U.S. reportedly won’t punish firm aiding Mugabe

WASHINGTON —  U.S. officials will not take any action against a German firm that is providing key support to Zimbabwe’s brutal regime and is also an important contractor to the American government, a Western diplomat said.

The firm, Giesecke & Devrient, is printing trillions of Zimbabwe dollars that the government of President Robert Mugabe is using to try to prop up the country’s collapsing economy, but also to pay off supporters and suppress its political opposition.

U.S. officials have regularly denounced the regime, which Secretary of State Condoleezza Rice has called an “outpost of tyranny,” and have been weighing new ways to bring pressure on it. But according to the Western diplomat, U.S. officials have decided against sanctioning the firm because of its role in supplying secure identification documents and bank notes.

“The issue has been raised within the State Department and other agencies but there was a decision not to do anything,” the diplomat said. “This company is important to the U.S. government.”

John Rankin, a spokesman for the Treasury Department, which is the lead agency on issues of economic sanctions, said the department does not discuss sanctions it is considering.

Another U.S. official, who spoke on condition of anonymity when discussing internal deliberations, said American officials have engaged in “brainstorming” on how to increase pressure on Mugabe’s regime, but are not considering any penalties that would apply to Giesecke & Devrient.

The United States and other world powers have been pressing Mugabe, who has been accused of holding power through fraud and intimidation, to allow fair elections. But with a presidential runoff election scheduled June 27, international human rights observers say the regime continues to use widespread violence to try to ensure its victory.

Giesecke & Devrient, a Munich-based firm with revenue of about $2 billion a year, is the world’s second-largest printer of bank notes, with offices in 53 countries. The company’s office in Dulles, Va., supplies the federal government under a contract worth $381,200.

In Zimbabwe, the firm provides bank notes for half the nation’s currency. With the country’s inflation at 2,000,000%, the regime keeps its presses running constantly at its plants outside Harare, the capital.

Some experts contend that the mass printing has destroyed food markets, made ordinary business investment impossible, and contributed to hunger and disease in the economically devastated country.

At the same time, the currency was used to provide bonuses to the army and to some unions in an attempt to ensure their loyalty to the government.

Officials at Giesecke & Devrient’s U.S. office didn’t respond to a request for comment. Though the government of German Chancellor Angela Merkel also has complained about the Zimbabwe regime, German officials have said they have no grounds on which to impose sanctions on the company.

The United States has had a minimal economic relationship with Zimbabwe, which means that it has little leverage with the government. Because the firm is based in the territory of an important American ally, any decision to pressure or sanction it would be diplomatically sensitive, and would require discussions with German officials.

In addition, economic sanctions can harm Zimbabwe citizens as well as the government.

U.S. officials have applied sanctions aimed at Mugabe and more than 100 members of Mugabe’s party, ZANU-PF. The sanctions limit travel and freeze assets under U.S. control, and bar U.S. firms from doing business with them. U.S. officials have not imposed broader economic sanctions, which could prohibit U.S. firms from doing business with Zimbabwean firms.

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paul.richter@latimes.com

A Times staff writer in Mozambique contributed to this report.