substantially over the next decade. This forecast is based on existing reserves and discoveries in fields that are, at the time of this analysis, considered to be commercially viable. Reserves in this region can be broadly grouped into two separate categories: (1) onshore and shallow water and (2) deepwater. On a regional basis, onshore and shallow water production is relatively mature, whereas deepwater production is just now becoming a reality. Production growth will be driven by the development of deepwater

This appendix was prepared by PFC Energy as a free-standing report, “West Africa Petroleum Sec- tor: Oil Value Forecast and Distribution,” for the Africa Policy Advisory Panel. The report, which was issued in December 2003, is used here with permission of PFC Energy, Washington, D.C. Note that for all discussions in this report, when reference is made to gross production value, company value, or government value, we are not referring to actual revenues, but rather the world market value of entitlement volumes, royalties, and taxes. Entitlement volumes are the production volumes to which each party is entitled under the terms of the contracts. Losses of value resulting from subsidies, corruption, forward sales of oil, borrowing against future production, etc., are not accounted for in this analysis.

151 152 Rising U.S. Stakes in Africa discoveries, and over time, shallow water will be a smaller component of the region’s total oil wealth. Current production in the region is 3.4 million barrels per day. However, by 2010 there is a 90 percent probability that daily production will exceed 5.3 million barrels, a 50 percent chance it will exceed 6.3 million barrels, and a 10 percent chance it will exceed 7.4 million barrels. Although this suggests a large increase for the region, within the context of global supply, West African production will represent less than 10 percent of total daily oil production at the end of the decade. It should be noted that this assumes that companies will develop new deepwater discoveries according to the schedule they have reported to shareholders. Any future delays caused by host governments is not taken into account in this production forecast.

Figure A.1. West Africa Distribution of Oil Production: Actual and Forecast

) 8,000 d p

o 7,000

b P10 m ( 6,000 n o i t 5,000 c u d

o 4,000 r

P P90

y 3,000 l

i P50 a D

2,000 e g

a 1,000 r e v

A 0 9 7 5 3 1 9 7 5 3 1 9 7 5 3 1 9 7 5 3 1 1 1 1 1 1 0 0 0 0 0 9 9 9 9 9 8 8 8 8 8 0 0 0 0 0 0 0 0 0 0 9 9 9 9 9 9 9 9 9 9 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1

The production curve above will be produced from the reserve base in seven countries included in this analysis for the time period of 2002 to 2019. It is worth noting here that the production forecast and future value forecast show declining annual levels after the end of this decade. This is because this analysis addresses those reserves that have already been discovered and are considered to be commercially viable. In all likelihood, other reserves in smaller discovered fields and new reserves that are yet to be discovered will be brought on stream to fill the post-2010 declines shown above. As can be seen from figure A.2, the reserve base is not distributed evenly throughout the region, with greater reserves concentrated in Nigeria and Angola. As a result, the distribution of potential value to be derived from the oil sector is not evenly distributed. Over time there have been 75 billion barrels of oil discovered in West Africa, 30 percent of which—more than 20 billion barrels—was discovered since 1990 in deepwater. Although this is a sizeable reserve base, by comparison it is only one tenth the size of the total reserve base of the Middle East. West Africa Petroleum Sector 153

Figure A.2. Expected Mean Production for Countries Analyzed in This Study

30,000 2002-2010 25,000 2011-2019 2002-2019 20,000

15,000

10,000

5,000

Cum. Mean Production Oil (mmbbls) 0 EG Chad Gabon Congo Angola Nigeria

Cameroon

Produced Oil Value for West Africa Will Increase in Next Decade The gross value of oil produced in West Africa over the two decades 1980 to 2000 fluctuated between $15 billion and $28 billion annually. From 2000 onward, the value of produced oil has likely been higher, within the range $32 billion to $40 billion, not due to production growth, but due to relatively high world oil prices. Even though this analysis assumes that mean oil prices will fall back into a range with a mean price of $22.50/barrel, the models suggest by 2010 there is a 90 percent probability (P90) that the annual value of produced oil will exceed $43 billion, a 50 percent probability (P50) that it will exceed $51 billion, and a 10 percent probability that it will exceed $62 billion. When development costs and operating costs are taken into account, it is possible to model the value of the government’s and companies’ entitlement share of the oil. It should be noted again, that entitlement share of the oil refers to the production volumes to which each party is entitled under the terms of the contracts. Losses of value resulting from subsidies, corruption, forward sales of oil, borrowing against future production, etc., are not accounted for in this analysis.

Note: All forecasts in this analysis are based on probabilistic models for onshore and shallow water production aggregated at the country level, and individual detailed project models for deepwater production. These models were run assuming that oil prices will fluctuate between $17/barrel and $27/barrel nominal. Potential revenues from proposed liquefied natural gas (LNG) projects are not considered in this analysis. A detailed description of the assumptions used for each country is outlined in country reports, which accompany this executive summary. 154 Rising U.S. Stakes in Africa

Figure A.3. Produced Oil Value for West Africa

West Africa Distribution of Hydrocarbon Value 70,000 60,000 P10 50,000 40,000 30,000 P50 20,000 P90 10,000

Gross Production Value ($mm) Value Production Gross 0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

PFC Energy analysis suggests that through the balance of the present decade, the governments of West Africa will receive a mean expected value of approximately $183 billion from oil production. Extending the time horizon through 2019 would generate an additional $166 billion in value, resulting in a total mean expected value to these host governments of $350 billion in the 2002 to 2019 period. This excludes the additional value that will be created during this period by the development of yet-to-be-discovered reserves in the region. With respect to the IOCs, we project mean expected values of $76 billion for 2002 to 2010 and $74 billion for 2011 to 2019, or a total of $150 billion for the entire period of observation. All values are based on uninflated dollars. It is also important to factor in provisions for cost recovery when estimating future oil revenue streams to the government and IOCs. All contracts in West Africa, and globally, contain provisions for cost recovery. These cost recovery provisions allow for a certain portion of the revenue stream to be allocated to companies in order for them to recover their investment costs over a period of 3 to 7 years, depending on the specific contract. That portion of the revenue not allocated for cost recovery is generally shared or taxed according to formulas specified in the contracts. When the investing companies have fully recovered their capital investments, the oil that was allocated for cost recovery is either taken entirely by the government or is placed back into the oil shared under profit-sharing formulas. For this reason, companies tend to get a higher percentage of the revenue or oil in the first few years of production from any given field, and as companies recover their costs over the life of a project, the government gets a higher percentage of the production or revenue. The cost recovery period can be politically complex and stressful, for governments and IOCs alike. New discoveries followed by expanded production can stir high popular expectations that there will be early, substantial public benefits through, for instance, improved public services. Cost recovery, concentrated in the first 3 to 7 years of oil production, means that revenues accruing to governments in this period are constrained, and large scale revenue increases postponed. In the West Africa Petroleum Sector 155 meantime, the government is placed in the position of having to explain to constit- uents why heavy pay-outs are necessary to external corporate partners. When this total oil wealth is broken out by country it is clear that it is not evenly distributed. The Nigerian government’s future oil wealth in either of the above time period views is more than double that of all other countries combined, with a mean expected value of $110 billion through 2010 and $205 billion between now and the end of the next decade (2019). Angola ranks a solid second place with $43 billion through 2010 and $94 billion over the period 2002 to 2019. The other countries show considerably less potential future value from expected future oil production. Nigeria. Nigeria holds perhaps as much as 60 percent of the region’s oil wealth, and will continue to have the largest oil wealth in West Africa. It is by far the most populous country in Africa, with an estimated population of 133,881,703. Through the balance of the present decade, the government of Nigeria will receive a mean expected value of approximately $110 billion from its oil production. By 2019, Nigerian production will generate an additional $95 billion in value, resulting in a total mean expected value to the government of $205 billion in the 2002 to 2019 period. Although production from deepwater fields will account for an increasing share in total future value streams, production and reserves from shallow water and onshore fields will continue to dominate with respect to value from the sector. Based on PFC Energy analysis, by the end of the decade, Nigeria will receive a mean expected value of approximately $103 billion from its onshore and shallow water production. This figure is approximately $7.4 billion for deepwater production. The total reserve volume discovered in Nigeria is approximately 50 billion barrels with an estimated 23 billion barrels having been produced to date.

Figure A.4. Percentage Distribution of Modeled Mean Expected Government Oil Value

10 Percentage of combined total 0

d n ea o in ha o ngola u abon ongo C igeria G C N A G l amer a C tori a u Eq 156 Rising U.S. Stakes in Africa

Angola. Angola, with an estimated population of 10,766,471, holds the second most wealth, with approximately 23 percent of expected future wealth. With its deepwater production initiated in 2001, Angola will see much of its future wealth driven by deepwater rather than onshore/shallow water production. The country will receive a total mean expected value of $94 billion in the 2002 to 2019 period for offshore production alone. Shallow water production in Angola is expected to decline, and the anticipated gross value of shallow water oil will fall annually from between $4 billion and $6 billion in 2004 to between $3 billion and $4.5 billion annually by the end of the decade. The total reserve volume discovered in Angola by some estimates is as high as 23 billion barrels with an estimated 5 billion barrels having been produced to date. Chad. Chad is one of the newest oil producing countries included in this series. The country’s population is estimated to be 9,253,493. Production from the land-locked Doba Basin is now unconstrained following the completion of the Chad-Cameroon pipeline project. Driven by oil production from ExxonMobil’s Doba Basin project, Chad will receive a total mean expected value of approximately $3.8 billion from its onshore production in the 2002 to 2019 period. Total proven reserves for Chad are relatively modest at approximately 1 billion barrels and production is now only beginning. Equatorial Guinea. Equatorial Guinea, with an estimated population of 510,473, is another of the newest oil producing countries in this series. It is likely to maintain a stable level of oil value from its offshore production through most of this decade. The country will receive a mean expected value of approximately $10 billion by 2010; this figure by 2019 will be an additional $5.8 billion, resulting in a total mean expected value of $15.8 billion in the 2002 to 2019 period. This analysis does not include potential revenues from a proposed LNG project. The total reserve volume discovered in Equatorial Guinea is approximately 1.8 billion barrels with 350 million barrels having been produced to date. Cameroon. Cameroon is one of the older producing countries in West Africa, and its production profile is clearly in decline. It has an estimated population of 15,746,179. Without significant commercial discoveries, Cameroon will see a steady erosion of annual oil value through most of this decade and into the next. Through the balance of the decade, the government of Cameroon will receive a mean expected value of approximately $2.4 billion from its onshore and offshore oil production. Through 2019, this value is extended to $1.3 billion for a total mean expected value to the government of $3.7 billion in the 2002 to 2019 period. The total reserve volume discovered in Cameroon is approximately 1.4 billion barrels with 1.1 billion barrels having been produced to date. Congo Brazzaville. Similarly, Congo Brazzaville, with an estimated population of 2,954,258, is an older onshore and shallow water oil producing country in West Africa, with production from these sources expected to decline. The country’s production profile will receive a boost from deepwater discoveries coming onstream in the next couple of years. Oil production from Congo’s deepwater fields is likely to account for an increasing share of total future value streams, but the country is likely to experience a steady erosion of annual oil value. The government West Africa Petroleum Sector 157

Table A.1. Mean Estimated Oil Value for the Government and Foreign Companies as well as Estimated Government Take Levels

2002–2010 2010–2019 2002–2019

Gov’t Gov’t Gov’t IOC Gov’t Take IOCs Gov’t Take IOCs Gov’t Take (U.S.$) (U.S.$) ( %) (U.S.$) (U.S.$) (%) (U.S. $) (U.S.$ (%)

Nigeria 28,026 110,065 80 26,180 95,011 78 54,206 205,076 79

Angola 28,651 42,623 60 34,852 51,275 60 63,504 93,898 60

Eq. Guinea 6,361 9,689 60 4,876 5,647 54 11,237 15,336 58

Gabon 2,989 8,988 75 1,701 5,095 75 4,690 14,083 75

Congo 3,727 7,333 66 3,288 6,452 66 7,015 13,784 66

Chad 5,465 2,158 28 2,953 1,650 36 8,418 3,808 31

Cameroon 784 2,362 75 442 1,331 75 1,226 3,693 75

Total 76,004 183,218 71 74,292 166,461 69 150,296 349,678 70 of Congo will receive a mean expected value of approximately $7.3 billion from its production through the balance of the decade. Extending the time horizon through 2019 would generate an additional $6.5 billion in value, resulting in a total mean expected value to the government of $13.8 billion in the 2002 to 2019 period. The total reserve volume discovered in Congo is 3.1 billion barrels with 1.6 billion barrels having been produced to date. Gabon. Finally, Gabon is set to see its production profile decline unless significant new discoveries are made. Gabon’s estimated population is 1,321,560. Its production is split between an offshore area in shallow water and an onshore area; exploration in deepwater has so far been of very limited success. With respect to future oil wealth, Gabon is likely to experience a steady drop in annual oil value through most of this decade and into the next. PFC Energy estimates that Gabon will receive a mean expected value of approximately $9 billion from its onshore and offshore production through the balance of the decade. This figure will be an additional $5.1 billion in value by 2019 for a total mean expected value to the government of $14.1 billion in the 2002 to 2019 period. The total reserve volume discovered in Gabon is approximately 4.5 billion barrels with 3.1 billion barrels having been produced to date. As shown, future government streams and takes will vary widely, reflecting how the oil reserves of the region are distributed. Government takes represent the percentage of revenue or oil, above that required to cover the cost of production (capital and operating costs), that governments receive. The government takes in Nigeria, Cameroon and Gabon are all higher than 70 percent, because all or at least the majority of their oil is onshore or on the continental shelf, which are relatively less expensive operating environments. In the case of Angola, Equatorial Guinea and Congo, a relatively higher percentage of their production will come from deepwater, which is a more expensive, riskier operating environment. As a result, the 158 Rising U.S. Stakes in Africa

Figure A.5. Mean Estimated Oil Value for the Period 2002 to 2010

$mm $ Per Capita

$120,000 $24,000 IOCs $100,000 Governments $20,000 Per Capita $80,000 $16,000

$60,000 $12,000

$40,000 $8,000

$20,000 $4,000

$0 $0 Nigeria Angola Eq. Guinea Gabon Congo Chad Cameroon

Figure A.6. Mean Estimated Oil Value for the Period 2002 to 2019

$mm $ Per Capita

$250,000 $35,000 IOCs

$200,000 Governments $28,000 Per Capita

$150,000 $21,000

$100,000 $14,000

$50,000 $7,000

$0 $0 Nigeria Angola Eq. Guinea Gabon Congo Chad Cameroon

government takes are somewhat lower. Chad’s government take is considerably lower for the following reasons: its small reserve base; remote location; risk associated with the transportation of oil by pipeline across international boundaries; and high production costs. All of these factors result in foreign investors requiring a larger share of oil proceeds in order to justify making the heavy development investment required. Figures A.5 and A.6 and tables A.2 and A.3 display the upper and lower ends of the probability ranges calculated for government oil value on a per capita basis for the corresponding time periods. The ranges reflect the combined uncertainties of oil price, government takes, project start dates, reserves, etc. The tables illustrate the clear disparity in the distribution of future oil wealth, which itself is the result of a disparity in how the oil reserves of the region are distributed. West Africa Petroleum Sector 159

Table A.2. Probablistic Distribution of Modeled Government Oil Value (U.S. dollars)

$ Per Capita $ Per Capita $ Per Capita 2002–2010 2011–2019 2002–2019

Nigeria

90 percent chance of exceedance (P90) 74,728 mm 63,422 mm 138,150 mm

50 percent chance of exceedance (P50) 110,065 mm 95,011 mm 205,076 mm

10 percent chance of exceedance (P10) 151,888 mm 133,175 mm 285,064 mm

Angola

90 percent chance of exceedance (P90) 31,426 mm 36,308 mm 67,734 mm

50 percent chance of exceedance (P50) 42,623 mm 51,275 mm 93,898 mm

10 percent chance of exceedance (P10) 56,248 mm 72,116 mm 128,364 mm

Equatorial Guinea

90 percent chance of exceedance (P90) 7,224 mm 4,087 mm 11,311 mm

50 percent chance of exceedance (P50) 9,689 mm 5,647 mm 15,336 mm

10 percent chance of exceedance (P10) 11,809 mm 7,851 mm 19,660 mm

Gabon

90 percent chance of exceedance (P90) 7,167 mm 3,740 mm 10,907 mm

50 percent chance of exceedance (P50) 8,988 mm 5,095 mm 14,083 mm

10 percent chance of exceedance (P10) 11,071 mm 6,857 mm 17,928 mm

Congo

90 percent chance of exceedance (P90) 5,541 mm 4,413 mm 9,953 mm

50 percent chance of exceedance (P50) 7,333 mm 6,452 mm 13,784 mm

10 percent chance of exceedance (P10) 9,536 mm 8,911 mm 18,447 mm

Cameroon

90 percent chance of exceedance (P90) 1,882 mm 966 mm 2,848 mm

50 percent chance of exceedance (P50) 2,362 mm 1,331 mm 3,693 mm

10 percent chance of exceedance (P10) 2,908 mm 1,781 mm 4,689 mm

Chad

90 percent chance of exceedance (P90) 1,413 mm 978 mm 2,391 mm

50 percent chance of exceedance (P50) 2,158 mm 1,650 mm 3,808 mm

10 percent chance of exceedance (P10) 2,728 mm 3,451 mm 6,179 mm 160 Rising U.S. Stakes in Africa

Table A.3. Probabilistic Distribution of Modeled Oil Value Per Capita (U.S. dollars per capita)

2002–2010 2011–2019 2002–2019

Nigeria

90 percent chance of exceedance (P90) 558 474 1,032

50 percent chance of exceedance (P50) 822 710 1,532

10 percent chance of exceedance (P10) 1,134 995 2,129

Angola

90 percent chance of exceedance (P90) 2,919 3,372 6,291

50 percent chance of exceedance (P50) 3,959 4,762 8,721

10 percent chance of exceedance (P10) 5,224 6,698 11,923

Equatorial Guinea

90 percent chance of exceedance (P90) 14,152 8,006 22,158

50 percent chance of exceedance (P50) 18,980 11,062 30,043

10 percent chance of exceedance (P10) 23,133 15,380 38,513

Gabon

90 percent chance of exceedance (P90) 5,423 2,830 8,253

50 percent chance of exceedance (P50) 6,801 3,855 10,656

10 percent chance of exceedance (P10) 8,377 5,189 13,566

Congo

90 percent chance of exceedance (P90) 1,876 1,494 3,369

50 percent chance of exceedance (P50) 2,482 2,184 4,666

10 percent chance of exceedance (P10) 3,228 3,016 6,244

Cameroon

90 percent chance of exceedance (P90) 120 61 181

50 percent chance of exceedance (P50) 150 85 235

10 percent chance of exceedance (P10) 185 113 298

Chad

90 percent chance of exceedance (P90) 153 106 258

50 percent chance of exceedance (P50) 233 178 412

10 percent chance of exceedance (P10) 295 373 668 West Africa Petroleum Sector 161

Tables A.2 and A.3, above, illustrate the upper and lower ends of the probability ranges calculated for government oil value for the different time periods as well as on a per capita basis. The ranges reflect the combined uncertainties of oil price, government takes, project start dates, reserves, etc. The tables illustrate the clear disparity in the distribution of future oil wealth, which itself is the result of a disparity in how the oil reserves of the region are distributed. Although Nigeria is projected to be the wealthiest in terms of total oil value to the government, it ranks among the lowest when considered on a per capita basis. Nigeria is the most populous country in West Africa, and government revenues will go to support a much larger population than the other countries in this study. Equatorial Guinea and Gabon stand out in this view, due to their extremely small populations. Equatorial Guinea will see the highest per capita wealth in the region, rising to nearly $19,000 per capita by the end of the decade and nearly $30,000 by the end of the 2002 to 2019 period. Angola will see its per capita oil value almost triple by the 2019 time period. Congo, Chad, and Cameroon will see less dramatic increases in per capita wealth given their declining production profiles. It should be noted that the per capita numbers are based on current population figures. For a more thorough discussion of the assumptions used in this analysis, the reader is referred to a series of companion energy reports, prepared by PFC Energy, that specifically address the analysis of each of the seven countries outlined in this executive summary: 1. “Angola Petroleum Sector: Forecast of Oil Value and Its Distribution” 2. “Nigeria Petroleum Sector: Forecast of Oil Value and Its Distribution” 3. “Equatorial Guinea Petroleum Sector: Forecast of Oil Value and Its Distribution” 4. “Gabon Petroleum Sector: Forecast of Oil Value and Its Distribution” 5. “Cameroon Petroleum Sector: Forecast of Oil Value and Its Distribution” 6. “Congo Petroleum Sector: Forecast of Oil Value and Its Distribution” 7. “Chad Petroleum Sector: Forecast of Oil Value and Its Distribution.” appendix b

Legislative Language

Language creating a special panel to examine U.S. policy on Africa was included in the Fiscal Year 2003 omnibus spending bill approved by Congress in early 2003. President Bush signed the bill into law on February 20, 2003. Congressman Frank Wolf (R-Va.), who is chairman of the House Commerce–Justice–State (CJS) appropriations subcommittee, inserted the measure into the bill to help focus more attention on the importance of U.S.-Africa relations. The language creating the new panel was included in the “Statement of Managers” accompanying the CJS portion of the bill. The bill language is as follows: Africa Policy Advisory Panel. The conference agreement includes language authorizing the Secretary to create an Africa Policy Advisory Panel, and provides up to $500,000 to fund related costs. The conferees expect that this panel will be appointed by the Secretary and will deliver its final report to the Secre- tary no later than one year from the enactment of this Act. The conferees believe that the U.S. government too frequently fails to devote sufficient attention and resources to African affairs. African nations today face enormous obstacles to development and political stability. The United States has a vital national interest in helping African nations to develop workable solutions to provide people with freedom, economic opportunity, and functioning governments. The conferees expect that the establishment of this panel will generate greater interest in the importance of sub-Saharan Africa. In calling for this panel, the conferees recognize the complex issues facing Africa and the limited budgetary resources available to help policymakers address these problems. The conferees acknowledge the Department’s increased efforts in these areas, including the strengthening of the trading relationships spawned by the African Growth and Trade Act, substantially increasing two-way trade with Africa, launching a Sov- ereign Credit Rating Initiative, increased HIV/AIDS funding, programs to enhance African peacekeeping capabilities, support for UN and regional peacekeeping efforts, and assistance in ending conflicts continent-wide, including in the Sudan and in the Democratic Republic of the Congo. Assertive engagement between Africa and the United States is vital to U.S. interests and necessary. Africa is a key player in our global war against international terrorism. Africa is also a key supplier of crucial resources, including oil. The most serious challenge facing Africa today is the AIDS pandemic: its social, eco-

162 Legislative Language 163 nomic, and political impact will be devastating for millions of Africans for years to come. In the past decade alone an estimated 17 million Africans died of AIDS. Of the 40 million people infected with HIV worldwide, an estimated 28 million are in sub-Saharan Africa. Civil war continues to plague the continent. The conflict in Sudan continues unabated with two million killed and four million displaced. It is critically important to strengthen our relations with Africa and formulate a coherent, effective Africa policy. An Africa Policy Advisory Panel could help meet these objectives and explore related issues, including: • How the United States can most effectively assist in the fight against AIDS/ HIV and other infectious deadly diseases in Africa; • What role the United States should play in conflict prevention and resolution in Africa; • How the United States can use its economic and development assistance more effectively; • How the United States should approach recurring natural and man-made humanitarian crisis; • What specific measures the United States can take to promote democracy, human rights, religious tolerance, and a free press in Africa; • How the United States can help strengthen Africa's institutional capacity to fight international terrorism effectively, and U.S.-Africa security relations; and • What specific measures the United States can take to increase trade and investment between Africa and the United States. The conferees expect that this Panel will take a fresh look at U.S. policy in the region, focus more attention to the importance of U.S.-African affairs, and make recommendations to the Secretary for specific action. About the Panel Members, Working Group Chairs, and Expert Authors

Kofi Adjepong-Boateng is the group managing director of First Africa, which provides a range of corporate finance advisory services in sub-Saharan Africa and has offices in Nairobi, Johannesburg, and London. Mr. Adjepong-Boateng holds bachelor’s and master’s degrees from the Universities of Oxford and East Anglia, England. He has worked in the corporate finance and government advisory field in Africa since 1987, with SG Warburg & Co., Price Waterhouse, and HSBC Equator. In the past, he has been involved in a wide range of transactions in sub-Saharan Africa. Paul V. Applegarth is the chief executive officer of Value Enhancement Interna- tional, an international finance and general management consulting firm with institutional, governmental, and corporate clients in Europe, Asia, Africa, and the United States. In addition, he serves as senior adviser to the secretary of state and to the under secretary for economic, business, and agricultural affairs at the State Department. Previously, Mr. Applegarth was a managing director at Emerging Markets Partnership, the initial chief operating officer of the British-led Emerging Africa Infrastructure Fund, and the founding managing director of Emerging Africa Advisers. He has also held positions with Lehman Brothers/American Express, United Way of America, Bank of America, and the World Bank. On Febru- ary 20, 2004, President George W. Bush announced his intention to nominate Mr. Applegarth to be chief executive officer of the Millennium Challenge Corporation. Frederick D. Barton is a senior adviser at the Center for Strategic and Interna- tional Studies and codirector of the CSIS Post-Conflict Reconstruction Project. For the past school year, Mr. Barton was the Frederick H. Schultz Professor of Eco- nomic Policy and Lecturer of Public and International Affairs at Princeton University’s Woodrow Wilson School and continues as a visiting lecturer. He has served as UN deputy high commissioner for refugees (1999–2001) and was the first director of USAID’s Office of Transition Initiatives. Pamela E. Bridgewater has served as assistant secretary for Africa, as U.S. ambassador to Benin, and as a member and president of the 42nd Senior Seminar (1999–2000), the Department of State’s most prestigious professional development program. She has also served as deputy chief of mission in Nassau, Bahamas; political officer in Pretoria, South Africa; consul general in Durban, South Africa; labor

164 About the Panel Members, Working Group Chairs, and Expert Authors 165 attaché/political officer in Kingston, Jamaica; and vice consul in Brussels, Belgium. Her State Department assignments have included the Office of Global Affairs, Bureau of Oceans and International Environmental Affairs, Bureau of European Affairs, and Bureau of Intelligence and Research. Ambassador Bridgewater entered the Foreign Service in 1980 after a teaching career that included Morgan State Uni- versity in Baltimore, Maryland; Bowie State University in Bowie, Maryland; and Voorhees College in Denmark, South Carolina. Bathsheba N. Crocker is a fellow and codirector of the Post-Conflict Recon- struction Project at CSIS. From 2002 to 2003, she was a Council on Foreign Relations International Affairs Fellow, working on post-conflict reconstruction issues at CSIS. Before joining CSIS, Ms. Crocker worked as an attorney-adviser in the Legal Adviser’s Office at the U.S. Department of State, as deputy U.S. special representative for the Southeast Europe Initiative in Rome, Italy, and as the executive assistant to the deputy national security adviser at the White House. She received a B.A. from Stanford University, a J.D. from Harvard Law School, and an M.A.L.D. from the Fletcher School at Tufts University. Chester A. Crocker returned to the School of Foreign Service at Georgetown University in 1989 as distinguished professor in the practice of diplomacy. He holds the recently created James R. Schlesinger Chair in Strategic Studies and serves as an associate in the school’s Institute for the Study of Diplomacy. He is also chairman of the board of the U.S. Institute of Peace. From 1981 to 1989, Dr. Crocker served as assistant secretary of state for African affairs. His previous professional experience includes service as news editor of Africa Report magazine and staff officer at the National Security Council where he worked on Middle East, Indian Ocean, and African issues. He first joined Georgetown University as director of its master of science in foreign service program, serving concurrently as associate professor of international relations. In 1976, he served as director of African studies at CSIS. Robert E. Ebel is chairman of the CSIS Energy Program. He holds an M.A. in international relations from the Maxwell School at Syracuse University and a B.S. in petroleum geology from Texas Tech. At CSIS, he focuses on world oil and energy issues, with particular emphasis on the former Soviet Union, and is codirector of the Caspian Sea Oil Study Group and the CSIS Strategic Energy Initiative. He also directs the Global Nuclear Materials Management project. Previously, Mr. Ebel served with the CIA for 11 years and spent 7 years with Department of the Interior’s Office of Oil and Gas. He has worked on international energy issues in the Federal Energy Office and was vice president for international affairs at the ENSERCH Cor- poration where he worked for 14 years. Dina Esposito has been working in the fields of humanitarian aid, post-conflict transition assistance, and development aid for the last 14 years. She served at the U.S. Agency for International Development (USAID) from 1989 to 1999, in the Bureau for Democracy, Conflict, and Humanitarian Aid; the Program Planning and Management office; the Office of Transition Initiatives; and the Africa Bureau. Prior to joining USAID, Ms. Esposito served in the U.S. Department of State 166 Rising U.S. Stakes in Africa

Bureau for Population, Refugees, and Migration, and since leaving USAID, she has been an independent consultant, in which capacity she has worked with CSIS, the International Organization for Migration, Creative Associates International, Inter- national Resources Group, and USAID. She received a master’s degree in international relations from the Johns Hopkins University School for Advanced International Studies and a B.A. from Williams College. Anthony S. Fauci received his M.D. degree from Cornell University Medical Col- lege in 1966. He then completed an internship and residency at the New York Hospital–Cornell Medical Center. In 1968, Dr. Fauci joined the National Institutes of Health as a clinical associate in the Laboratory of Clinical Investigation (LCI) at the National Institute of Allergy and Infectious Diseases (NIAID). In 1974, he became head of the Clinical Physiology Section, LCI, and in 1980 was appointed chief of the Laboratory of Immunoregulation, a position he still holds. In 1984, Dr. Fauci became director of NIAID, where he oversees an extensive research portfolio of basic and applied research to prevent, diagnose, and treat infectious and immune-mediated illnesses, including HIV/AIDS and other sexually transmitted diseases, illness from potential agents of bioterrorism, tuberculosis; malaria, autoimmune disorders, asthma, and allergies. Dr. Fauci also serves as one of the key advisers helping to guide U.S. Department of Health and Human Services initiatives to bolster medical and public health preparedness against possible future bioterrorist attacks. Russell W. Feingold has served as a U.S. senator (D-Wis.) since 1992. Previously, he represented Wisconsin’s 27th District in the Wisconsin State Senate, having first been elected in 1982 at age 29. A Wisconsin native, he attended the University of Wisconsin at Madison and Harvard Law School and was a Rhodes scholar at Oxford University. In the Senate, he serves on the Judiciary, Foreign Relations, and Budget Committees as well as on the Special Committee on Aging. Carlton W. Fulford Jr. is currently the director of the Africa Center for Strategic Studies. He retired from the U.S. Marine Corps in February 2003 with the rank of general after serving as deputy commander of U.S. European Command, a position that included extensive work on U.S.-Africa relations. His many previous assignments include commanding general, Fleet Marine Force, Pacific; commander, U.S. Marine Corps Bases, Pacific; director (1999–2000) and vice director (1995–1996) of the Joint Staff; and commanding general, Marine Corps Bases, Japan. General Ful- ford received his commission in 1966, following graduation from the U.S. Naval Academy. He also holds an M.S. degree from Rensselaer Polytechnic Institute and graduated from the Industrial College of the Armed Forces, a strategic component of the National Defense University. Helene D. Gayle is director of the HIV, TB, and Reproductive Health Program for the Bill and Melinda Gates Foundation. In this capacity, she is responsible for research, program, and policies related to HIV/AIDS, reproductive health, sexually transmitted diseases, and tuberculosis for the foundation. Previously, she was director for the National Center for HIV, STD, and TB Prevention at the Centers for About the Panel Members, Working Group Chairs, and Expert Authors 167

Disease Control and Prevention in Atlanta. A member of the Institute of Medicine and the Council on Foreign Relations, she has served as a health consultant to such international agencies as the World Health organization, UNICEF, the World Bank, and UNAIDS. Dr. Gayle has worked extensively in Africa, Asia, and the Americas. Thomas R. Gibian is a managing director of Emerging Markets Partnership (EMP) and chief operating officer of the AIG Africa Infrastructure Fund. He joined EMP in 1995 as a managing director for EMP’s Asian Funds. Previously Mr. Gibian was executive director and co-head of structured finance for the Asia-Pacific Region for Goldman Sachs (Asia) Ltd. He had joined Goldman Sachs in 1987 as a vice president in public finance after serving with Salomon Brothers. Throughout his career on Wall Street, he has focused on private investment in regulated businesses including power, utilities, and transportation and especially the independent power sector. David L. Goldwyn is president of Goldwyn International Strategies, a consulting firm that provides advice on international relations and international business. Pre- viously, he served as assistant secretary of energy for international affairs (2000– 2001) and as senior adviser/counsel to Ambassador Bill Richardson, U.S. representative to the United Nations (1997–1998). Under Presidents George H.W. Bush and Bill Clinton, Mr. Goldwyn served in the Office of the Under Secretary for Political Affairs at the State Department. He is a member of the Council on Foreign Rela- tions and is licensed to practice law in New York and the District of Columbia. Jeffrey Herbst is professor of politics and international affairs and chair of the Department of Politics at Princeton University. His primary interests are in the politics of sub-Saharan Africa, the politics of political and economic reform, and the politics of boundaries. He is the author of States and Power in Africa: Comparative Lessons in Authority and Control (Princeton, 2000) and several other books and articles. He has taught at the University of Zimbabwe, the University of Ghana, Legon, the University of Cape Town, and the University of the Western Cape, and he is a research associate of the South African Institute of International Affairs. Walter H. Kansteiner III is a principal member at the Scowcroft Group. Previ- ously, he served as assistant secretary of state for African affairs (2001–2003). Before assuming his duties at the Department of State, Mr. Kansteiner was a founding principal of the Scowcroft Group. He has more than 20 years experience with Afri- can and emerging market business issues. In addition to his business experience in emerging markets, he served in the U.S. government as director of African affairs on the National Security Council staff. He also served as the Africa specialist on the Secretary of State’s Policy Planning Staff and with the Department of Defense as a member of the strategic minerals task force. Mr. Kansteiner is author of South Africa: Revolution or Reconciliation (IRD Press, 1988), is a member of the Council on Foreign Relations, and is a senior associate at CSIS. Nicholas P. Lapham is vice president for policy at Conservation International, a nonprofit organization dedicated to promoting the conservation of biological 168 Rising U.S. Stakes in Africa diversity, and directs its Center for Conservation and Government. Previously he served as senior program officer for environment at the UN Foundation in Wash- ington, D.C., special assistant to the assistant secretary of state for oceans, environment, and science, as well as senior adviser to the White House Climate Change Task Force. He has also held positions with the Natural Resources Defense Council and the Center for Humanities and Environment in Jackson, Wyoming. He currently serves on the Board of Directors for the Audubon Naturalist Society. Princeton N. Lyman is Ralph Bunche Senior Fellow in Africa Policy Studies at the Council on Foreign Relations. He served for more than three decades in the U.S. Department of State and U.S. Agency for International Development, completing his government service as assistant secretary of state for international organization affairs. He was previously U.S. ambassador to South Africa, ambassador to Nigeria, and director of the U.S. Aid Mission to Ethiopia at USAID. He was also a senior fellow at the U.S. Institute of Peace and executive director of the Global Interdepen- dence Initiative of the Aspen Institute. Richard T. McCormack, currently a senior adviser at CSIS, was a counselor at the Center for the Study of the Presidency. A former under secretary of state for economic affairs, Ambassador McCormack has extensive experience and expertise in international economic, financial, and diplomatic matters. For the past eight years, he has served as a private consultant for various U.S. companies, financial institutions, and think tanks with interests in many parts of the globe. In the administration of George H.W. Bush, he was awarded the Distinguished Service Medal by then secretary of state James Baker. Earlier, in the Reagan administration, he served as the U.S. ambassador to the Organization of American States and was awarded the Superior Honor Award for Outstanding Sustained Performance. Prior to that, Ambassador McCormack served as assistant secretary of state for economic and business affairs; adviser to a member of the Senate Foreign Relations Commit- tee; deputy to the assistant secretary of the treasury; and senior staff member of the President’s Council on Executive Organization at the White House under President Nixon. J. Stephen Morrison is director of the CSIS Africa Program and executive director of the CSIS Task Force on HIV/AIDS. From 1996 through early 2000, he served on the secretary of state’s Policy Planning Staff, where he was responsible for Afri- can affairs and global foreign assistance issues. In 1993–1995, he conceptualized and launched USAID’s Office of Transition Initiatives, where he served as its first deputy director and created post-conflict programs in Angola and Bosnia. From 1992 until mid-1993, he was the democracy and governance adviser to the U.S. embassies and USAID missions in Ethiopia and Eritrea. In the period 1987 to 1991, he was senior staff member of the House Foreign Affairs Subcommittee on Africa. Constance Berry Newman is assistant administrator for Africa at the U.S. Agency for International Development. Before joining USAID, she served as a board member of the International Republican Institute. She also has served as a private consultant to South African leaders on affirmative action and diversity; to About the Panel Members, Working Group Chairs, and Expert Authors 169 the World Bank as liaison to representatives of the South African National Con- gress, Pan-Africanist Congress, Inkatha, and the National Union of Mineworkers; and as a Cooperative Housing Foundation consultant on a World Bank project in Lesotho to merge existing housing corporations into one that was structured to receive World Bank funding. From 1992 to 2000, she was under secretary of the Smithsonian Institution; from 1989 to 1992, director of the U.S. Office of Personnel Management; and from 1994 to 2000, board member and vice chair of the District of Columbia Financial Responsibility and Management Assistance Authority. Robert I. Rotberg is president of the World Peace Foundation (WPF) and director of the WPF Program on Intrastate Conflict, Conflict Prevention, and Conflict Resolution at the Kennedy School of Government, Harvard University. Previously he was professor of political science and history at MIT; academic vice president at Tufts University; and president of Lafayette College. He is the author/editor of numerous books and articles on U.S. foreign policy, Africa, Asia, and the Carib- bean, including most recently Patterns of Social Capital: Stability and Change in Historical Perspective (Cambridge, 2001), Peacekeeping and Peace Enforcement in Africa: Methods of Conflict Prevention (Brookings, 2001), Truth v. Justice: The Morality of Truth Commissions (Princeton, 2000), and Creating Peace in Sri Lanka: Civil War and Reconciliation (Brookings, 1999). Ed Royce is serving his sixth term in the U.S. House of Representatives, representing California's 40th District. Since his election to the U.S. House of Representatives in 1992, he has earned a reputation for his tough, no-nonsense approach to governing. Republican whip Tom Delay appointed him an assistant whip for the 107th Congress. Representative Royce is a member of two important committees in the House. He serves as a ranking member on the International Relations Committee, where he is chairman of the Subcommittee on Africa, and a member of the Sub- committee on East Asia and the Pacific. He also serves on the House Financial Services Committee. Within this committee he serves on three subcommittees: Subcommittees on Capital Markets, Insurance, and Government Sponsored Enter- prises; on Domestic Monetary Policy, Technology, and Economic Growth; and on Financial Institutions and Consumer Credit. Representative Royce served as corporate tax manager for a Southern California company prior to entering public service as a state senator in 1982. Peter Seligmann cofounded Conservation International in 1987 and serves as the organization’s chairman and CEO. Under Mr. Seligmann’s leadership, CI has pioneered conservation tools that are economically sound, scientifically based, and culturally sensitive. He has guided CI to become a major international conservation leader, with field offices in 30 countries and major influences in science and business. In 1998, CI established the Center for Applied Biodiversity Science and, in 2001, the Center for Environmental Leadership in Business. In 2000, CI launched the Critical Ecosystem Partnership Fund in collaboration with the World Bank and the MacArthur Foundation. Mr. Seligmann serves on the board of the Wild Salmon Center in Portland, Oregon, and on the Mayor’s Environmental Council in Wash- ington, D.C. He also serves on several corporate boards as well as on the advisory 170 Rising U.S. Stakes in Africa councils of the Jackson Hole Land Trust, Ecotrust and other not-for-profit organizations, including the Japanese Keidanren’s Nature Conservation Fund. In 2000, President Clinton named him a member of the Enterprise for the Americas Board. Todd Summers is the president of Progressive Health Partners, a Washington, D.C.-based consultancy focused on providing strategic guidance and policy support to clients engaged in addressing the HIV/AIDS pandemic in the United States and across the globe. Major clients include the Henry J. Kaiser Family Foundation, the Bill and Melinda Gates Foundation, the Center for Strategic and International Studies, and the International AIDS Vaccine Initiative. Mr. Summers served as deputy director of the White House Office of National AIDS Policy during the Clinton administration. Previously, he was the founding executive director of the AIDS Housing Corporation in Boston. He has also worked for the Metropolitan Boston Housing Partnership, managing large-scale affordable housing development initiatives, and the Claremont Corporation, managing commercial and residential real estate development projects. He is a board member of the Black AIDS Institute and Transatlantic Partners against AIDS. Mr. Summers has also served as a member of the Presidential Advisory Council on HIV and AIDS, as chair of the Boston Ryan White HIV Services Planning Council, as board president for the Boston AIDS Consortium, and as an executive committee member of Cities Advocating Emer- gency AIDS Relief (CAEAR Coalition) and the National AIDS Housing Coalition.