US to Invest in Burma’s Oil

Americans are now allowed to pump investments into Burma’s contentious energy sector despite opposition warnings.

burma-mitchell-naypyidaw-305 Newly appointed US Ambassador to Burma Derek Mitchell presents his credentials to Burmese President Thein Sein in Naypyidaw, July 11, 2012.

U.S. President Barack Obama moved Wednesday to allow American companies to invest in Burma, including in the controversial state-controlled oil and gas sector that opposition leader Aung San Suu Kyi has said should remain off-limits.  

In Washington’s biggest step yet to ease sanctions as a reward for political and economic reforms in the former pariah state, Obama ordered the U.S. Treasury Department to issue two licenses, one giving special permission for investment in Burma and the other allowing financial services.

The directives pave the way for the first new U.S. investment in Burma in nearly 15 years and are intended to support Burma’s transition toward democracy after nearly five decades of military rule.

“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.

“Responsible investment will help facilitate broad-based economic development, and help bring Burma out of isolation and in to the international community.”

Obama said the companies will, however, be required to provide unusually detailed disclosures about their dealings in the country, which is ranked as one of the most corrupt in the world.

“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.

Myanma Oil and Gas Enterprises

But in a move that marks a rare break between Washington and democracy leader Aung San Suu Kyi, the new rules include no ban on investment in the energy sector, which critics say is still  closely tied to the military.

American companies will be allowed to invest in the Myanma Oil and Gas Enterprises (MOGE), the state-controlled entity through which all energy sector business in Burma flows, as long as they notify the U.S. State Department within 60 days.

In June, Aung San Suu Kyi warned foreign governments against allowing their companies to partner with the enterprise until it improves its business practices.

Speaking at the International Labour Organization summit in Geneva during a landmark European tour, Aung San Suu Kyi said MOGE “lacks both transparency and accountability at present.”

"The [Burmese] government needs to apply internationally recognized standards such as the International Monetary Fund code of good practices on fiscal transparency. Other countries could help by not allowing their own companies to partner MOGE unless it signed up to such codes," she said.

Instead, the key to helping her resource-rich country along the path to democracy is responsible investment, she said.


Rights groups criticized the move to allow American investment in MOGE, saying it amounts to backsliding on pledges for “responsible investment” and sends the message that the U.S. puts business interests ahead of Burma’s reforms.  

“The new United States government policy allowing business activity in Burma’s controversial oil sector with reporting requirements will not adequately prevent new investments from fueling abuses and undermining reform,” New York-based watchdog Human Rights Watch (HRW) said in a statement Wednesday.

“By allowing deals with Burma’s state-owned oil company, the U.S. looks like it caved to industry pressure and undercut Aung San Suu Kyi and others in Burma who are promoting government accountability,” HRW’s Business and Human Rights Director Arvind Ganesan said.

“The U.S. government should have insisted that good governance and human rights reform be essential operating principles for new investments in Burma.”

Warmer ties

The U.S. first announced eased sanctions in May, when it said it would suspend restrictions on investments and financial transactions in Burma while keeping the laws on the books to deter Naypyidaw from backsliding on democratic transition.

The easing of investment restrictions came as the newly appointed U.S. Ambassador to Burma Derek Mitchell presented Thein Sein with his credentials in a ceremony in Naypyidaw on Wednesay.

Mitchell, who had served as U.S. Special Representative and Policy Coordinator for Burma, is the first American ambassador to Burma in 22 years.

The announcement of the eased sanctions also coincides with Clinton’s trip to Southeast Asia to attend the Association of Southeast Asian Nations annual summit in Cambodia.

Burma is set to chair the 10-member association in 2014.

Reported by Rachel Vandenbrink.


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