Whither US sanctions in 2016?

A decision by the United States to lift remaining
sanctions against Myanmar would be a boost
for the incoming NLD government but a key
factor in any US move will be the politics of its
presidential election

by Peter Janssen, Frontier, Myanmar, January 7

“Democracy needs to deliver,” said a western diplomat, summing up the challenges the next government faces in 2016. Daw Aung San Suu Kyi’s National League for Democracy romped to victory in the November 8 polls, and contrary to sceptical predictions of military obstruction, is ready to lead the next government when the transfer of power takes place on April 1. A key challenge for an NLD government will be to quickly satisfy the expectations created by its “time for change” campaign slogan. The NLD will need all the help it can get, domestically and internationally, to deliver that change.

The United States is in a unique position to deliver quick support to the incoming government by lifting its remaining sanctions on Myanmar and some of its more notorious citizens, which come up for presidential renewal in May. President Barack Obama on May 15 last year renewed his authority to maintain sanctions against Myanmar, citing persistent concerns over human rights abuses, particularly in Rakhine State. Concerns over the Rohingya issue are unlikely to go away with the advent of an NLD-led government in Nay Pyi Taw, but the situation has obviously changed, diplomatically.

An indication of where US policy is heading came on December 7 when the Treasury Department announced a limited easing of sanctions on the Asia World Port Terminal, the busiest of Yangon’s four container terminals. The decision allows US and other foreign banks to finance trade through the facility even though it is run by Asia World, whose owner Stephen Law is on the US blacklist of specially designated nationals (SDNs). The decision applies for just six months and was welltimed to coincide with the pending presidential decision on May 15 about renewing sanctions.

Would Mr Obama renew sanctions with an NLD-led government in power? And would the Republican-led Congress allow it? This remains to be seen. For Mr Obama there are domestic considerations. “The fact is we are in the middle of a very hotly disputed presidential election,” said Eric Rose, founding partner of Herzfeld Rubin Meyer & Rose Law Firm Ltd, the first US law firm to set up shop in Myanmar. “And lifting the sanctions against Burma and restarting full diplomatic relations between the two countries, including economic ones, would be one of the success stories of the administration as well as for Mrs Clinton. I do not know if the Republicans are prepared to give a win to the President and Mrs Clinton, particularly before the elections,” said Mr Rose, well known for his anti-sanctions stance.

An indication of the Republican position on the issue emerged in a statement issued by the chairman of the House Foreign Affairs Committee, Ed Royce, on December 7, after the Treasury Department’s decision to ease sanctions on the Asia World Port Terminal. “At a time when human rights abuses are rising and the Rohingyas – some of the most persecuted people on the planet – still lack basic rights, we need to be focused on cracking down and sanctioning individuals that are violating the rights of the Burmese people,” Mr Royce said.

Economic sanctions have long been one of the powerful diplomatic tools the US has wielded to achieve its objectives abroad. In Myanmar, the US has made quite clear during the past two decades what it wanted was a democratically-elected government with Daw Aung San Suu Kyi at its head. Although the form of leadership that Daw Aung San Suu Kyi will assume remains unclear, even former junta chief U Than Shwe has readily acknowledged that she will be the country’s next leader.

Whatever her official position, it is likely that one of Daw Aung San Suu Kyi’s first trips overseas will be to the US, probably in late April or early May, when Congress is in session. This would provide a good opportunity for the Nobel laureate and democracy beacon to ask for a lifting of the remaining sanctions, and it might be difficult even for Republican members of Congress to deny the request. “If there is a view taken by Daw Aung San Suu Kyi that the sanctions don’t make sense, then a policy push would follow,” predicted a western diplomat, who asked to remain anonymous.

But it is not clear that this is what Daw Aung San Suu Kyi has in mind. “My scenario is that she will make a request that the sanctions be suspended, not lifted,” predicted Mr Rose. “Just suspended in order to keep, if she wants, a perceived hammer for at least another year.” A suspension would also avoid putting Congress in the embarrassing position of being forced to provide the Obama administration with a foreign policy victory.

A suspension could include the dropping of the US Office of Foreign Asset Control requirement that all American companies must register with it if they invest more than US$500,000 in Myanmar. And in theory, US companies could start considering business deals with the so-called cronies who remain on the SDN, although a one-year suspension that could be renewed would be likely to discourage permanent marriages. Uncertainty over the future of US sanctions has been felt by the due diligence industry. “There hasn’t been a spike of interest in the tycoons or their businesses since the elections,” said a Bangkok-based source with a leading risk analysis company. “We expect interest to pick up in the New Year, especially after the presidential elections.”

Most US sanctions were lifted as a reward for President U Thein Sein’s decision in 2011 to allow Daw Aung San Suu Kyi to contest the 2012 by-elections, in which the NLD won 43 out of the 44 contested seats. There have been some big name US investments in Myanmar in the past two years, including the Singapore-subsidiary of ConocoPhilipps in an offshore gas concession, the Ball Corp that makes cans for Coca-Cola, ACO Investment in solar energy and General Electric in power and healthcare. More recently, fast food giants KFC and Pizza Hut have opened restaurants in Yangon, and Krispy Kreme Donuts Inc is coming soon. Even so, as of March 31, US investments in Myanmar totalled only $2 million, ranking it 30th among foreign investor nations last fiscal year.

Not everyone is convinced that lifting remaining US sanctions will have a big impact on the foreign direct investment. “So what? Okay, the sanctions list has led to the choice of partners being a little more narrow, but Europe is not a small place, and our tycoons have been doing deals with the Chinese for a long time,” said U Aung Htun, managing director of Myanmar Investments, a holding company listed on the London Stock Exchange that invests in Myanmar. With the exception of an arms embargo, the European Union lifted all sanctions on Myanmar, including individuals, in 2012.

China is Myanmar’s largest single investor and its influence has been cited as another good reason to lift US sanctions.

“We are a country that has challenges all over the world and here is a country (Myanmar) that actually wants us to be friendly with them but we’re still keeping them at arm’s length. There has to be a starting point, and the starting point has to be the elimination of sanctions,” said Mr Rose.

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