Myanmar’s Oil and Gas: To Sanction Or Not to Sanction?

Since the military coup in Myanmar 11 months ago, the reaction of the West has been rhetorically strident but politically ineffective – at least thus far. The United States, European Union, the United Kingdom, and other Western democracies have imposed an array of targeted sanctions on the top military leaders and their families. Other sanctions have taken aim at senior military leaders and the two octopodal army-controlled conglomerates, the Myanmar Economic Corporation (MEC) and Myanmar Economic Holdings Limited (MEHL).

But still the junta’s bloodshed continues, and the frustration of the pro-democracy movement grows, spurring calls for much more muscular sanctions aimed at choking off the military’s revenues and forcing the generals to the negotiating table.

At the top of the list of proposed targets is the state-owned Myanma Oil and Gas Enterprise (MOGE), which, according to a United Nations human rights expert, “represents the single largest source of revenue to the state.” According to a Myanmar government forecast, MOGE is expected to earn $1.5 billion from oil and gas projects in 2021-2022.

In August, a group of 462 civil society organizations called on Western governments to blacklist MOGE, arguing that its revenues were “being paid into accounts now controlled by the illegal regime, even as it commits atrocities, from air strikes on communities in ethnic areas to detaining and torturing peaceful protesters and journalists.” The U.S. Congress and European Parliament have also recommended the imposition of sanctions on MOGE.

The importance of oil and gas revenues for the military was illustrated in a batch of correspondence obtained by the advocacy group Justice for Myanmar, and reported by the Wall Street Journal on December 16. The letters, sent between military officials and MOGE in early November, appear to show junta leader Senior General Min Aung Hlaing ordering the state-owned oil firm to disclose how much profit it would earn over a six-month period from a gas project called Yetagun, which is jointly owned by Thai, Malaysian, and Japanese companies, and asking what would happen in the event that the payments weren’t made.

“The fact that top junta leaders are showing concern about when they will get paid demonstrates how crucial oil and gas is for the junta, at a time when they are intensifying their campaign of terror,” Yadanar Maung, a spokesperson for Justice for Myanmar, told the newspaper.

Given the importance of oil and gas revenues to Myanmar’s junta, and the rhetoric of outrage that has accompanied its atrocities since February, it is somewhat surprising that no action has yet been taken. Last month, the U.S. announced a raft of sanctions against several more Myanmar officials and entities – but again avoided going after oil or gas revenues.

What explains the reluctance? The most obvious reason is that targeting MOGE with sanctions would impinge on multinational corporate interests – something that is not the case for obscure gem trading concerns and even military-linked holding companies like MEHL.

Take Myanmar’s largest natural gas project, Yadana, which earned the Myanmar government around $400 million in revenues in 2017-2018. Established in 1992, Yadana is a four-way joint venture operated by the French energy giant Total, in partnership with Unocal Myanmar Offshore, a local affiliate of the U.S. firm Chevron. (The two other partners are Thailand’s PTT and MOGE itself.)

Total and Chevron, which launched the Yadana project in the early 1990s, have condemned the coup and pledged that they will comply with any Western sanctions. They have also lobbied policymakers to prevent sanctions from happening. In April, the New York Times reported that Chevron had dispatched lobbyists to agencies including the State Department and key congressional offices to warn against any sanctions that might disrupt its operations in Myanmar.

According to the Associated Press, in the first half of 2021, Chevron reported spending $3.7 million on federal lobbying in the U.S., with “Burma Energy Issues” and “Myanmar Energy and Investment Issues” listed as specific areas of focus. The AP also cited an aide on the House Foreign Affairs Committee as saying that Chevron’s lobbying efforts, in addition to objections from Singapore and Thailand, had played a role in the Biden administration’s hesitation to impose new sanctions.

Naturally, these multinational corporations have framed their arguments in terms of corporate social responsibility. They point to the fact that Yadana project provides around half of the power supplied to Myanmar’s largest city, Yangon, and also supplies a large swath of western Thailand. Total has cited a “human right to energy” in Thailand and said it was maintaining the production of gas at Yadana, “so as not to disrupt the electricity supply that is vital to the local populations of Myanmar and Thailand.”

The second, related, claim will be familiar to anyone who followed the debates over Myanmar sanctions in the late 1990s and first decade of the 2000s: namely, that an abrupt withdrawal of Western firms could open up a vacuum that will be simply filled by less scrupulous investors. In May, Chevron put out a statement warning that a precipitate exit from the country “may open the door for another company that doesn’t share our values to take our place.” In addition, Total has said it is wary of putting its local employees in danger of reprisals from the military, including forced labor.

Despite the clearly motivated reasoning, these lines of argument point to the second consideration for Western governments, which is their desire to avoid, at least in the case of Myanmar, hurting ordinary people with their sanctions.

That said, neither of these arguments holds up to concerted scrutiny. In the first instance, the Yadana project has long passed its production peak and therefore comes with immense financial, to say nothing of reputational, risk. This makes it unclear whether it would quickly attract an alternative buyer, especially given the project’s technical complexity.

In any event, rights groups said they are not asking for the gas to stop flowing, merely the revenues. The joint civil society statement from August advised that gas production should continue but that revenues be paid into an escrow account “until a legitimate, democratic government is in power.” As a result, it is unclear if the picture painted by Chevron and Total – of mass blackouts in Yangon and western Thailand – would transpire if MOGE is targeted by Western governments. Even if it did, thousands of ordinary people are already running their own personal boycotts of MOGE, refusing to pay power bills to a firm they rightly see as supporting the military dictatorship.

Imposing sanctions on MOGE is not guaranteed to lead to a reversal of the coup; indeed, the Myanmar military has many other sources of revenue that could enable it to maintain a precarious hold on the institutions of the state. But it seems clear that the oil majors, whatever their mix of reasoned argument and simple bottom-line interest, are simply taking the path of least resistance in lobbying for a continuation of the status quo. How long will their home countries continue to do the same?