Business, Economics and Jobs

Petrol that funded Myanmar's junta now open to US firms

Myanmar President Thein Sein meets with US Secretary of State Hillary Clinton during a meeting in Naypyidaw, Myanmar in 2011.


Saul Loeb

More than jade and rubies, more than labor or timber, oil and gas were the natural resources that made Myanmar's former junta rich while its citizens struggled.

Until this week, any American conglomerate striking a new deal with Myanmar's state-run energy sector would have run afoul of sanctions.

No longer.

The Obama administration, according to the Washington Post, is now allowing US firms to work with Myanmar's government to extract the nation's vast oil and gas reserves.

This is highly significant. It shows that the State Department leadership has grown confident enough in Myanmar's reforms that it will allow Americans to dabble in a sector marked by secrecy, land grabs and abuse. Were it not for the fossil fuels buried beneath Myanmar's central plains and near seas, the former junta -- now supplanted by a quasi-democracy -- would have lacked a core funding stream that kept corrupt generals in power.

Lucrative energy deals with non-Western countries, namely China, kept the former military government afloat. How they spent the $16 billion earned from oil/gas projects through the last decade -- a figure cited by Myanmar's Eleven Media Group -- is a mystery. (Safe to say little was showered on sectors that would improve lives in Myanmar: schools, hospitals and public infrastructure.)

Having recently returned from a June summit in which Myanmar's energy sector bureaucrats pitched opportunities to foreign investors, I can state with confidence that officials are keen to see more Western firms inside their country. (I say "more" because Total, a French firm, and America's Chevron already operate a pipeline long exempt from sanctions through a grandfather clause.)

As it stands, there are about 20 foreign companies from 11 nations operating in Myanmar's oil/gas fields. China is the big player in Myanmar's energy sector with Chinese interests largely responsible for making oil/gas projects amount to more than 40 percent of the country's foreign investment pledges. .

But the government is confident that many more lucrative deposits lie beneath the waters offshore. According to Myanmar government data, there are currently 25 blocks of barely explored or unexplored offshore terrain available to energy conglomerates.

And Western firms, endowed with the the most advanced technology, are best suited to go in, locate it, extract it and kick a percentage of their profits to the government. (Expect a 25 percent tax on profit coupled with a 12.5 percent royalty fee.) But unlike Chinese firms, American firms will be forced by the State Department to prove their operations are free of abuse.

Given America's energy needs, the Obama administration's decision is only slightly surprising. More surprising is US diplomats' rare defiance of Aung San Suu Kyi, the Nobel Peace Prize-winning opposition figure who has appeared to all but dictate America's Myanmar policy.

Aung San Suu Kyi has pointed out the obvious: for now, her government's oil and gas sector is murky and unaccountable. This is the landscape US operators will enter if they seek the wealth of fossil fuels buried beneath Myanmar's soil.

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