U.S. Opens Investment in Myanmar Oil and Gas, Over Suu Kyi’s Advice

By Carey L. Biron Reprint | | Print |

WASHINGTON, Jul 12 2012 (IPS) - Following on a May announcement, the U.S. government on Wednesday moved to implement its most significant rollback in longstanding sanctions on Burma, also known as Myanmar.

Putting an end to what has been rumoured to be an intense debate within his administration, President Barack Obama’s declaration clears the way for U.S. companies to move into Myanmar’s rich energy sector.

“Easing sanctions is a strong signal of our support for reform, and will provide immediate incentives for reformers and significant benefits to the people of Burma,” President Obama said Wednesday, signalling the government to begin issuing licenses to companies wishing to invest in Myanmar.

He hastened to note that “Burma’s political and economic reforms remain unfinished,” saying the government “remains deeply concerned about the lack of transparency in Burma’s investment environment and the military’s role in the economy.”

U.S. companies investing in Myanmar will now be required to file regular reports on their activities in the country.

Secretary of State Hillary Clinton, who arrived in Cambodia on Wednesday, is expected to lay out more details on how the sanctions regime will be wound down during a major meeting with U.S. business executives in Phnom Penh, on the sidelines of a meeting of ASEAN foreign ministers.

Rights groups and some U.S. lawmakers are reacting to the announcement with disappointment, saying the administration has ignored recommendations at the behest of U.S. corporate interests.

“As it stands now, investment in many of the most attractive sectors of the Burmese economy is likely to worsen the human rights situation while directly benefitting individuals and entities responsible for rights abuses,” warned a statement from several Washington-based advocacy groups, Freedom House, Physicians for Human Rights, United to End Genocide and the U.S. Campaign for Burma.

“What little progress has been accomplished in Burma – as well as the prospects for lasting peace, human rights and democracy – is being undermined by failures in U.S. decision-making.”

Wide-ranging U.S. sanctions have been in place on Myanmar for decades, but the United States has emerged as a primary supporter of the new quasi-civilian government, which has been in office since early 2011 after taking over from decades of military rule. Since then, a suite of unprecedented but still contentious reforms have been put in place that, cumulatively, have done much to open the country’s civil space.

Of particular importance for many international powers, in April these reforms culminated in relatively free parliamentary by-elections, which resulted in opposition leader Aung San Suu Kyi winning a seat in the Parliament along with several dozen other members of her National League for Democracy (NLD).

Suu Kyi herself recently urged foreign governments not to allow investment in the state-owned Myanmar Oil and Gas Enterprise (MOGE), citing its lack of transparency and related worries over the extractive industry generally.

“The (Myanmar) government needs to apply internationally recognised standards … Other countries could help by not allowing their own companies to partner (with) MOGE unless it was signed up to such codes,” Suu Kyi said in mid-June.

Yet while President Obama on Wednesday did specify that U.S. companies will not be allowed to invest in entities owned by the Ministry of Defence of the armed services, these exemptions technically no longer cover MOGE.

“By allowing deals with Burma’s state-owned oil company, the U.S. looks like it caved to industry pressure and undercut Aung San Suu Kyi and others in Burma who are promoting government accountability,” Arvind Ganesan, with Human Rights Watch, said on Wednesday.

“The Obama administration promised to replace sanctions with responsible investment in Burma but instead has opened up every sector without adequate measures to ensure that companies act responsibly.”

Insufficient groundwork

For many observers, the most significant concern is not necessarily the sanctions rollback, the broad contours of which had been hinted at in May. Rather, the fear is that insufficient groundwork has been done to ensure that foreign investment – particularly in the extractive industries – do as little harm and as much good as possible for local communities in Myanmar.

For months, rights groups in and out of Myanmar have been urging the U.S. government to update its so-called specially designated nationals (SDN) list – a black list of alleged human-rights abusers and others with whom entities in the United States are barred from investing with – before taking the final step to allow U.S. companies into Myanmar.

In having failed to do so, “They’ve put the cart before the horse,” Jennifer Quigley, advocacy director for the U.S. Campaign for Burma, told IPS.

“Now you’ll have people going in and establishing connections with those who should be on the list – the oligarchy that actually has the businesses in Burma,” Quigley says.

“In the future, even once the list is updated, those investments will likely be grandfathered in, negating the affect of adding that individual in the first place. You’re just entrenching the status quo.”

Quigley says that a similar dynamic was seen in 1990, when the U.S. petroleum company Unocal – now Chevron – was grandfathered in on its Myanmar investments despite the imposition of new sanctions.

Indeed, the Unocal example has remained a stark warning for many longtime Myanmar observers during the debate over how and when to allow U.S. investors back into the country. In recent months, the pro-business lobby in Washington has been arguing that U.S. companies, bound by U.S. law, would have a positive effect if allowed to operate within Burma.

On Wednesday, for instance, John Murphy, an official with the U.S. Chamber of Commerce, stated, “It’s a false choice to say we have to choose between human rights and business interests in Burma. Ensuring U.S. companies have a strong presence in Burma will help raise labour and environmental practices and corporate social responsibility.”

Yet Unocal’s operations in the country following the 1990 exemptions led it to become the junta’s top moneymaking operation for years.

Further, the primary issue at stake may not be the intention of U.S. business, but rather the pre-emptive actions taken by the Myanmar military in advance of foreign investment.

“The United States is giving itself a pat on the back for refusing to include military-backed business, but there’s no prohibition on the military’s ability to go in and clear out villages, to use forced labour in the name of foreign investment,” Quigley says.

“There has been a pandemic of land confiscation in Burmese tied to foreign investment, mostly connected to businessmen who want to set up special economic zones. It seems clear that some sort of safeguards need to be put in place to deal with these issues.”