Friday, May 18, 2012

US Suspends Burma Sanctions

The U.S. announced yesterday that it will suspend Burma sanctions against the Myanmar regime, Secretary of State Hillary Clinton announced.  This will be achieved by the US Treasury Department's Office of Foreign Asset Control (OFAC) issuing a general license that will amend the Burmese Sanctions Regulations.  The amendments would enable U.S. companies to enter into contracts relating  to the "economic development of resources in Burma" and other investment activities.    In addition, the general license will also authorize financial institutions and other parties to provide financial services to Myanmar.

The general license would thus achieve what the EU, Australia and Canada have done - impose a suspension of sanctions.  This is because the general license can be revoked at any time should the Myanmar regime backtrack on its reforms.  

Secretary Clinton indicated that U.S. companies doing business in Myanmar will be expected to implement corporate social responsibility measures and U.S. companies will be expected, but not required to "to conduct due diligence to avoid any problems, including human rights abuses . . . create a grievance process that will be accessible to local communities; to demonstrate appropriate treatment of employees, respect for the environment; to be a good corporate citizen; and to promote equitable, sustainable development that will benefit the people."

The list of U.S. Burma sanctions includes the following:

  1. a ban on new investment in Myanmar by U.S. persons and companies;
  2. a ban on the importation of goods from Myanmar;
  3. a freeze on U.S. assets of any designated Myanmar nationals connected with the Myanmar state
  4. a ban on property investment by certain Myanmar nationals connected with the Myanmar state
  5. a prohibition on the provision of U.S. financial services to and from Myanmar;
  6. a ban on assisting investment by third country entities in Myanmar;
  7. a ban on purchasing shares in third country entities involved in resource extraction activities in Myanmar; and
  8. a ban on visas for certain Myanmar nationals connected with the Myanmar state
The OFAC general license would deal with items 1 and 5, and likely 6 and 7.  Whether other sanctions will be lifted, in particular the import ban, will need to be confirmed when the OFAC license is actually issued.

U.S. exports of commercial goods to Myanmar will remain subject to export control requirements administered by the Commerce Department's Bureau of Industry and Security (BIS). This would include exports of goods, technology and software which have dual civilian/military uses.  Myanmar has been subject to a U.S. arms embargo since 1993 and therefore no "defense articles" or "defense services" subject to the jurisdiction of the International Traffic in Arms Regulations can be exported to Burma. Secretary Clinton's announcement will not affect these sanctions.   In addition, the State Department said that it would maintain the ban on investment or dealings with the Myanmar military and certain military-linked entities (e.g., sanctions covered under items 3, 4, 8 and parts of 1 and 5).

Suffice it to say that this is much faster than I had expected, but given the bipartisan support from the U.S. Congress, particularly from those concerned about the U.S. role in the region (like Senators McCain, Kerry and Webb) and/or religious rights of Burmese minorities (like Senator McConnell) the Obama administration felt more at ease in issuing (or announcing the plan to issue) the general license.  Coupled with the naming of Derek Mitchell as the first U.S. Ambassador to Myanmar in many years, the U.S. suspension of sanctions represents a major commitment to the Myanmar regime's reform efforts.  Let's hope that those reform efforts continue.

We'll have more when the official OFAC general license is issued.