The Political Context
The National League for Democracy (NLD) grew out of the 1988 democracy movement and has been led since that time by Aung San Suu Kyi. Soon after SLORC rule was established, Suu Kyi was detained and put under house arrest. In 1990, general elections were held. The NLD gained a clear majority of the votes, but SLORC refused to give up its dictatorial rule. Suu Kyi was held under house arrest until 1995, and has been closely watched and under house arrest intermittently in the last eleven years as well.
Although SLORC invited foreign investment and a number of Western companies took up their offer, many have since withdrawn from Burma - for varying reasons. Following longstanding protests against investment in Burma, the European Union introduced its first Common Position on sanctions against Burma in 1996, and US President Bill Clinton enforced a prohibition on future investments in Burma in 1997. This was on the advice of the Burmese democracy movement, including Burmese exile activist groups, Aung San Suu Kyi and the NLD. The EU Common Position has been gradually expanded. It currently prohibits investment in Burmese state-owned enterprises, precludes travel to the EU by officials of the SPDC and their families, and freezes their bank accounts. Multinational companies operating in Burma have also been under heavy pressure from NGOs, especially in Europe and the United States, who have carried out numerous public campaigns, including protests outside shareholder meetings and the publication of blacklists of companies with a presence in Burma. [16] The Yadana pipeline and Yetagun gas development projects have been particularly controversial. Since the 1990s, NGOs have also provided legal assistance to Burmese nationals affected by the construction of the Yadana pipeline, and have taken their cases to court in the USA and Europe. In 1996, EarthRights International filed a lawsuit in US courts on behalf of 15 Burmese villagers, against California-based Unocal for human rights abuses associated with the construction of the Yadana pipeline. [17] In 1997, the US Federal District Court in Los Angeles found that 'the evidence does suggest that Unocal knew that forced labor was being utilized and that the Joint Venturers benefited from the practice'. On the basis of this finding, the Court concluded that corporations and their executive officers can be held legally responsible under the Alien Tort Claims Act for violating international human rights in foreign countries, and that US courts have the authority to adjudicate such claims. [18] In Europe, lawsuits were filed against Total, first in Belgium on the basis of the Universal Jurisdiction Law, citing 'complicity in crimes against humanity', and later in France, citing 'complicity in unlawful confinement'. [19]
Both the case in France against Total and the case in the USA against Unocal were settled out of court, and none of the companies ceased operating in Burma. However, the mounting pressure did lead other oil companies to withdraw. In the mid-1990s, Texaco and Premier Oil were joint partners in the Yetagun project, but in 1997 Texaco withdrew from the venture and Premier Oil increased its stake from 20 to 27%. In 2002, Premier Oil also had to pull out of the Yetagun project, following sharp criticism of its involvement and calls for it to withdraw from both the British government and US investors. Premier's share in the Yetagun consortium was bought by the Malaysian oil company Petronas. In 2000, Aung San Suu Kyi was again detained, but in May 2002 she was released from house arrest after UN-led confidence-building negotiations. Following this, Japan and Australia agreed to provide financial support for targeted development programmes and dispatched their foreign ministers to Burma for the first time in almost two decades. Tokyo also began releasing part of a US$28 million aid package for a hydroelectric dam. [20] However, this situation did not last long. In May 2003, Suu Kyi was rearrested, together with a large number of NLD followers. The Association of Southeast Asian Nations (ASEAN), of which Burma became a member in 1997, broke its traditional principle of non-interference in the domestic affairs of its members and called for the release of Suu Kyi and other political prisoners in Burma. Japan, Burma's top donor, stopped all new humanitarian and development aid, and the EU extended and intensified sanctions for another year. [21] The United States authorized new sanctions under the Burma Freedom and Democracy Act of 2003 and the accompanying 'Presidential Executive Order', extending a visa blacklist to all of Burma's military leaders, freezing their overseas assets, and banning all imports from Burma. [22] US financial institutions were also directed to take special measures against Burma to deny access to the US financial system through correspondent accounts. [23]
In August 2003, General Than Shwe resigned as prime minister while continuing as chairman of the SPDC, and General Khin Nyunt, former chief of military intelligence, became the new prime minister. In October 2004, new fissures appeared within the SPDC. After just over a year in office, Khin Nyunt was arrested on corruption charges (receiving a 44-year suspended sentence in 2005) and replaced by Lieutenant General Soe Win. Khin Nyunt had promoted UN-brokered talks between the government and the NLD and was considered to represent a relatively outward-oriented and conciliatory faction in the regime. However, the talks reached a stalemate when the government excluded the political parties from the constitutional drafting process and kept Suu Kyi under detention. [24] In the autumn of 2003, the government introduced a 'Road Map to Democracy', which has likewise failed to meet expectations. When the National Convention finally resumed constitutional talks in February-March 2005, a number of ethnic and political groups, including the NLD, were left out. In an unexpected turn of events, the regime also announced its decision to move the capital to Pyinmana. Moreover, the SPDC refused entry for both the UN special envoy for political reform and the UN human rights envoy. [25]
Although the withdrawal of Western oil companies operating in Burma has certainly had consequences for the projects in question, the impact of such withdrawals on the Burmese economy has been negligible, since countries such as Thailand, China, India and Russia are expanding their economic ties with Burma. The Burmese regime depends on revenues from foreign investment, primarily in oil and gas production. Access to Burma's gas resources is highly attractive for Thailand, India and China, as well as Malaysia, South Korea and Japan.
China and several ASEAN countries also see Burma as an important potential source of hydroelectric power. Hydropower development is set to become an important new income source for Burma, and another industry in which Burma has vital interests in common with its neighbours, particularly Thailand. In 2005, Burma signed an agreement with Thailand to build four new dams on the Salween River and one on the Tenasserim River. At the same time, the SPDC also signed contracts with two Chinese companies, CITIC Technology Co Ltd and Sino Hydro Corp Ltd, to build a new hydroelectric facility, the 790-megawatt Yeywa hydropower plant on the Dukhtawaddy River near Mandalay. [26]
Japan provided funds for Burma's first large-scale hydroelectric project, the Lawpita hydropower plant and Mobye dam on the Balu Chaung River, built in the 1960s as part of Japan's war reparations package after World War II. According to the Karenni movement, the construction led to the displacement of more than 12,000 local villagers (mainly Shan and Karenni), due to forced relocation and land loss. [27] A Japanese company, Nippon Koei, was also involved in the initial planning, starting in 1981, of the Tasang Dam on the Salween River. At 228 metres, the Tasang Dam is slated to become the highest dam in Southeast Asia. The Chinese hydroelectric construction company Sino Hydro Corp Ltd is one of the interested parties in the hydropower projects developed by the Electricity Generating Authority of Thailand (EGAT), including the Tasang Dam and four other dams in Burma. The Asian Development Bank is promoting a US$4.6 billion regional electricity scheme, which is to be powered in part by the Tasang Dam. [28] According to current plans, 12 hydropower projects in China, Burma and Laos will fuel the 'Mekong Power Grid' and generate power for consumers in Thailand and Vietnam. These include the Tasang in Burma, the Jinghong and Nuozhadu projects in China, and the Nam Theun 2 in Laos. In addition to the need for foreign revenue from hydropower and gas development, Burma's foreign relations are driven by the SPDC's need for military assistance. Since the early 1990s, China has been the major provider of weapons, military aircraft, naval ships and other military hardware. China withdrew, however, from a project to develop a Burmese nuclear research reactor. In 2002, Russia instead signed an agreement to assist Burma in building this reactor. It has since been constructed on an island off the Burmese coast. There is also reliable evidence that Pakistan has been assisting the Burmese nuclear research programme. Two Pakistani scientists who were involved in Pakistan's nuclear arms programme have been working in Burma for several years. Their presence in Burma was revealed when they appeared on a list of suspected 'terrorist connections' presented to Pakistani authorities by the CIA in late 2001. [29] Burma recently granted the two scientists asylum. [30]
In April 2006, a top-level Burmese 'goodwill' delegation to Moscow reportedly sought Russian investment in hydropower and communications projects. [31] The Russian foreign ministry announced that the two sides discussed the importance of a regular dialogue on international and regional problems and expressed interest in cultivating cooperation in fighting terrorism and drug-trafficking. In exchange for access to Burmese oil and gas resources, Russia also agreed to supply a range of arms, including Tor-M1 and Buk-M1-2 air-defence systems, as well as MiG-29 fighters. [32] Russia further offered to build factories for repairing and upgrading arms bought from the former Soviet Union. According to some analysts, this was done 'in a bid to end Chinese monopoly'. [33] However, an alternative interpretation is that these factories would accommodate Chinese as well as Russian interests, since the hardware in question is also used by the Chinese military. In support of this view, Russian assistance to Burma was described by one commentator as 'a contribution to regional security following President Vladimir Putin's recent visit to China'. [34] From the SPDC's perspective one of the key advantages of cooperating with Russia is to reduce the country's dependence on China. Another factor is the Russian assistance to Burma's nuclear research programme. ASEAN, Australia and India are all seeking to 'constructively engage' the Burmese regime, and this, as well as China's close cooperation with the SPDC, is regarded by critics as undermining sanctions imposed by the USA and the EU. However, others take a more pragmatic view, also taking into consideration factors such as the implications of the Western-imposed sanctions on Burma's economic and geopolitical ties, as described above. For instance, within the EU negotiations on the Common Position, France has objected to the current use of sanctions and called for more lenient sanctions or the replacement of sanctions with active engagement. In 2005, China and Russia also challenged US Burma policies, using the threat of a veto to block a US move in the UN Security Council to implement recommendations on Burma. After the USA and the EU had threatened to boycott ASEAN meetings if Burma assumed the chair in 2006, Burma's rulers agreed to relinquish the country's turn to hold the rotating ASEAN chairmanship. During a recent meeting of the ASEAN Regional Forum (ARF), however, Chinese Foreign Minister Li Zhaoxing chose to skip the security point on the agenda, and travelled to Burma instead to express solidarity with the regime. [35] These are just a few examples of the continuous diplomatic manoeuvring over Burma, with China, Thailand and other ASEAN countries, the United States, India, the EU, Australia and Russia playing the key roles.
Actors and Interests in Burmese Natural Gas
In 2004, Burma exported natural gas (through the Yadana pipeline) to Thailand for nearly US$1 billion, which is claimed to be at least twice as much as Burma could have earned from trade with the USA and the EU if they had not applied sanctions. [36] The oil and gas sector continued to grow in 2005, owing to Chinese, Thai, South Korean and Indian investments. Thailand's imports from Burma, mainly consisting of gas from Yadana and Yetagun, rose by more than 50% that year. [37] Gas is now by far the most important source of income for Burma, and one-third of foreign direct investment (FDI) in Burma is in the oil and gas sector. The combined FDI in Burmese oil and gas since 1988 is approximately US$2.5 billion, 33% of all of Burma's FDI. [38] From the newly discovered Shwe field alone, the Korean Daewoo International has predicted at least US$86 million in net profit annually for 20 years from 2010, while Burma is projected to earn a minimum of US$800 million a year, and potentially up to US$3 billion. [39]
The Yadana project was developed by a consortium consisting of Total (31%), Unocal (28%), PTT-EP of Thailand (26%) and Burma's own MOGE (15%). It is operated by Total. Gas from Yadana is transported via a 346 km subsea pipeline and a 63 km onshore pipeline from the Yadana field to the border between Burma and Thailand at Ban I Thong. At the border, the Yadana pipeline connects with a pipeline built by Thailand, which carries the gas to its destination area near Bangkok, providing fuel to the Rathcaburi and Wang Noi power plants. Gas from the Yadana field covers an estimated 15-20% of Thailand's demand for natural gas. [40]
The Yetagun gas field was developed by a joint venture of Texaco (50%), the British oil company Premier Oil (30%) and Nippon Oil (20%). Following Texaco's withdrawal in 1997 and Premier Oil's in 2002, Yetagun is operated by Petronas in partnership with MOGE (20%), Nippon Oil (19%) and PTT-EP (19%). The gas is transported by 210 km of subsea pipeline and 67 km of onshore pipeline, linking up onshore to the Yadana pipeline. The Yadana pipeline was constructed and is operated by the Moattama Gas Transportation Company, which has been set up by the shareholders in the Yadana gas field project. In August 2000, the South Korean Daewoo International partnered with MOGE to explore and potentially develop offshore natural gas deposits in the Bay of Bengal off the coast of Arakan. Exploration commenced, and in 2004 Daewoo International announced the discovery of the Shwe field, off the coast of Sittwe, the capital of Arakan state. There are preliminary plans to explore for gas in several blocks in the Bay of Bengal, but so far test drilling has only been made in Shwe's blocks A-1 and A-3. The A-1 block is the largest, estimated to contain between 2.88 trillion and 3.56 trillion cubic feet of natural gas. Partners in the project's international consortium are Daewoo (60%), the state-owned Korean Gas Corporation (10%), and India's ONGC (20%) and GAIL (10%). Production from the Shwe field is planned to start in 2009. Natural gas from Shwe has become a contentious issue in relations between India and China, and an obstacle to Sino-Indian energy cooperation. For more than two years, it was presumed that gas from the A-1 Block would serve uniquely the Indian market via an overland pipeline running through Burma's Arakan and Chin states, across Bangladesh to Kolkata. [41] However, using India's growing demand for natural gas as a leverage point, Dhaka set forth a number of conditions for allowing any pipeline to cross Bangladeshi territory: establishing trade routes for commodities from Bangladesh to Nepal and Bhutan through Indian territory; allowing transmission of hydro-electricity from Nepal and Bhutan to Bangladesh through Indian territory; and pursuing measures to reduce Bangladesh's trade imbalance with India. [42] The project reached a diplomatic stalemate when India rejected these conditions. In December 2005, while India and Bangladesh deliberated to a standstill, Burma seized the opportunity to sign a Memorandum of Understanding with PetroChina for the sale of gas from the A-1 Block to China through an overland pipeline through Burma to Kunming, the capital of China's Yunnan province. [43]
The introduction of China into the Shwe gas picture was to be expected for several reasons. According to Burmese scholar Dr. Kyaw Yin Hlaing, the Memorandum of Understanding with PetroChina should be seen in light of the ever-growing trade relationship between Burma and China. When PetroChina indicated that it was ready to buy, the Burmese regime had no incentive to set aside the gas exclusively for India and patiently await the outcome of stalled bilateral negotiations with Bangladesh. [44] With another buyer at hand, there is also added pressure on the Indians to find solutions to their problems, including alternative pipeline routes bypassing Bangladesh. Burma already gains substantial hard currency from the sale of natural gas through pipeline to Thailand, and the Burmese rulers are of course aware of the advantages they can reap from negotiating prices when selling gas from the same field to more than one country at a time. Following publicity on the PetroChina agreement, Burma assured the Indian petroleum ministry that it had sufficient gas reserves to meet the needs of both China and India, although India would have to wait until May 2006 for third-party consultants to confirm reserves before export deals were finalized. Burma was waiting for assessments of several deposits, including the Mya1 well in the A-3 block. The Burmese promise seems to have satisfied the Indian government. In early 2006, Brussels-based consulting firm Suz Tractebel was hired to conduct a feasibility study for overland pipeline routes to Northeast India, circumventing Bangladeshi territory. [45]
It should be in the interest of Burma to diversify its foreign relations, but the military regime has done so only to a limited extent, favouring its relations with China. Burma has of course strengthened its economic ties with other neighbours, including Laos, Thailand and India, and with allies such as Vietnam and Russia. However, when Burma recently agreed to Chinese pipeline projects both for oil and gas, this drew Burma even deeper into the Chinese sphere of interest. On the other hand, if the current plans are realized, gas pipelines from Burma will extend into two new and significant markets for Burmese natural gas, India and China. Burma may then play its three gas customers against each other when negotiating for the best possible prices.
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