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repealed the investment ban, which has been in place since the Clinton
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
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
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
"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.
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
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