Why the US Shouldn't Have Lifted Sanctions on Myanmar

By Aaron Balshan

The Diplomat

October 3, 2016

The removal of sanctions will not do Myanmar’s fledgling democracy any favours.

Heading into 2016, Myanmar was on pace to truly become the democratic Cinderella story of our time. After half a century of despotic military rule, it seemed as though dramatic reforms were taking place on a daily basis, from the signing of the first national ceasefire agreement in October 2015 to the first relatively free election a month later. While very positive steps have been taken, huge blind spots in the democracy still exist, particularly concerning the military’s influence in decision making.

It was in this context that President Barack Obama decided three weeks ago to lift the U.S. sanctions that had been imposed on the country for decades, ushering in similar calls of encouragement by EU Foreign Policy chief Federica Mogherini on September 23. At the time of their termination, U.S. sanctions had become impressively effective in targeting those specifically responsible for human rights abuses, thanks to decades of incremental modification and evolution. While there is some economic and political benefit, the ends are unlikely to justify the means and in the long-term may serve as one of the larger policy blunders of the Obama administration. Ultimately, the move will hamper liberalization, encourage human rights abuses, help Chinese investments, and fuel anti-Western sentiment in the country.

To cite one example, the sanctioned junta-aligned generals fully established themselves as the dominant players in the country’s mineral extraction industries, an area in which Western investment remains nonexistent. This is particularly significant for Myanmar’s jade industry, the illicit trade of which was estimated at approximately $31 billion in 2014, or about half of the country’s GDP. The dealings of these morally unscrupulous industry barons were two-fold. Due to a severe lack of regulation and safety standards, the mines themselves have become death traps. For example, mining operations near the town of Hpakant in northern Kachin State have led to the death of hundreds of people in 2016 alone, usually brought on by landslides from substandard mining practices.

Equally alarming is the effect these operations have on the local ongoing military conflicts. The Kachin Independence Army (KIA), an ostensibly fully capable military that seeks more autonomy from the central government in Naypyidaw, has often targeted infrastructure, as they view such operations as encroachment on their land and terrorizing of their peoples. This was the case with the unfinished Myitsone Dam, the unregulated construction of which is expected to cause the flooding of almost 50 towns and displacement of thousands, leading the KIA to end the 17-year-ceasefire with the central government and begin a widespread bombing campaign against the dam and its supply routes. The recent violence has resulted in the deaths of thousands of people, and the displacement of over 100,000 civilians. As recently as August 10, the KIA bombed a military convoy on its way to protect mining operations, resulting in nine injuries.

Now imagine these operations unencumbered by the deterrent of sanctions and the negative result it will likely have on local minority communities, prospects for peace, and the empowerment of anti-democratic industry leaders.

Unfortunately, this isn’t the worst of it. The real cataclysmic impact will take place in the country’s western Rakhine State. There, the Rohingya Muslim minority community remains more vulnerable than ever. Rohingya gained international exposure after an alleged attempted genocide against the community in 2012 was carried out by Buddhist national groups. Now the Muslims live under quasi-apartheid conditions, separated from the rest of the ethnic Rakhine people. Following the communal violence of 2012 the situation largely stabilized, although human rights abuses were still reported daily.

Again, the levy preventing another deluge of violence was the threat of U.S. sanctions. It is no coincidence that just a week after the sanctions were lifted, a high-level state official in Rakhine indicated that hundreds of Muslim buildings, including 12 mosques and 35 Islamic religious schools in Maungdaw and Buthidaung would be destroyed. In response, Muslim community leaders suggested that the provocative action could lead to violence. This all comes at a time when the United Nations World Food Program announced massive reductions in food aid for the impoverished people on September 12.

Presumably, one of the reasons for sanction reduction was the “successful” implementation of the Rakhine State Advisory Commission, led by former UN Secretary General Kofi Annan. The Commission visited Rakhine for a week on in late September and was met with daily protests by thousands of Buddhist nationals. After sanctions were lifted and the Commission left, the government’s lower house attempted to pass a proposal which would remove all foreigners, including Annan, from the Commission. Ultimately, the bill was struck down by the ruling party, but further attempts remain on the horizon. Testing the boundaries of their newly revamped, post-sanction political capital, the state government is likely to increasingly push radical anti-Muslim legislation in the coming months and years, making a boiling point seem inevitable. Once it happens, the West will have no leverage in ending it and will sit on the sidelines as it does in other areas where premature sanction reduction was infamously carried out, like against North Korea in the 1990s.

On the surface, there is a seemingly obvious value to sanction reduction in the ability for Western companies to break into the Chinese-dominated economic system in Myanmar. China wields incredible influence in the country, with Beijing’s direct investment in the country dwarfing all other countries with over $15 billion plowed into 126 projects from 1985 to 2015. This is exponentially greater than Western investment, with the EU clocking in as the closest at less than $6 billion over the same period. An argument can be made that the reduction in sanctions would allow Western businesses to better penetrate the country, allowing for a slow rise in regulation and a boon for Western markets.

However, given the obvious economic advantage in skirting regulation and transparency, these industry leaders have little incentive to work with Western companies. Most of these former generals-cum-tycoons have developed iron-clad ties with Chinese counterparts over decades of business, and much like Chinese investment at home and around the world, they care very little about the state of labor conditions and the effect of unfettered capital injection.

It will actually be to the advantage of these businessmen to perpetuate ethnic conflicts in Kachin and Shan states, as further violence would support a pretext for a continued heavy military presence and effectively ward off prospective Western investors. The military, still resentful of decades of Western intervention on the pretext of moral superiority, is fully capable of engineering such a scenario. The democratic compromises over past years have legally guaranteed that the portfolios of defense, interior, and border security are filled by military leaders, essentially allowing them to dictate the trajectory of ethnic conflict with no government oversight. In other industries, most notably hydroelectric, China’s dominance will provide little room for Western companies to penetrate, with 56 dams like Myitsone already completed or under construction along the Irrawaddy River.

Economics aside, it is totally plausible that the reduction of sanctions will serve to strengthen anti-Western sentiment in the country. Now that sanctions are no longer a factor, Western leaders will have to more heavily rely on diplomacy and rhetoric to mitigate an inevitable Rohingya crisis. However, unlike sanctions, which quietly pressure leaders toward incremental reforms, outspoken measures can flare sensitivities among the hyper-nationalist population. This was evident in May, when the U.S. ambassador’s use of the term “Rohingya” in a written statement sparked a series of protests attended by thousands in front of the Embassy. The term Rohingya continues to be illegal in Myanmar, as hardline Buddhists still demand that members of the suffering community be called “eastern Bengali” in an attempt to validate the narrative that these people, who have been living in the state since its creation, are actually Bangladeshi. The protests held against Kofi Annan’s presence on the Commision and subsequent legislation held a similarly anti-Western tone.

The decision to lift sanctions on Iran was not without flaws, but at least it was done after a significant deal had been inked and mechanisms would prevent potential failures. However, in the case of Myanmar, no such deal was made and no such mechanisms really exist. As recently as May 22, U.S. Secretary of State John Kerry said that Myanmar would need to change its constitution and address human rights issues, a call that democratically elected leader Daw Aung San Suu Kyi supported, but by and large didn’t happen. This begs the question: why would these reforms happen now?

The effect of this mistake is likely to be felt for decades as the former junta leaders will gain unprecedented financial influence and legitimacy now that they are free of sanctions. It’s difficult not to get caught up in the optimism of change when watching an infant democracy emerge from dictatorship, but as any parent will tell you, sometimes tough love is the kind that prevents developmental problems in the future.

Aaron Balshan is an intelligence analyst with a dedicated focus on South Asian politics at MAX-Secuirty, a Middle-East based geopolitical risk and research consultancy firm.