US unlikely to lift sanctions in 2016

Despite boasting a new democratically elected government that enjoys enormous popular support, Myanmar looks unlikely to shed the US sanctions that have restricted the country for decades, according to experts familiar with the sanctions program.

Various individuals and organisations – international and domestic – have called for the US to lift sanctions against Myanmar, following the National League for Democracy’s victory in last November’s elections and an apparently smooth transition to a new administration underway.

Five major business associations sent a joint letter to the US administration earlier this month, which said that the benchmark of free and fair elections had been met, and that it was “incumbent upon the United States to continue to advance the normalisation process”.

Myanmar is sanctioned under the International Emergency Economic Powers Act (IEEPA), which provides a legal framework for the US Treasury to blacklist certain individuals or companies. The joint letter asked that the IEEPA is allowed to lapse when it falls due for renewal in May.

But one US lawyer familiar with the sanctions program holds out little hope that 2016 will see an end to the sanctions program, pointing to recent comments from several US administration officials as signalling maintenance of the status quo.

Scot Marciel, the new US ambassador to Myanmar, said at his confirmation hearing in November 2015 that the US would need to engage with the new government to encourage progress on a range of issues, including ending ethnic fighting and human trafficking, increasing respect for human rights, and promoting broad-based economic development.

He was also quoted in his response to the Senate’s questions as saying he would not recommend any dramatic change to the sanctions program.

The outlook is also complicated by timing. The NLD will take power shortly before the annual Thingyan water festival, which heralds almost two weeks of national holiday.

“Then you’re almost into the heart of the US campaign season, and so Congress for all intents and purposes will be home for summer and campaigning into autumn,” said Peter Kucik, a sanctions expert at Inle Advisory Group and former senior sanctions adviser at the US Treasury’s Office of Foreign Assets Control (OFAC).

“That’s not to say that the US administration will stop operating, but you lose Congress so that the legislature isn’t able to focus on the issue. That will be the period when the new NLD government is up and running,” he added.

The US administration was once concerned that Myanmar’s democratic elections would not be allowed to take place. Now that the elections are over, the administration will want to see that the NLD is allowed to govern without interference, said Mr Kucik.

“Until members of Congress and the US administration see that the NLD administration is up and running and able to govern, there will be fear in the back of some people’s minds,” he said.

The NLD formally takes power in April and the IEEPA is due for renewal shortly afterward, in May, leaving little time for the administration to become comfortable.

A spokesperson for the US embassy in Yangon said it did not “anticipate any dramatic change in the near term” to the US administration’s sanctions policy. The US will wait to see how the political transition proceeds, and is looking for “progress on a wide range of issues affecting Myanmar’s political transition”, the spokesperson said.

President Barack Obama has the power to lift the trade and financial sanctions enforced by OFAC. But even if he was willing to do this, it would require political capital that he may not be willing to spend, said Eric Rose, lead director at Herzfeld Rubin Mayer & Rose Law Firm in Yangon.

A US presidential election scheduled for November of this year, and the recent death of Supreme Court Judge Antonin Scalia, requiring Mr Obama to nominate a replacement, means the US president has more pressing problems, he said.

“I don’t think that in his last year, with all the problems he is having, he is willing to invest political capital into what is arguably one of his greatest foreign policy successes.”

There are politicians in both the Republic and Democratic parties eager to see sanctions relaxed and others that have argued for additional sanctions to be imposed.

Californian Congressman Ed Royce, in a House Foreign Affairs Subcommittee Hearing last October, said he was concerned that “only one individual had been added to the Specially Designated Nationals [SDN] list for violations of human rights since violence erupted in 2012”, and that he hopes to add other names. At least 140,000 Rohingya and other Muslims in Myanmar have been displaced by violence in the previous five years, he said.

Deputy Secretary of State Antony Blinken in a visit to Nay Pyi Taw on January 18 also raised concerns about discrimination and violence against ethnic and religious minorities, including the Rohingya population, who are officially called Bengalis in Myanmar.

However, even if sanctions are not lifted in their entirety, progress towards easing the program can still be made. This was demonstrated last year, a month after Myanmar’s elections, when the US treasury department issued a six-month general licence, allowing trade to pass freely through Yangon’s blacklisted Asia World Port Terminal and other key infrastructure hubs with an SDN connection.

A spokesperson for OFAC could not comment on whether the six-month general licence was likely to be renewed, but sanctions lawyers are confident that it will be extended either for a set period of time or indefinitely before it expires in June.

“I would be floored if there wasn’t an extension,” Mr Kucik said.

Progress is also possible on the SDN list – one of the biggest barriers to US trade with Myanmar. However, the general licence does not solve the difficulty US firms have in determining exactly who they are dealing with, said Kaveh Miremadi, an OFAC economic sanctions attorney at Price Benowitz in Washington.

SDNs have become adept at operating through shell companies, and the due diligence required to evaluate potential business partners is onerous, he said, adding that the average US company lacks the resources to fully vet who they are dealing with. For example, even soft drink giant Coca-Cola failed to uncover that a director at its local partner had links to jade mining.

Myanmar’s SDN list contains 38 individuals and 77 entities, but removing either an individual or an entity from the list has proved difficult.

Last year, U Win Aung became the first and only person to be removed from the SDN list. His two companies, Dagon International and Dagon Timber, were also removed. Mr Kucik estimated there were some 10 other individuals actively engaged in trying to remove themselves from the SDN list.

“But I don’t think the US is doing enough to effectuate its existing policies,” he said. “People are left two years into the process and they don’t know whether it will take another year.”

Clearer statements and better information on the de-listing process would encourage SDNs to engage. Efforts to shorten the process would also help, Mr Kucik said.

There remains a ban on investment with the military, and an import ban on rubies and jadeite. Most of the other economic sanctions have been removed. A better functioning de-listing process would allow the US to use the SDN list as a tool to chip away at the remaining sanctions.

“Then if the SDN list goes, the material sanctions are gone,” Mr Kucik said.

Source: Myanmar Times

NB: Take note that Myanmar has been taken off the US Sanction List by President Obama’s Executive Order signed on 7th October 2016. See US terminated remaining sanctions against Myanmar on 7 Oct 2016.

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