Why sanctions fail (Analysis)

Why sanctions fail (Analysis)

Bo Kyaw Nyein
Mizzima News (www.mizzima.com)
February 8, 2008

Many wonder why American-led sanctions against the Burmese junta have not yielded any results after all these years. Meanwhile, the Bush administration is now trying a new approach called "targeted sanctions". In this author's opinion it doesn't matter what new approach the administration may decide to take, it will again fail. Former oilmen like Bush and Cheney are either ignoring obvious developments or pretending not to notice the facts.

Americans like to emphasize rhetoric and impose sanctions based on the news of the day, but they choose to ignore the most significant income for Burma's generals. A few years back, the topic was garment factories. The wise men in the U.S. Congress wrote a sanction law to shut down a few garment factories in Burma without studying the consequences it could or could not have on the Burmese junta. The target was the assumed $300 million income generated from the garment industry.
In reality just a portion of the income, in the form of briberies, actually reached the generals' pockets, and the loss of income neither hurt the government machinery nor stopped the junta from purchasing military hardware or a nuclear reactor. Worse yet, many Burmese workers lost their jobs when the factories were shut down and many female employees became sex workers. The junta's propaganda machine blamed Burma's main opposition party, National League for Democracy, and the U.S. Congress for these negative effects.
After the Saffron Revolution the SPDC held an annual gem show, which became the focus of the international media. Again the U.S. Congress danced to the tune of the media and wrote a new sanction law to ban the export of Burmese gems. It aimed to close loopholes which allow third countries to export gems originating from Burma.
But I would just like to shout at the top of my lungs: 'Mr. Bush, it is energy stupid!'
Human Rights Watch, in a report on Burma in November 2007, listed 27 companies based in 13 countries as having investment interests in Burma's oil and gas fields. According to this report, thirteen of those companies are entirely or partially owned by foreign governments, and these state-controlled companies are invested in 20 of the 30 projects currently underway.
Gas revenue in Burma in 2006 was up $1 billion from the prior year, in part due to higher prices globally. Revenues are likely to have further increased in 2007 as world prices have surged. Future gas revenues are anticipated to increase even further once gas production from a massive offshore gas project, the Shwe Project, goes online. A South Korean-led consortium discovered the gas in the Shwe fields and is preparing to produce it for export. Several buyers vied for the rights to purchase the gas, with India and China among the most active bidders. Estimates of the gas yield from the Shwe deposits range from $37 to $52 billion, and could lead to profits for the Burmese government of $12 to $17 billion over 20 years.
Another Human Rights Watch report, from October of last year, says that at present the SPDC receives the bulk of its gas money from the onshore Yadana and Yetagun gas fields. The Yadana consortium is led by Total of France and includes UNOCAL (now Chevron) of the United States and Thailand's state-controlled PTT Exploration and Production Co Ltd (PTTEP). The Yetagun consortium is led by Malaysia's state-owned Petronas, and includes Japan's Nippon Oil as well as PTTEP.
According to these reports, Burma's military government earned approximately $2.16 billion in 2006 from gas sales to Thailand, its single largest source of revenue. The Asian Development Bank says Burma's junta exported goods worth $4.3 billion and imported goods worth $3.9 billion in 2006. It is obvious that as long as the Burmese junta is getting cash from foreign-financed oil and gas projects; they can easily withstand sanctions imposed by U.S. and Western democracies.
Furthermore, Burma fits perfectly into China's energy security plan. Chinese politicians and policy makers are long-term thinkers and they are concerned that oil routes to China can be blocked in times of conflict at the Strait of Malacca by the U.S. 7th fleet. China's energy policy is thus to exploit any source that can be accessed regardless of politics.
Deals signed with Sudan, Nigeria and Iran are proof of this approach. China has just signed a contract to develop Iran's Yadavaran oil and gas field, which exceeds $2 billion in value. In addition China is working with Russia, Iran, Uzbekistan and other Central Asian countries to build gas and oil pipelines to eastern China.
From sources inside Burma and personal discussions with Chinese officials, it is clear that China's interest in Burmese gas alone is minuscule. China's main interest is to develop a deep sea port in Kyauk Phru, Arakan's second biggest port, and use it as a transfer point for Middle Eastern oil to China's inland provinces, thus eliminating the need to ship its oil through the Strait of Malacca.
Another player to watch is Saudi Arabia. According to Wang Hongjiang from Xinhuanet.com, Burma may receive interest-free loans from Saudi Arabia, which established diplomatic relations with Burma in August 2004 and opened an embassy in Yangon in December 2005.
According to Dr. Sein Myint, a Burmese expert with more than 25 years experience in the oil industry, Burmese oil officials entered discussions with Middle Eastern equity investors in 1995/1996 to build oil refineries in Burma and to export diesel to India. The negotiations fell through then, but Saudi Arabia is hungry to find new places to build refineries to process its oil, as more developed countries are resisting building new refineries due to environmental concerns. Burma would be a perfect place to build new Saudi refineries. Burmese generals could not care less about the environmental issue.
With Saudi money and clout, the income of Burma's generals could be significantly increased, and Americans would find it hard to pressure the Saudis.
The fall of the U.S. dollar is also helping the junta evade the full impact of U.S. sanctions. The Burmese junta uses the European SWIFT network to bypass currency and financial restrictions imposed upon the junta by U.S. sanctions and they are pressuring trading partners for Euro-based transactions rather than dollar-based transactions. With the value of the dollar declining, one of my sources inside Burma has reported that the Burmese generals are confident they could move to a Yuan-based transaction system to fight U.S. currency restrictions.
The Burmese generals are no fools. They have tightly integrated India, China, Korea, Malaysia, Thailand and Russia into their energy network. If Burma becomes the southern leg of China's energy security plan, Burma's generals will be further buttressed by a growing global power. If the junta can build strong relations with Russia and Saudi Arabia as well, it will become very hard for any U.S. administration to pressure all these global players to sacrifice national interest in the name of democracy.
I hope the incoming American administration and a new Congress will realize that rhetoric alone and patchwork sanctions will not solve Burma's crisis. We need to look deeply into the issues and develop a sound policy to effectively help the long suffering people of Burma. We may need a tough new sanction law like the Iran-Libya Sanctions Act (ILSA), which penalized foreign companies daring to invest more than $20 million in Iran's oil and gas industry. Until and unless America blocks this energy revenue, the Burmese generals will laugh all the way to the bank.
This author supports economic sanctions, not for economic reasons but as a show of symbolic political support for Daw Suu. Daw Suu is the HOPE for Burma and it is important that Burma's iconic leader enjoys global support.
Sanctions have not met their original goal of forcing the SPDC to the negotiating table because Burma's generals and their partners work hard to find ways and means to bypass sanctions, while the U.S. and its partners are inclined to employ a patchwork approach without comprehensive plans for implementing sanctions and monitoring the effects.
I hope American policy makers will learn from failed Iraq and Iran policies, reevaluate, and formulate policies that will truly bring positive results for Burma. Closing the energy loophole may be the start.