Eritrea’s Elusive Economy: Can New US Sanctions Curb Financial Crime Allegations?

For over a decade, Eritrea has faced United Nations (UN) economic sanctions, yet its political landscape and economy remain unchanged. This article examines the impact of recent US sanctions on Eritrea and assesses their potential to address financial crime allegations.

Old Sanctions vs. New Sanctions

Eritrea has evaded the intended impact of sanctions due to its covert economic operations and the weak enforcement of measures. In November 2021, the US imposed new sanctions on the Eritrean ruling party, armed forces, businesses, institutions, and individuals in response to the humanitarian crisis and alleged war crimes in Tigray, Ethiopia. Previously, in August 2021, the army’s chief of staff, General Filipos Woldeyohannes, was sanctioned for the same reasons.

Three years ago, the UN Security Council lifted sanctions on Eritrea due to concerns regarding its suspected links to the Islamic rebel group Al-Shabaab and refusal to withdraw troops from disputed territory with Djibouti. Despite earlier measures, Eritrea continued to destabilize the Horn of Africa region by supporting insurgencies in neighboring countries.

Challenges in Targeting Eritrea’s Economy

Eritrea’s clandestine economy and money-laundering operations present significant challenges for formal sanction regimes. The country operates a vast informal economy, and senior government officials control unofficial revenue streams primarily from taxation of Eritreans in the diaspora and private business arrangements involving PFDJ-run companies or business partnerships abroad. Some enterprises operate outside of Eritrea, making it difficult to target them through sanctions.

One Eritrean government-owned conglomerate, the Red Sea Corporation, has been linked to various illicit activities such as the export of illicit gold and alcoholic beverages to Sudan and manipulation of regional currency differences to siphon off funds.

Effectively Targeting Eritrea through Sanctions

To effectively target Eritrea through sanctions, it is essential to identify and hit the economic nerve center of the regime, unveil its covert money laundering operations, and expose its partners in crime. This process may require considerable time and effort to identify the appropriate businesses and individuals responsible.

Key Eritrean diplomats currently stationed in various countries also need to be sanctioned to prevent them from overseeing illegal activities in their respective host nations. Sanctioning diplomats would also send a strong signal to host governments about the presence of sanctioned diplomats in their jurisdiction.

Primary Revenue Sources for Targeting Eritrea

For maximum impact, sanctions should be implemented against the primary known revenue sources of the Eritrean government, such as:

1. Bisha gold mine
2. Potash Colloli development
3. Foreign companies involved in these projects

Additionally, illegal trade with Sudan and Ethiopia should be closely monitored.

Impact of US Sanctions on Eritrea

Despite US sanctions against Eritrea, it remains uncertain if they will persuade the regime to halt its involvement in Ethiopian affairs or engage in peace negotiations. President Isaias Afwerki views sanctions as unjust and unfair.

The humanitarian crisis in Tigray continues, with Ethiopia facing the suspension of development aid from the US and loss of privileges under the African Growth and Opportunity Act. Despite international criticism and sanctions, neither the Ethiopian government nor the Tigray People’s Liberation Front (TPLF) have shown signs of halting aerial bombardment of Tigray or allowing humanitarian aid access to the population.

In conclusion, the most significant impact of the US sanctions on Eritrea may not stem from the imposition of the sanctions themselves, but rather from the ongoing humanitarian crisis in Ethiopia. The situation in Tigray remains a critical concern, and the international community continues to urge peace negotiations and humanitarian access.