The Cable

Former U.S. Officials Cash In on Myanmar

Former U.S. officials -- both critics and champions of Myanmar while working for the government -- are doing brisk business as consultants introducing investors to the newly open country.

Documents surfaced in Hong Kong last week indicating that former George W. Bush administration official Paul Wolfowitz received payment for introducing a famous local media mogul to officials of Myanmar's government. Although the documents couldn't be independently verified, the revelation follows a well-publicized trip in June 2013 that confounded many observers because Wolfowitz was deputy defense secretary when the United States condemned Myanmar's government for its treatment of political dissidents, tightening sanctions against the regime. If Wolfowitz, who is now head of the US-Taiwan Business Council, is a paid consultant on investing in Myanmar, formerly known as Burma, he is part of a long list of former officials benefiting from outside interest in the country.

The United States eased sanctions on Myanmar in 2012 after President Thein Sein released political prisoners, seemingly charting a course toward a more inclusive government. He has stumbled and the United States has lobbed new criticism about the government's treatment of journalists and minorities, but U.S. companies are testing the waters and expanding their business relationships in Myanmar.

Gap Inc., recently became the first U.S. retailer to makes clothes in Myanmar after a long, fraught process that included practical hurdles, such as a lack of labor laws, as well as more political ones. The company hired a slew of advisors and outside experts and consulted with both current and former U.S. officials.

It's unclear what Hong Kong's Jimmy Lai, owner of Next Media Ltd., wants to do in Myanmar. The media magnate is an outspoken critic of the Chinese government and owner of a splashy Hong Kong tabloid, Apple Daily, and a more salacious animation shop that creates cartoon versions of news stories. According to documents leaked to Hong Kong newspapers last week, he paid Wolfowitz $75,000 to further his business interests in Myanmar. A bank receipt viewed by Foreign Policy indicates that Lai paid Wolfowitz for "services in regards to Myanmar" in July 2013. The documents, which were earlier reported by the South China Morning Post, don't indicate what services Wolfowitz performed. Wolfowitz and Lai met with Thein Sein and other officials of Myanmar's government in June 2013, a month before the payment was issued. Lai and Wolfowitz did not return calls for comment about the payment and their trip to Myanmar. The American Enterprise Institute, where Wolfowitz is a fellow, and the US-Taiwan Business Council, where Wolfowitz has been chairman since 2008, both declined to comment.

There's a well-worn path between government and the private sector, which prizes not only expertise but also the access to current higher-ups that former officials can offer. Although it's not uncommon for companies to hire consultants when they enter new markets, many who work in the field speculated about what expertise Wolfowitz could offer about the country that he once helped to isolate.

Several former diplomats, on the other hand, have sought to be part of Myanmar's investment boom after working on renewing ties with the country. Kurt Campbell, a former top State Department official and architect of the rapprochement with Myanmar, quickly sought contracts from the country's newly rehabilitated government after leaving his post at the department. Campbell started a consulting firm called the Asia Group with his former deputy and bid last year with a consortium of other investors on a contract to renovate Yangon International Airport. Campbell's firm lost the initial round of bidding. The renovation has since been delayed, which could offer another opportunity to get in on the deal. The Asia Group did not respond to requests for comment about the company's business in Myanmar.

Other former State Department officials opt to create boutique firms that focus on only one issue or country. Former ambassador at large for global women's issues, Melanne Verveer, helped shape Gap's message when the company announced that "Made in Myanmar" vests and jackets would hit shelves later this summer. Verveer's firm, Seneca Point Global, focuses on women's issues and was consulted by the company on female empowerment, according to a Gap spokeswoman.

Erin Murphy, a former State Department official who worked on policy regarding the country, teamed up with a former sanctions expert from the Treasury Department to create Inle Advisory Group, a consultancy that helps companies understand what they can and can't do in the newly open Myanmar market.

Myanmar presents unique challenges because some sanctions against individual citizens there are still in effect. The State Department also requires U.S. businesses and individuals to apprise it of investments in Myanmar exceeding $500,000 and any stake in the oil and gas industry.

"Companies need help not only understanding who they're dealing with over there, but that if they deal with the wrong person they're breaking the law," said Ernie Bower, a senior advisor at the Center for Strategic and International Studies and head of the BowerGroupAsia consultancy. A vocal advocate of closer diplomatic ties with Asia, Bower also works in Myanmar, but has never worked for the U.S. government. His company has an office in Yangon where they advise foreign investors.

The only problem for former officials who've gone long betting on Myanmar is that the expected investment stampede hasn't materialized. After the initial buzz of interest, many companies are holding back, for now.

"Initially everyone wanted to understand what is this, what are the rules, but very few have decided that, 'This is very important to me; we've got to get in and do this now,'" said Bower.

Some analysts say they're expecting interest to keep growing, while others see companies waiting until after elections in 2015, a key test for the durability of Myanmar's tack toward democracy.

Photo via Office of the President of Myanmar

The Cable

Europe Finally Ready to Sanction Russia More Broadly

Western leaders say they've cobbled together a united front against Russia, a week and a half after the downing of Malaysia Airlines Flight 17 killed nearly 300 people.

U.S. President Barack Obama on Monday afternoon spoke to the leaders of Britain, Germany, France, and Italy in a joint call, during which they agreed on tougher sanctions against Moscow. The United States says Russia provided the training and weaponry to the militants in eastern Ukraine who shot down the passenger plane on July 17.

"They agreed on the importance of coordinated sanctions measures on Russia for its continued transfer of arms, equipment, and fighters into eastern Ukraine, including since the crash," a statement from the White House stated after the call.

Although the United States has long pushed for broader sanctions against whole sectors of the Russian economy, European leaders were reluctant until now.

British Prime Minister David Cameron said in a statement that the leaders agreed that "ambassadors from across the EU should agree [to] a strong package of sectoral sanctions as swiftly as possible."

EU leaders could announce new sanctions as early as Tuesday, July 29, when they meet. The United States often follows EU moves with measures of its own.

Although the European Union agreed last week to consider sanctions against Russia's energy, defense, and financial industries, it was unclear how far they would go. It's still uncertain how broad the sanctions will be, but the call on Monday indicated a change of tone from last week, when EU politicians were trading barbs over whether Britain or France was more reliant on Moscow's money.

The EU will likely restrict each industry slightly, rather than imposing a full ban -- such as an arms embargo. That approach would help address the fundamental problem of different EU countries relying more on Russian business in different industries. London's financial district, for instance, has many ties to wealthy Russian businessmen, whereas in France it's the defense industry that could suffer if it can't fulfill a $1.6 billion deal to sell warships to Moscow. The new measures could also target technology provided by Western companies that Russia relies on in its energy sector, which the United States has also considered.

Analysts have predicted further sanctions against Russian industry, after Moscow's continued intransigence since the crash in the face of Western threats. Eurasia Group's head of European risk analysis, Mujtaba Rahman, said in an analyst's note Monday that he expects more sanctions this week and that Moscow would respond, though likely in kind with economic measures, not with tanks.

"Russia will apply at least informal retaliation against U.S. companies, impairing their operations through health and safety inspections and customs delays," Rahman said.