RANGOON — If you’re American and want to do business in Burma,
there’s a list of people and companies you have to steer clear of by
law. But it leaves off a former minister’s son US officials suspected of
brokering arms deals with North Korea, and high-rolling relatives of
the man who led the repressive military government for 19 years.
The Obama administration didn’t add anyone to the US government’s
Burma sanctions list over three-and-a-half years, despite
recommendations from the US Embassy in Rangoon to blacklist hundreds of
top officials and their business cronies, as well as military and
private companies, according to an Associated Press examination of
hundreds of pages of government documents, and more than a dozen
interviews with officials and business leaders in Burma and Washington.
The reason: Washington was seeking to win the confidence of Burma’s
top leadership and encourage them to stick to the path of democratic
reform.
The result: The list is full of gaps.
The administration has said it wants US companies to set a “gold
standard” for investment and foster a fairer, more transparent way of
doing business in Burma. But the last powerful tool it has to punish the
bad guys and encourage the good ones has fallen way out of date, even
though legislation instructs the government to keep the list current.
That risks reinforcing a corrupt economic system that has concentrated
wealth in the hands of politically connected businessmen.
Human rights activists accuse the Obama administration of moving too
fast to reward the reformist government of Thein Sein, who on Monday
will become the first president of Burma to visit the White House in 47
years—a trip during which he’ll also woo US business leaders.
The US has suspended broad restrictions on investment and trade with
Burma. It still forbids imports of ruby and jade from Burma and doing
business with military-owned companies. But the restriction with the
greatest impact for investors is against dealings with individuals and
companies on the Treasury Department’s Specially Designated Nationals
list, which identifies those linked to sanctioned governments,
terrorists and drug traffickers.
The European Union lifted its sanctions last month, although like the
United States, it retains an arms embargo. That leaves America’s
sanctions list as the most important international restriction on doing
business in Burma. While not binding elsewhere, the list affects
government and business thinking as far afield as Singapore and London.
Decades of quiet deal-making have nurtured a small business elite
that has profited, sometimes brutally and most often dishonestly, from
relationships with Burma’s military leaders and a flood of Chinese
money.
With little information available about who owns what in Burma, it
can be difficult to determine whom a potential business partner is
affiliated with. Americans who violate the sanctions could face fines or
prison time, though a letter of warning is more likely for those who
acted in good faith.
“The list in no way lists all the individuals who would be
objectionable to doing business with. And there are individuals on there
for purely political and unvalidated reasons,” said Rachel Calvert at
the consulting company IHS, who helps advise US companies on investing
in Burma.
US companies, for example, are still free to invest with the wife,
eight children and grandson of former military leader Than Shwe—all of
whom were sanctioned by the European Union in the past.
They also can team up with the sons of a former minister of industry,
Aung Thaung, who was a hard-line leader of a pro-military organization
accused of conducting a 2003 attack on a convoy carrying opposition
leader Aung San Suu Kyi, killing a number of her supporters. Aung Thaung
is now a top figure in the ruling party.
The sons, Pyi Aung and Nay Aung, amassed tens of millions of dollars
running Burma’s second-largest timber company, exporting rice and
winning contracts to explore for oil and gas, according to a Sept. 19,
2008, cable from the US Embassy in Rangoon recommending their addition
to the sanctions list. It also said they were often seen driving around
in Hummers.
The cable, and others cited in this story, were obtained and released by WikiLeaks.
Nay Aung was also suspected of brokering arms deals with North Korea
and China, according to a July 2, 2009, cable, while Pyi Aung married
the daughter of the former military government’s second-in-command,
Maung Aye. They were sanctioned by both the EU and Australia.
In the 2008 JADE Act, which remains in force, the US Congress ordered
the government to sanction the top generals, their immediate family
members, officials implicated in human rights abuses and crony
businessmen. It also required the president to update the list as new
information became available.
But an AP review of Treasury Department online reports found that a
small amendment to an existing entry was the only change from the time
Obama took office in 2009 until July 2012, when the administration
suspended its broader sanctions on financial services and investment and
made two additions to the list. It has added only a few more names
since then.
“The engagement undertaking took quite a lot of political and
diplomatic weight,” a senior US government official said, speaking on
condition of anonymity under ground rules set by his department as a
condition for discussing policy choices. “We were keen to make sure that
it was viewed by the Burmese as genuine and as an opportunity. Although
we enforced our existing sanctions, I think there was a period when we
were less than fully aggressive on pursuing new designations or new
sanctions tools.”
On July 16, 2009, the US Embassy said in a cable that it had sent
over 400 names for sanction and warned that “many of the real
perpetrators of human rights abuses or those who provide significant
support to the regime are not yet targeted.” It added that failure to
designate relatives of leaders of the military junta was “an open
invitation for sanctions evasion.”
Also missing: 33 of the then 38 subsidiaries of Union of Myanmar
Economic Holdings, or UMEHL—one of Burma’s two military-owned
conglomerates. The US Embassy said in a Feb. 6, 2009, cable that all the
subsidiaries should be included, as well as its board of directors,
managing directors and general managers. While UMEHL itself is
blacklisted, there is little public information about its assets, making
it tricky for investors to identify its affiliates.
In an example of the inconsistencies, UMEHL’s $1 billion joint
venture in a copper mine in northwestern Burma with Wanbao, a subsidiary
of Chinese arms manufacturer Norinco, is not on the list, although its
previous owner, a now-defunct venture between the government and
Canada’s Ivanhoe Mines, is. The project made headlines last November
when police injured scores in a crackdown on Buddhist monks and others
protesting the mine.
When the Obama administration began dialogue with Burma’s then ruling
generals, it resisted pressure from activists who were urging
Washington to expand the list to bring it more in line with much longer
ones compiled by the European Union and Australia. The US list includes
just 39 individuals and 65 companies, after stripping out aliases and
duplicate entries.
Australia’s sanctions list named 392 individuals, before it was
repealed in June 2012. The EU listed 656 individuals and companies, plus
another 1,207 companies in the timber, metals and gem industries,
money-makers for the military that were banned to European investors.
The EU suspended its restrictions a year ago, then lifted them entirely
last month.
Tom Malinowski, Washington director for Human Rights Watch, commended
the US list as useful but said it “is only as good as the commitment to
keep it up to date.” He said it includes many of the right people, but
since there have been only minor adjustments to the list during the
Obama administration, it doesn’t reflect changes in the military, still
implicated in serious and ongoing rights abuses.
The Burma government’s failure to stop army violence against ethnic
minorities and bloody communal unrest between Buddhists and Muslims has
done little to slow the dramatic improvement in US-Burma ties.
US officials, who declined to comment on specific cases, concede the
sanctions list is not comprehensive. But they say that additions and
subtractions from the list remain under active consideration, both to
punish those who obstruct reform and reward those who promote it. “It’s a
punitive tool but the policy objective is to encourage behavior
change,” the senior government official said.
To date, the only names taken off the list have been President Thein
Sein and parliament speaker Thura Shwe Mann, former junta members now
seen as leading reformers, in September 2012; and a Singapore-based
associate of sanctioned crony Tay Za, who petitioned for removal.
Some argue that Burma’s crony businessmen, particularly those
sympathetic to reform, should be forgiven because they are among the few
with the acumen and resources to rebuild the economy. Being on the list
makes it harder for them to access capital. The sanctions also prohibit
US companies from working with Burma’s biggest economic players,
putting them at a competitive disadvantage.
The Singapore Stock Exchange recently rejected an attempt by Zaw Zaw,
the blacklisted chairman of the Max Myanmar Group, to list one of his
subsidiaries. The group is one of Burma’s largest conglomerates, with
interests ranging from construction and hotels to gas stations and
cement. The exchange’s top concern was Zaw Zaw’s presence on the US
sanctions list and the “lack of clarity” as to why he was placed there,
according to a filing with the exchange by the company that would have
been his partner in the deal. Zaw Zaw is widely regarded as the cleanest
of the cronies. Australian economist Sean Turnell, who follows Burma
closely, calls him a “pragmatic reform advocate.”
The failure to update the list was underscored in February, when
Assistant Secretary of State Jose Fernandez shared the stage and a firm
handshake with Win Aung, who is blacklisted, at a Rangoon event
organized by the US Chamber of Commerce. Turnell has described Win Aung,
head of Burma’s main business association, as an “active reformer.”
Then there are the Cabinet ministers who lost their portfolios years
ago but are still listed as holding them—a shortcoming that a senior
Treasury official attributed to the fact that it requires a rigorous
administrative process to update a filing.
The official, who requested anonymity under ground rules set by
Treasury as a condition for speaking about policy, said his department’s
resources are more usefully devoted to pursuing new listings or
responding to petitions for delisting. He said individuals are free to
write to Treasury or retain a lawyer to challenge their designation,
although few from Burma have done so.
If they don’t, the black mark of being on the sanctions list could
stick with them—even beyond the grave. Among those from Burma on the
list for his involvement in illegal narcotics is the once notorious Khun
Sa, who headed a guerrilla army that the United States once described
as the world’s largest producer of heroin.
He died in 2007.
Pennington reported from Washington.
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