The Global Magnitsky Effect: How will the U.S. sanctions against Israeli billionaire Gertler affect Congo’s extractive sector?

How will the U.S. sanctions against Israeli billionaire Gertler affect Congo’s extractive sector?

2017 ended rather dramatically for Israeli billionaire Dan Gertler, one of the most controversial businessmen in the Democratic Republic of Congo. On December 21st, two days before the mining magnate’s 44th birthday, U.S. President Donald Trump sanctioned him under the Global Magnitsky Act, a new law that allows the American president to sanction human rights abusers and corrupt actors.  While the international press and civil society have criticized Gertler’s controversial mining and oil deals in Congo for many years,  this is the first time a foreign government has explicitly targeted the mining magnate for high-level corruption in Congo.

It is also the first time a government has imposed “tangible and significant consequences” for such practices. Other Congo-focused sanctions had so far targeted security officials involved in human rights violations or ministers who obstructed the electoral process as President Kabila has sought to cling on to power beyond the constitutional mandate, which ended in December 2016. This time, the sanctions touch the core of a financial system. According to the U.S. Treasury, “Gertler has acted for or on behalf of [Congolese President Joseph] Kabila.”

The sanctions intend to cut off Gertler and his businesses from the American financial system. “It doesn’t get much worse for a businessman than U.S. sanctions,” an investment banker told Resource Matters.

And yet, the real impact will depend on how Gertler’s existing partners comply with the sanctions. Six weeks after the sanctions, Randgold, Congo’s foremost gold operator, announced that it is called ‘force majeure’ and said that it wanted to stop providing exploration services to Gerler’s gold mining company. Likewise, Glencore, the Swiss commodity trading giant that owes Gertler nearly $200 million in royalties over the next two years under outstanding contracts, told Resource Matters that it has not paid any royalties since the sanctions were enacted. However, the legal conundrum for both of Gertler’s partners is not over yet, and neither company has provided a final update on whether they have definitively interrupted their business relationship with Gertler’s companies.

The real impact of Magnitsky will depend on their ultimate decisions as to how to deal with Gertler going forward. It will also depend on the reaction of Congo’s political authorities. Will the government keep protecting the businessman? Or will the government revoke the two oil blocks that Gertler’s sanctioned companies own in eastern Congo?