Impacts on Exports, the Foreign Exchange Market, and Overall Macroeconomic Stability

Sudan Scope – Economic Editor

On 13 July 2026, the European Union adopted a new package of sanctions targeting Sudan’s gold sector. This represents a significant shift, as the measures not only target individuals or companies but also extend to the trade in gold itself. The key provisions of the decision include:

  • Ban on the purchase of Sudanese gold by individuals and companies within the European Union.
  • Ban on the import of gold of Sudanese origin into EU member states.
  • Ban on the transport or transfer of Sudanese gold through the European Union or by European entities, including related commercial and financial transactions.
  • Ban on the export of mercury and cyanide to Sudan, two key materials used in artisanal mining and gold extraction, to reduce gold production believed to finance conflict parties.

In justifying the comprehensive ban on all commercial dealings in Sudanese gold, the European Union stated that these measures aim to:

  • Limit the use of gold revenues in financing the war in Sudan.
  • Reduce the financial resources reaching conflict parties.
  • Increase economic pressure to push the parties toward a political settlement.
  • Curb trade associated with what is known as “conflict gold.”

The repercussions of the EU decision to ban the purchase, import, and transport of Sudanese gold are not expected to be limited to direct trade between Sudan and EU countries. Given the central role of European markets and financial institutions in the global trade, financing, and compliance system, the impact of the decision may extend to parties outside the EU through several indirect channels. These include stricter due diligence on sources of funds, reduced tradability of Sudanese gold internationally, heightened reputational risks, and increased risk premiums associated with Sudanese transactions.

Based on the above, the channels through which the European ban affects Sudanese gold exports can be summarized as follows:

First: Financial Transfers and Compliance with Sources of Funds

One of the earliest indirect repercussions of the ban is likely to appear in the tightening of scrutiny over financial transfers related to Sudan, particularly large or recurring transfers that could potentially be used to finance or settle gold purchases.

For example, Sudanese nationals residing abroad who own companies or commercial activities and wish to transfer large sums to Sudan may face additional requirements to prove the economic purpose of the transfer, identify the ultimate beneficiary, and document the source and use of funds. Transfers whose size does not align with the declared commercial activity, or those suspected of being linked to the gold trade, are more likely to face delays, rejections, or requests for additional documentation.

This does not mean the European decision automatically prohibits all transfers by Sudanese nationals from their countries of residence. Rather, the most probable effect is increased sensitivity among banks, exchange companies, and money transfer institutions toward any transactions that could be linked to Sudanese gold trade. This sensitivity intensifies when payments pass through European correspondent banks or involve currencies and settlement systems that include institutions subject to European rules.

For local companies, it may become more difficult to convince some suppliers, intermediaries, or financial institutions to accept Sudanese gold as a means of payment or collateral, due to concerns over proving origin, legal ownership, and the ultimate beneficial owner of the transaction proceeds. Consequently, companies may be forced to rely on more expensive settlement methods, use additional intermediaries, or restructure their transactions to meet compliance requirements.

The economic outcome of this channel includes higher transaction costs, longer processing times for transfers, increased likelihood of rejection, and a widening gap between formal and informal channels. Excessive strictness may also push some actors toward informal arrangements, thereby increasing risks of money laundering and smuggling rather than reducing them.

Second: Liquidity of Sudanese Gold and Demand from Foreign Central Banks

The ban may also affect the willingness of some central banks and sovereign institutions outside the EU to purchase Sudanese gold or hold it as part of their reserve assets.

Legally, the decision does not necessarily prohibit a central bank outside the EU (for example, some central banks in the region that trade gold with Sudan) from buying Sudanese gold. However, the core issue lies in the reduced liquidity and resale potential of this gold in European markets in the future.

When managing gold reserves, central banks prioritize several key characteristics, the most important of which are high liquidity, ease of sale in global markets, and the ability to use gold in swap operations, repurchase agreements, or short-term financing. If gold of Sudanese origin becomes difficult to enter the European market or requires additional verification procedures for trading, this shrinks the pool of potential buyers and limits its use as a liquid reserve asset.

Consequently, some central banks may hesitate to purchase it, not necessarily due to a direct legal prohibition, but because of marketability and liquidity risk, the possibility of being unable to sell it quickly in a broad market when liquidity is needed.

This could lead to a price discount on Sudanese gold compared to similar gold from unrestricted sources, reflecting its lower liquidity and higher verification costs.

Purchasing institutions may also require that the gold be refined or re-certified in internationally recognized refineries and that a documented chain of custody proving origin and ownership be provided, adding new costs for Sudanese exporters.

Third: Reputational Risks and Reassessment of Business Relationships

The reputational risk channel may be one of the broadest, as its impact extends beyond entities directly trading in gold to banks, refineries, transport and insurance companies, brokers, and general trading firms that have dealings with Sudan.

In recent years, large private companies in the region have been active in purchasing Sudanese gold or financing its production and export. With the issuance of the European ban, these companies may reassess the viability of continuing their dealings, even if they are not directly subject to European law.

This stems from fears that their relationships with international banks, insurers, auditors, or foreign investors could be jeopardized, in addition to the potential association of their name with gold trade perceived internationally as a possible source of war financing. Some institutions may adopt policies that go beyond explicit legal requirements and decide to avoid dealing with Sudanese gold entirely, a phenomenon known as over-compliance.

As a result, the impact may take the form of voluntary withdrawal by some buyers, reduction of exposure to Sudan, increased disclosure and due diligence requirements, or conditioning purchases through intermediaries with higher credit ratings. In all cases, this reduces the number of regular buyers and increases the bargaining power of remaining intermediaries, which may lower the price received by Sudanese producers or exporters.

Fourth: Country Risk and Increased Risk Premium

The potential repercussions are not limited to the gold sector. The ban may contribute to raising the overall assessment of risks associated with Sudan — known as country risk — and consequently increase the risk premium demanded by foreign financial institutions when dealing with Sudanese banks and companies.

Country risk premium reflects the additional compensation demanded by a lender or investor for bearing risks related to the country, such as political instability, limited currency convertibility, payment disruptions, sanctions, and reputational and compliance risks.

Following the ban on a major export commodity like gold, foreign institutions may assume higher risks of foreign currency shortages in Sudan, weaker capacity of local banks to meet external obligations, and increased likelihood of transactions facing delays, scrutiny, or rejection. This causes the impact of the ban to spill over from the gold trade to overall external commercial and banking transactions.

Fifth: Letters of Credit and Enhanced Guarantees

This channel appears clearly in trade finance operations, particularly documentary letters of credit.

When a Sudanese importer wishes to purchase goods from abroad, a Sudanese bank issues a letter of credit in favor of the foreign supplier. Due to the heightened risks associated with Sudan, the supplier or their bank may not be satisfied with the letter of credit issued by the Sudanese bank and may request confirmation or enhancement from a foreign bank with higher creditworthiness.

The confirming bank assumes the risk of non-payment by the Sudanese bank, foreign currency unavailability, political and sanctions risks, and compliance risks. The higher its assessment of Sudanese risks, the greater the compensation it will demand for confirming the letter of credit, or the more it will require the Sudanese bank to provide cash collateral or additional guarantees.

Accordingly, the ban may lead to:

  • Higher cash collateral ratios required from Sudanese banks.
  • Increased confirmation and enhancement fees for letters of credit.
  • A reduction in the number of foreign banks willing to confirm Sudanese credits.
  • Shortening of financing tenors or refusal to finance certain goods and counterparties.
  • Increased demand by foreign importers for advance payment instead of sales on credit.
  • Higher final cost of imports, which is passed on to consumer prices.

Practical experience indicates that some foreign banks previously requested relatively limited margins or guarantees (perhaps around 5% of the transaction value in some cases), while certain institutions now demand ratios that may reach 20% or more, depending on the bank, the commodity, and the nature of the client.

Sixth: Repercussions on Foreign Trade and the Macro Economy

Through the above channels, the impact of the ban may gradually extend to foreign trade and the macro economy. Higher costs of letters of credit, guarantees, and transfers increase the cost of importing food, medicine, fuel, and production inputs. Foreign suppliers may raise prices, shorten payment terms, or withdraw from the Sudanese market.

At the same time, narrowing the base of regular buyers for gold may lead to a decline in official export proceeds, reduced foreign currency inflows through the banking system, expansion of the parallel market, and increased pressure on the exchange rate and domestic prices.

This could create a negative feedback loop: weak official gold proceeds increase foreign liquidity risks, which in turn raises risk premiums on Sudanese banks and transactions, further elevating the cost of foreign trade and adding pressure on the balance of payments and exchange rate.

Conclusion

Considering the above, this decision opens a wide door for discussion, as it raises important questions, including:

  • Will the ban reduce Sudanese gold exports, or will it redirect them to other markets?
  • What is the impact of the decision on the Central Bank of Sudan’s foreign currency revenues?
  • Will it lead to increased smuggling and expansion of the informal economy?
  • How will it affect artisanal mining, on which hundreds of thousands of Sudanese depend?
  • What will be its impact on the exchange rate and monetary stability if official export proceeds decline?

Sudan Scope Economic Editor will address further insights on this topic in subsequent developments.