After Secretary of State Hillary Clinton’s announcement that the United States would be suspending the ban on the export of financial services and investment across all sectors of the Burmese economy, major oil and gas companies like Chevron, Total and Exxon Mobil rejoiced. Burma has vast reserves of oil and natural gas. And, what will be a boon for big oil and gas will likely be disastrous for those living in ethnic minority regions where these resources are concentrated and which continue to be areas of conflict.
The U.S. government hopes that opening up investment in the long-isolated country can benefit both U.S. businesses and the people of Burma. However, Burma presents a context where investment can exacerbate human rights problems and undermine broad-based development, especially considering that the most attractive areas for investment are precisely the areas in which rights violations are ongoing. Institutional investors, financial service providers and related stakeholders recently expressed these concerns in a joint letter to President Obama.
In addition to the oil and gas industry’s role in funding conflict and corruption in Burma, the industry has the potential to be directly tied to mass atrocities and human rights abuses. For example, access roads necessary to construct, expand and operate in the industry are highly militarized and have been acquired through massive land confiscation where locals received inadequate compensation.
The roads used for projects in the industry provide access for the military to remote and contested areas, heightening the conflicts that have displaced thousands. Common abuses of human rights occurring in conflict-affected, resource-rich areas of Burma include arbitrary execution and detention, torture, rape, the recruitment of child soldiers, forced labor and forced relocation.
Moreover, Burmese natural resources have historically been used by the military-backed government and armed groups as key strategic tools for political, economic and territorial control. Foreign companies are generally required to operate in partnership with a state-owned Burmese firm. This requirement enables the concealment of revenues and impedes transparent disclosures of royalties, profit-sharing, signing bonuses, profits, fees and taxes, which create a deeply corrupt environment among government and corporate actors.
There is also a high likelihood that revenues from the oil and gas sector – including from the construction of exploration and production equipment and transit pipelines, fund the military-backed regime.
As Burma’s extractives industry opens to foreign investment, further reform is essential to a mutually beneficial relationship between Burma’s citizens and companies doing business in its extractives industry. Effective systems both inside and outside of Burma such as rule of law, corporate governance structures, and labor, human rights and environmental standards that guarantee corporate transparency and accountability are similarly essential to investors in extractives companies and to the Burmese.
Responsible, rights-respecting trade and investment in Burma must include consultation with civil society, which is critical to mitigating investors’ exposure to significant financial, operational, legal and reputational risks. None of this will be possible with wholesale lifting of the investment ban by the United States. While it may be too late to reverse Secretary Clinton’s decision, the U.S. Congress has legislation pending to keep other critical sanctions in place. If the United States is serious about seeing through the nascent reforms in Burma to a successful end, these sanctions should stay in place.
Loss of sanctions as a point of leverage would put big oil and the Burmese military in the driver seat, once again endangering the safety and security of those in the ethnic regions. The risks are greater than the rewards. Hopefully this Memorial Day weekend, Congress will remember the history of the Burmese military and the role of oil and gas in fueling conflict and move to keep sanctions in place.
Read more about the oil and gas industries and other problematic sectors of the Burmese economy in the Conflict Risk Network’s recent report, Burma: Not Open for Business.
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