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22 December 2009
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US-Myanmar Engagement:
Bank sanctions may be used to push Myanmar towards reforms

The Obama administration has ready a powerful economic weapon if talks with Myanmar fail to achieve democratic reforms: pressuring banks to avoid doing business with the country's ruling generals, the Associated Press reported.

A similar approach has been used to push North Korea to give up its nuclear weapons. In Myanmar's case, targeting international banks could effectively tie up the large amounts of money the generals get from selling natural gas.

The US Congress has already provided the power to go after the banks; some rights groups want President Barack Obama to use it soon, or at least if direct talks fail.

So far, however, the administration has been hesitant. It has just started face-to-face negotiations and wants to give them more time to show results. Imposing the banking sanctions would be expensive and time-consuming, and Myanmar isn't a top priority on a crowded foreign policy agenda that includes Afghanistan and Iran.

Still, the administration has warned of tougher action if engagement breaks down with Myanmar, also known as Burma. And the mere threat could add force to the US negotiating position.

"We will reserve the option of tightening sanctions on the regime and its supporters to respond to events in Burma," Obama's top diplomat for East Asia, Kurt Campbell, told lawmakers in September.

Myanmar has one of the most repressive governments in the world and has been controlled by the military since 1962. For years, the United States has used punishing sanctions to try to force change on the country, with little success. Former President George W Bush's administration favoured shunning Myanmar, and Bush's wife, Laura, and many in Congress were strong advocates of the nascent democracy movement there.

Now, the Obama administration has reversed the isolation policy in favor of engagement, which it hopes will persuade the generals to grant greater freedoms to opposition parties and minorities and to free political prisoners.

Myanmar has since made a few symbolic gestures of good will, letting detained democracy leader Aung San Suu Kyi meet with Campbell, for instance, and releasing some political prisoners. At the same time, it has continued to persecute ethnic minorities, journalists and student activists.

Obama himself spoke of a possibly stronger position on Myanmar in his Nobel Peace Prize acceptance speech. There will be engagement and diplomacy with Myanmar, he said, "but there must be consequences when those things fail."

Activists say those consequences should include the application of a law that allows the United States to use financial measures to hinder Myanmar's ability to access the international banking system.

"What the Burmese government values is not its commerce with the outside world but the financial proceeds of that commerce," Tom Malinowski of Human Rights Watch said.

"Once the Burmese government deposits the checks in its bank accounts, there's a lot the United States government can do to prevent that money from being used in the international banking system."

The United States already imposes many sanctions on Myanmar. Treasury officials have targeted 40 people and 44 entities since the junta killed and arrested protesters during demonstrations in 2007. Being added to the sanctions list prevents people from making transactions in the banking system of the United States, the world's largest economy.

A 2008 law, however, allows another level of sanctions that grants Treasury the authority to impose conditions on banking relationships. U.S. officials will not comment on future policy decisions, but Treasury says it is looking at all potential sanctions, including the banking provision, "to apply the tools best calibrated to address the threat presented."

The United States cannot easily block the lucrative natural gas deals Myanmar does with its neighbors and with European and U.S. companies. But the bank measure would let foreign banks know that the United States has worries about their association with Myanmar money and will be wary of their contact with US financial institutions until those worries are cleared up, according to Jennifer Quigley, advocacy director for the US Campaign for Burma.

Supporters of the banking sanctions often raise North Korea, saying that the United States effectively froze the North out of the international banking system, hurting leader Kim Jong Il.

For the moment, the Obama administration is urging patience as it pursues talks.

Next year's elections in Myanmar will provide a good look at the junta's intentions. A big question will be whether high-level US-Myanmar talks lead to the junta's allowing true participation by minorities and opposition groups or merely let the generals consolidate power.


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