Can Sanctions Work in Myanmar?

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Can Sanctions Work in Myanmar?

Sanctions and mass boycotts have hurt the junta and driven investors away. Could stronger steps actually bring down the regime?

Can Sanctions Work in Myanmar?

Anti-coup protesters flash the three-finger salute during a demonstration in Yangon, Myanmar, Friday, May 14, 2021.

Credit: AP Photo

More than 100 days after the February coup in Myanmar, and with no sign of action from a divided U.N. Security Council, international sanctions and boycott campaigns have assumed an ever greater importance in denying any legitimacy to the new military junta.

Western governments responding to global outrage at the mounting bloodshed have expanded sanctions to target the vast labyrinth of the Myanmar military’s economic assets, which are based on two conglomerates: Myanmar Economic Holdings Limited (MEHL) and Myanmar Economic Corporation (MEC).

Even beyond sanctions, Myanmar is an increasingly risky climate for any business venture, with a collapsing economy and a floundering regime that has failed to establish any kind of governance beyond bullets and brutal repression.

Foreign investors in Myanmar are also under pressure from the daily exposures of embarrassing investment links to military-controlled companies, as a result of public scrutiny provided by a new research activist group known as Justice for Myanmar (JFM).

The investigative skills of JFM have led to the naming and shaming of dozens of companies, spurring local boycotts, such as the campaign against Japan’s Kirin Beer for its partnership with the military-owned Myanmar Beer. Kirin announced a suspension of dividend payments to the military in February.

Similar pressure has triggered Telenor, the Norwegian telecommunications provider, to write off $782 million from its Myanmar business following the coup, and India’s Adani Ports has been forced to review its military links over a major investment in a new sea-port that may be subject to U.S. sanctions.  

Remarkably, a recent business survey found that nearly 13 percent of the companies surveyed have ceased all activities in Myanmar since the coup. Many more companies are cutting back operations and actively considering the reputational risk of being tainted by their financial support to a regime that has joined the premier league of pariah regimes.

The Gaps to be Plugged

However, a crucial pillar of Western financial support for the faltering regime remains a tough nut to crack: the oil and gas sector. Montreal-based lobbyist for the military and former arms dealer Ari Ben-Menashe has admitted that payments from oil giants like Chevron are “pretty important” to Myanmar’s junta, “because they don’t have that many revenue streams right now.”

“Myanmar earns close to US$1 billion a year from natural gas sales. Much of this money is not paid directly from oil companies to the government. It flows through Myanma Oil and Gas Enterprise (MOGE), a state-owned enterprise with deep links to the military’s business empire,” Justice for Myanmar explained.

The group “calls for all businesses with commercial ties to MOGE to immediately cut ties,” arguing that “[i]f it’s business as usual, foreign investors in Myanmar’s gas will be funding an illegitimate and brutal military regime as they did before 2011, when the country was under full military rule.”

MOGE operates offshore gas fields in joint ventures with international firms, including U.S.-based Chevron and France’s Total. Over 400 civil society organizations have also called for Chevron to halt revenue payments to the military junta. However Chevron has hit back with a huge lobbying campaign in a bid to hang onto its lucrative oil and gas assets.

France’s Total is equally determined to resist any sanctions in the sector. Total’s gas operation in Myanmar has been propping up the military junta by diverting funds from gas sales to offshore accounts instead of the government, according to documents accessed by French newspaper Le Monde. The giant oil corporation retaliated by pulling all of its ads from Le Monde.

Despite the intransigence of the multinationals in the sector, the deputy director of Human Rights Watch’s Asia division, Phil Robertson, remains optimistic. “Everyone agrees that cutting off the oil and gas revenues to the Myanma Oil and Gas Enterprise (MOGE) and by extension, the SAC junta, is critical,” he told The Diplomat. “It’s just a matter of time until that is done. Frustrations are mounting in North America and Europe about the total lack of progress in ending the junta’s violence.”

Another gap that needs plugging in the sanctions regime is the deliberate obfuscation and silence of international finance institutions (IFIs), including the World Bank and Asian Development Bank, about their ambiguous relations with the military regime.

Paul Sein Twa, president of the Karen Environment and Social Action Network, or Kesan, has pointed out that “international finance institutions are currently funding projects worth an estimated $11 billion in the country, with direct loans, grants, guarantees, and funds going through financial intermediaries.”

Are all these funds now up for grabs as an economic lifeline for the junta? The World Bank’s own Yangon offices in Sule Square sit on land directly owned by the military junta. Its silence after an open letter dated February 17, 2021 from 218 civil society organizations called for IFI loans to Myanmar to be frozen has aroused suspicions about the World Bank’s human rights due diligence on disbursements.

“The SAC junta’s dictatorial rule only just passed its 100th day, but the suspension of these projects should have happened on day one,” Robertson said. “International campaigners are working hard to pressure the IFIs and ultimately they will succeed.”

The Trouble With Singapore

Within Southeast Asia, ASEAN’s slow, inadequate, and ambiguous response to the burgeoning Myanmar crisis – which threatens to spill over into Thailand and the region – is at odds with the U.N. human rights agenda of reversing the coup and pushing for stronger sanctions from member states.

Singapore, the largest investor in Myanmar, with $24 billion in cumulative approved investments as of December 2020, according to government figures, is not surprisingly an avid opponent of sanctions.

Singapore’s Foreign Minister Vivian Balakrishnan declared that the government “should not embark on widespread, generalized indiscriminate sanctions, because the people who will suffer most would be the ordinary people in Myanmar.”

“It is crucial for us in both good times and bad times to maintain this separation between politics and business, and let businesses make commercial decisions, investment decisions, on their own merits,” he added.

This Singaporean view is shamefully out of step will the progress made in recent years to encourage ethical and socially responsible business, as highlighted by a press release from the U.N.’s Working Group on Business and Human Rights.

Indeed, U.N. Human Rights Special Rapporteur Tom Andrews said that “businesses, both individually and collectively, should exert the maximum leverage on the military in Myanmar, to halt what the High Commissioner for Human Rights has said may amount to crimes against humanity.” In other words, businesses cannot look the other way when people are being massacred in a Yangon street near their office.

Singapore’s strong economic ties to Myanmar’s military regimes, past and present, reveal a darker side to this renowned international business hub. A 2009 EarthRights International investigation found that Myanmar’s military elite was “hiding billions of dollars of the people’s revenue in Singapore while the country needlessly suffers the lowest social spending in Asia,” in the words of ERI’s Myanmar coordinator, Matthew Smith.

Justice for Myanmar has now updated this information, claiming that approximately $5.7 billion of Myanmar’s foreign reserves are parked in commercial banks in Singapore and other countries, not including the $1 billion frozen by the U.S. Treasury in response to the coup.

Singapore’s central bank has issued a disclaimer, asserting “that there are no significant funds from Myanmar firms or citizens in the city state,” but Singapore is also well known for hiding sensitive information behind its tight banking secrecy laws.

Can Sanctions Work?

The debate over the effectiveness of sanctions is bedeviled by many complex variables, including the objectives of the sanctions and the amount of international compliance. In addition, the politics of sanctions could be differentiated into the good, the bad, and the ugly.

One widely claimed success story dates back to U.N. sanctions imposed on South Africa’s apartheid regime in 1977, with a mandatory arms embargo added in 1986. Joseph F. Jordan, the director of the Sonja Haynes Stone Center for Black Culture, explained in the New York Times that “sanctions were crucial to the defeat of apartheid” in South Africa.

By contrast, many unilateral sanctions imposed by the United States have failed because they aroused a storm of protest from people and government around the world. In the case of Cuba, U.S. sanctions were neither multilateral nor supported by the U.N. In 2019, the U.N. overwhelmingly supported an end to the U.S. embargo of Cuba, with the final tally 187 votes against three. These ideologically-driven sanctions have lasted for over 60 years, in defiance of annual condemnation by the U.N. General Assembly.

Between these two extremes – arguably the best and the worst examples of sanctions leveraged to attempt to force political change – where does Myanmar’s case stand?

Myanmar sanctions enjoy some modest U.N. backing from the human rights agency, and multilateral sanctions by mostly Western countries are now in force. But the threatened veto of Russia and China has blocked support from the U.N. Security Council, which has reduced the global impact of the sanctions in place. On the other hand, sanctions on the junta are bolstered by the appeals of the Civil Disobedience Movement inside the country for more and tougher sanctions from the outside world.

Meanwhile, sanctions seldom work in isolation. The international anti-apartheid campaign, for example, blocked South African teams from playing cricket and rugby matches. A Burmese athlete has already refused to participate in the Tokyo Olympics in protest. Will this avenue be pursued further?

Starving the Junta But Keeping Aid Flowing

Stronger targeted Myanmar sanctions that starve the junta of dollars could effectively complement ethnic armed resistance and peaceful protest from within the country. But development experts say the peoples’ bravery must not result in starvation.

Millions of people have been left with no income after losing their jobs for participating in boycotts, while tens of thousands are fleeing air strikes from the junta. As the military-run economy staggers toward bankruptcy, most Myanmar people are in dire need of humanitarian aid and economic assistance. Under the circumstances, there is an increasingly vital need for an emergency aid corridor from the outside world, but one that bypasses the state banking system to avoid funds being siphoned off by the military.

“If development banks really want to get aid to the people, there are ways to bypass the junta and reconfigure their aid model,” said Paul Sein Twa of Kesan. He urged the development banks to provide support to civil society by sending funds directly to them rather than the junta. Development banks, the EU, and Japan must transfer their aid disbursement to a kind of “wartime” distribution network of food and medical supply-lines facilitated by authorized NGO agencies.

Paul Sein Twa explained that the “Lebanon model” showed how this could be done: “These banks should prioritize cross-border aid to ethnic health organizations [and] replicate a framework tested in Lebanon, where the World Bank, U.N., and European Union developed a model to pool funds and disburse them directly to NGOs and businesses as a novel way to counter corruption.”

If sanctions on Myanmar can successfully mesh the various components – choking most sources of revenue for the regime, securing supply lines for aid from Thailand and possibly India, and driving the junta into ever deeper political isolation – then the doors could open to possible fragmentation and splits inside the army’s ranks. The big question is whether there is a political will to find a way to do this.

Sanctions on Myanmar will start to really bite if Chevron and Total can be dragged into line. Combined with indications that the United Nations General Assembly in September may not accept the weak credentials of the junta to occupy Myanmar’s U.N. seat, then the only path for the generals is surely all downhill.