Plans Afoot to "Suspend" Sanctions on Myanmar to Boost Investment, Trade

Speaking after a meeting with Myanmar's opposition leader Aung San Suu Kyi on Friday (13 April), the United Kingdom prime minister David Cameron asserted that "if we really want to see the change of greater freedom and democracy in Burma [Myanmar], we should respond when they take action". He said that "for the sake of a country that has been crying out for freedom after decades of dictatorship, and that is crying out for a stronger economy after so much grinding poverty, it must be worth taking that risk". Suu Kyi reciprocated, saying that "this would strengthen the hands of the reformers—not just the suspension but the fact that there is always a possibility of sanctions coming back again if the reforms are not allowed to proceed smoothly".

This statement is significant on a number of fronts. First and foremost, it represents a U-turn on the part of the UK government, who had, until now, been among the staunchest supporters of the EU's targeted sanctions regime. With the UK now obviously in favour of undoing sanctions, a key obstacle blocking the removal of sanctions when the annual review of the EU's sanctions regime takes place on 23 April has been removed. Secondly, the move is arguably turning the situation on its head: rather than providing an incentive to continue with its reforms programme and to satisfy a range of benchmarks, that of a future removal of sanctions, the international community is now moving to provide disincentives if the government halts the reforms. However, in practice, it is unclear how the "suspension" of sanctions is different from their "lifting". The procedures to reinstate sanctions are likely to be similar, if not the same. Thirdly, the move represents a significant shift on the part of Suu Kyi, who has been at the forefront of calling for sanctions ever since her party, the National League for Democracy (NLD), was denied power after winning the 1990 elections by a landslide. Again, the change in wording to "suspend" rather than to "lift" sanctions—even if not very different in practice—is likely to have been crucial to bring about that change of heart. Given her role as a figurehead for the democratic movement in the country, Suu Kyi's voice on the sanctions issue is seen as crucial in the West.

Sanction Semantics

The new phraseology of a "suspension" of sanctions has already been willingly adopted by the governments of Australia and Norway, both of whom moved to "suspend" some restrictions over the past weekend. This is likely to be followed by most Western countries and blocs, with imminent moves expected on the part of the European Union, among others. There follows an overview of the current state of the main actors who have enacted sanctions regimes on Myanmar over the past two decades:

European Union: The EU is widely expected to significantly ease its restrictions when the sanctions regime against Myanmar comes up for annual review on 23 April. So far, the pro-sanctions stances of countries like the UK have kept in check those countries who have traditionally sought a less restrictive regime, including France and Germany. Following Cameron's U-turn last week, the EU looks almost certain to "suspend" most sanctions, except its arms embargo. The EU's arms embargo on Myanmar was introduced in 1990, and other trade privileges have been successively withdrawn, with a Common Position adopted in 1996. Sanctions were tightened in 2003, 2004 and again in 2007. Newer provisions include the prohibition of EU companies from investing in state-owned enterprises. The EU last extended its sanctions regime on 27 April 2010, although on 15 April 2011 and 23 January 2012 a number of amendments were made, including an easing of travel restrictions and asset freezes for certain individuals (see EU – Myanmar: 24 January 2012: EU Suspends Some Visa Bans Against Myanmar Officials).

United States: United States Secretary of State Hillary Clinton announced on 4 April that the administration of Barack Obama would begin easing travel and financial restrictions on Myanmar, and name an ambassador in response to the formerly military-run country's landmark 1 April by-elections (see US – Myanmar: 5 April 2012: US Moves to Ease Sanctions Against Myanmar). The easing of restrictions comprises five steps: the restoration of full diplomatic ties with Myanmar after a two-decade gap by appointing an ambassador; the establishing an in-country US Agency for International Development (USAID) mission and supporting the establishment of a UN development programme to boost annual aid to the country; allowing private US organisations to pursue greater aid work inside Myanmar in areas such as health, education, and democracy building; facilitating travel to the US for selected government members and parliamentarians; and the targeted easing of investment sanctions to help to accelerate economic modernisations and political reform, with the priority given to allowing the use of credit cards in Myanmar. However, removing all the sanctions, particularly those applied to the exporting of jade and timber that need congressional approval, will probably take years rather than months, and will be subject to specific conditions, such as the freeing of all remaining political prisoners and a free and fair general election, which is scheduled for 2015. Tellingly, Clinton did not give details on the exact investment sanctions measures set to be lifted or a timeframe, which are still under government consideration, leaving room for US manoeuvring. The US was the first country to impose sanctions in 1988, and in 1997, Executive Order (EO) 13047 was issued, prohibiting new private US investments into the country. Since then, a raft of legislation has been passed extending the sanctions regime, which is based on various US laws and Presidential Executive Orders. This includes the Burmese Freedom and Democracy Act of 2002 (BFDA), aimed at restricting the financial resources of members of the former military government. The BFDA was supplemented by EO 13310, which blocked all property and interests in property by individuals listed in the EO's annex, or as determined through continuous updates by the Department of the Treasury's Office of Foreign Assets Control (OFAC). Similar EOs were issued following the 2007 uprising on 18 October 2007 (EO 13448) and on 30 April 2008 (EO 13464). The latest sanctions legislation signed into law was the Tom Lantos Block Burmese JADE (Junta's Anti-Democratic Efforts) Act of 2008 (JADE Act), which bans the importation of all jadeite and rubies mined or extracted from Myanmar, while also imposing mandatory blocking sanctions on individuals associated with their trade.

Australia: Australia's Ministry for Trade and Competitiveness issued a media release today (16 April), saying that "the Australian Government is supporting the democratic transition underway in Burma by easing autonomous sanctions and normalizing trade". Foreign Minister Bob Carr said that "reducing our sanctions and encouraging trade recognise the far-reaching political, economic and social reforms we are witnessing in Burma in recent times", adding that "it is incumbent upon us now to support Burma in practical ways and seek greater engagement that will encourage these reforms to take root and sustain the conditions for further change". More specifically, the statement reads that travel and financial restrictions will be reduced from 392 down to 130 individuals. The restrictions were already eased in January this year (see Australia - Myanmar: 10 January 2012: Australia Rewards Reforms and Eases Sanctions List in Myanmar). These restrictions were implemented following Myanmar's security crackdown in September 2007 under the Banking (Foreign Exchange) Regulations 1959. While Australia has not imposed trade and investment sanctions on Myanmar, it has discouraged such activities with the country, serving as a strong disincentive for companies. Like the US and the EU, Australia has named broad benchmarks for progress that would need to be fulfilled in order for its sanctions regime to be lifted completely, including the "release of all political prisoners" and "the peaceful resolution of ethnic conflicts".

Norway: Norwegian foreign minister Jonas Gahr Stoere issued a statement yesterday (15 April), in which he announced that Norway will discontinue its economic sanctions against Myanmar, Agence France-Presse reports. Mirroring the perceptions of other Western leaders, Stoere said that "recent developments in Myanmar demonstrate that the authorities are serious about reforms and that should be welcomed", adding that "what Myanmar needs now is contact with the rest of the world, economic development and international aid". At the same time, he cautioned that "it is a message to those who oppose the reforms that the sanctions can be reinstated", adding that "the reality is that we are now suspending them". Norway's arms embargo will remain in place for the time being.

Outlook and Implications

However it is described, with the effective lifting of sanctions Myanmar is likely to see an influx of foreign investment from Western countries, while bilateral trade activities would witness a significant boost. On the whole, the "suspension" of sanctions has become politically possible only because the move is intended to support reforms. But while the recent changes represent the impoverished country's best chance since independence in 1947 to rid itself of its pariah image, to end decades of ethnic conflict, and to finally capitalise on its tremendous economic growth potential, important questions remain. This relates to the top-down process of reform that was initiated by the military more than a decade ago, and is still tightly controlled by it. Going forward, this could limit the extent of democratisation, while it could also have a bearing on the peace process with more than a dozen of armed ethnic minority groups. While designed to preserve national stability, a perhaps unintended and potentially destabilising by-product of the reforms are quickly changing dynamics that pits the military's language of reform against that of the opposition and the international community. There are also key risks associated with potentially haphazard and uneven economic growth.