Ivory Coast: Financial Noose Tightens on Defeated President

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Sia Kambou / AFP / Getty Images

People wait outside a branch of Ecobank in Abidjan, Ivory Coast

More than two months after losing Ivory Coast's presidential election, incumbent Laurent Gbagbo is still refusing to yield to the internationally recognized President-elect Alassane Ouattara. In an attempt to dislodge Gbagbo, the European Union and the U.S. have slapped economic and travel sanctions on his regime. And there are signs they might be starting to bite.

Citizens of West Africa's second largest economy are for the first time experiencing the cooking-gas shortages and power cuts that used to be the preserve of their poorer neighbors. The country's sizable middle class has quietly begun to leave, while the number of street beggars has visibly increased. And an exodus of international banks from Ivory Coast prompted Gbagbo's government to announce on Feb. 17 that it will nationalize two of the country's biggest lenders. The question now, analysts say, is which of the two presidential claimants will best be able to capitalize on all of this social discontent.

The week began with the closures of the local units of BNP Paribas and U.S banking giant Citigroup, who cited security and liquidity concerns as their reasons for leaving the country. With other banks imposing a $100-a-day limit on cash machines, a run on banks ensued, prompting scuffles outside many larger branches. By Friday, all the international banks, including Standard Chartered and Société Générale, had shut shop. In response, Budget Minister Koné Katinan accused French-owned BNP Paribas of acting in a "purely criminal, racist" manner and said the government would nationalize SocGen and BNP Paribas, sparking angry denunciations from the French government.

"Nationalization is a sign of absolute desperation within Gbagbo's regime," a Western diplomat tells TIME, asking to remain anonymous. Insiders say the bank seizures are also a sign that Gbagbo is worried the African Union — which has launched a number of failed diplomatic efforts to persuade him to step down — will likely reiterate that it recognizes Ouattara as President when a five-state panel visits Ivory Coast's commercial capital Abidjan next week.

Cut off from the regional BCEAO central bank, which recognizes Ouattara as head of state and so will accept only his signature, Gbagbo's administration last month raided the bank's offices in Abidjan. Meanwhile, the regional bourse has quit the country after it had a visit by the pro-Gbagbo paramilitaries. "They asked us for cash, as if we keep sacks of money lying around in a stock exchange," a trader, who asked not to be named for fear of reprisals, told TIME. "It's worrying to imagine these are the people who will be in control of the economy."

A cocoa export ban called by Ouattara to starve Gbagbo of a crucial source of funding has left sacks of beans piled in warehouses in the world's biggest cocoa grower, which provides almost 40% of global supply. Gbagbo's government is demanding exporters continue to pay taxes, although their beans can't leave the country.

Now Ouattara's Prime Minister, Guillaume Soro, is calling for an "Egypt-style" revolution to oust Gbagbo. But many Ouattara supporters will be reluctant to respond to the appeal. Since the polls on Nov. 28, state-sponsored violence has led to at least 300 deaths — most of them Ouattara supporters — according to the U.N. And on Saturday security forces fired live ammunition and tear gas at protesters in Abidjan.

Meanwhile, Ouattara's government has spent over two months trapped in the U.N.-guarded Golf Hotel under siege by Ivorian troops, who remain loyal to the incumbent President. Unable to leave the hotel — and banned from state media, which is tightly controlled by Gbagbo — Ouattara hasn't made a public appearance since the election results were announced, leaving some Ivorians to believe their President-elect may have fled the country.

"I don't see how we can be asked to go into the streets. This is not Egypt. The police will kill us," said Awa, a 29-year-old teacher, as she waited three hours to withdraw money for medicines her mother needs, only to find the cash machines empty. "At the very least, we need to see Ouattara himself first."

Whether Gbagbo continues to cling to power depends on salaries being paid, both to civil servants and — crucially — the armed forces who are propping him up. With funding sources drying up, his regime has been talking of launching its own currency. "It's going to become increasingly difficult for him to maneuver," says Standard Bank emerging-market strategist Samir Gadio. "Launching his own currency could buy him some time because he'll be able to pay salaries. But obviously the price is hyperinflation and economic isolation." And global investors already worry that Africa's former economic powerhouse will plunge into a downward economic spiral if Gbagbo holds on at all costs.

So where will Ivory Coast be in one month's time? "It's hard to have a clear picture. At the end of the day, financial systems can collapse, but the regime won't go if there's no one to push it," says Gadio. For some, though, the increasing radicalization of Gbagbo's camp is tentative evidence that the groundwork has been laid for Ouattara's supporters to dislodge him. "This week has been a major game changer," says the Western diplomat. "It suggests the regime is ending."