Posted By Josh Rogin 
Wednesday, July 11, 2012 - 3:06 PM
President Barack Obama announced Wednesday he is lifting the investment ban on Burma, allowing U.S. companies to enter Burma's lucrative energy sector, above the objections of Nobel Peace Prize winner Aung San Suu Kyi.
"Today, the United States is easing restrictions to allow U.S.
companies to responsibly do business in Burma," Obama said in a
Wednesday statement. "President Thein Sein, Aung San Suu Kyi and
the people of Burma continue to make significant progress along the path
to democracy, and the government has continued to make important
economic and political reforms. 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."
Obama said that that entities owned by the Burmese armed forces and
the ministry of defense will not be covered by the general licenses to
invest in Burma that the administration is issuing to U.S. companies
today.
"Burma's political and economic reforms remain unfinished. The
United States Government remains deeply concerned about the lack of
transparency in Burma's investment environment and the military's role
in the economy," he said.
He also noted that U.S. companies will be required to report on
their new activities in Burma and adhere to international corporate
governance standards. The president signed a new executive order
expanding sanctions against human rights violators in Burma at the same
time it repealed the investment ban, which has been in place since the
Clinton administration.
Wednesday's announcement comes after an intense internal debate
over whether to include Burma's energy and natural resource sectors in
the new general licenses. Industry groups such as the U.S.-ASEAN
business council, working with oil companies like Chevron, lobbied hard
and successfully for a full repeal of the investment ban. They were
supported by some lawmakers, such as Sen. James Inhofe (R-OK) and Jim Webb (D-VA).
Human rights groups and other lawmakers, including Sens. John McCain (R-AZ) and Joe Lieberman
(I-CT), cautioned the administration to go slow and issue only a
partial repeal of the investment ban. They especially wanted the
administration to retain bans on U.S. companies working with the Myanmar
Oil and Gas Enterprise (MOGE) the state controlled entity through which
all energy sector business flows, which they say is still heavily
influenced by the Burmese military.
"We share Aung San Suu Kyi's concerns that MOGE's operations lack
transparency, that it remains overly influenced by the Burmese military,
and that the large amounts of foreign investment flowing into MOGE are
not sufficiently accountable to the Burmese people or its parliament,"
the senators wrote to Secretary of State Hillary Clinton in a July 3 letter.
"We are not opposed in principle to U.S. investment in Burma's oil
and gas industry. However, it is critical that foreign investment in
Burma be carefully structured to benefit the Burmese people and
strengthen the political and economic reforms that are at last underway
there."
Suu Kyi, who was elected to Burma's parliament in April after more
than two decades of house arrest, last month specifically asked foreign
governments not to allow their companies to partner with MOGE at this
time.
"The Myanmar Oil and Gas Enterprise (MOGE) ... with which all
foreign participation in the energy sector takes place through joint
venture arrangements, lacks both transparency and accountability at
present," she said June 14
in a speech in Geneva. "The [Myanmar] government needs to apply
internationally recognized standards such as the IMF code of good
practices on fiscal transparency. Other countries could help by not
allowing their own companies to partner [with] MOGE unless it was signed up to such codes."
The Obama administration has repeatedly said that it would follow
Suu Kyi's lead while cautiously opening up to closer ties with the
Burmese regime. The new U.S. ambassador to Burma Derek Mitchell arrived there today.
But in this case, supporters of a more cautious path of easing
Burma sanctions inside the administration lost out. They included the
State Department Bureau of Democracy, Human Rights, and Labor (DRL), let
by Assistant Secretary of State Michael Posner, and those in the National Security Staff focused on human rights, such as Senior Director for Multilateral Affairs Samantha Power, according to sources familiar with the internal discussions.
Following a Deputies Committee meeting last week, the side that advocated for a broader repeal of
the investment ban won out. That side included the State Department's
East Asian and Pacific affairs bureau (EAP), led by Assistant Secretary Kurt Campbell, the economics office at State led by Undersecretary Robert Hormats,
and the Treasury and Commerce departments. Hormats is set to travel to
Burma next week with a contingent of business leaders in tow.
Human rights experts saw today's move as a change from the administraion's original promise
to pursue targeted easing of the investment ban. Administration
officials promised a sector-by-sector approach whereby the
administration would have begun by focusing on sectors of the economy
most likely to help the Burmese people, rather than the country's
military.
The idea was to encourage development of tourism, banking,
agriculture, and manufacturing sectors, while maintaining investment
bans on industries such as natural gas, mineral extracting, and timber,
which are mostly controlled by the military.
"The pro-industry lobby convinced the administration to back off
from the sector-by-sector approach and issue the general license which
allows companies to go into any sector, including oil and gas," said
Human Rights Watch Washington director Tom Malinowski.
He said that U.S. companies understandably don't want to lose out
on market share due to the influx of European corporations now set to do
business with Burma's energy and mining sectors, but opening up MOGE to
vast new sources of financing could have a negative effect on Burmese
political reform.
"All the money the Burmese military uses to finance their wars in
the ethnic areas and their procurement of illicit materials from North
Korea comes from MOGE. If the military wants to hold on to power and
resist civilian oversight, this is what would finance their ability to
do that. It represents the bulk of the regime's hard earnings,"
Malinowski said.
Once corporations make long-term investments in Burma's energy
sector, it will be almost impossible to get those countries to abrogate
those agreements if the tide turns in Burma and the U.S. government
decides it wants to reinstate the investment ban. Chevron's stake in
Burma was grandfathered in when the investment ban was originally instituted.
Overall, the concern in the human rights community is that the U.S.
government is now making diplomatic decisions about Burma policy based
on economic considerations, and not national security or the desire to
see the Burmese people live a better life.
"For the last 20 years or so, U.S. policy on Burma was focused on
promoting a democratic transition and nonproliferation. The desire of
U.S. based companies to get contracts was never on the table until the
last couple of months. The fact that is now being balanced against
longstanding U.S. interests in Burma really does represent a shift in
priorities," Malinowski said.
"The bottom line here is that you have Aung San Suu Kyi asking the
administration to hold up on allowing unfettered investment in Burma,
and the administration went with Chevron over Aung San Suu Kyi."
NSC spokesman Tommy Vietor told The Cable that the
administration shares concerns about MOGE and views MOGE as meriting
closer oversight than other firms in Burma. U.S. investors must alert
the U.S. government within 60 days of entering into any contract with
MOGE, he said
"We are working very hard with MOGE and the wider Government of
Burma to quickly improve its operations. We have been pleased with
MOGE's and the Government's commitments in this regard, which include
engagement with the Extractive Industries Transparency Initiative
(EITI)," Vietor said. "While we share these concerns we believe that
there will be benefits both to the people of Burma and to U.S. investors
in allowing U.S. companies, in a careful, calibrated and responsible
manner, to engage with MOGE."
Aung Din, executive director of the U.S. Campaign for Burma, told The Cable today
that Obama's action has freed the Burmese regime and military from any
fear of being substantively sanctioned going forward.
"I am sure Obama will be appreciated by the Burmese generals,
cronies and U.S. corporations, but not by the people of Burma," he said.
Soe Than WIN/AFP/Getty Images
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