Quarterly Business Magazine

The Evolution of U.S. Myanmar Sanctions

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It was hard to imagine following the 2010 election that the ties between the U.S. and Myanmar would be where they are today. Relations between the U.S. and Myanmar have thawed remarkably thanks to the previously unthinkable steps Myanmar’s government has taken in the past two years. Additionally, the advent of the U.S. State Department’s dual-tracked principled engagement policy – a combination of sanctions and diplomatic engagement – and its subsequent “action-for-action” policy further pushed Myanmar’s political opening. Myanmar’s dramatic democratization efforts led to vast improvement in the bilateral relationship, placing ties in a virtuous cycle.

From Engagement to Sanctions

The U.S. sanctions easing policy has been the most tangible and visible sign of change coming from the international community. But it was also the most difficult one to enact. Both Congress and the Executive Branch piled on restrictive measures, resulting in a virtual “spaghetti bowl” of sanctions. The U.S. Myanmar policy after 1988 shifted from a strategic partnership that included military to military ties, trade, and political engagement throughout the Cold War era to a policy focused on restricting the economic and political clout of the pre-reform era administration for not adhering to international norms of governance. The U.S., along with the Australian, Canadian, British, and European Union governments, levied a series of measures on Myanmar in an effort to isolate and penalize the then-ruling junta and its associates.

U.S. policymakers began to implement sanctions in the wake of the Myanmar military’s crackdown on protestors in 1988. Congress called on the Reagan Administration to respond. President Reagan started what would be a gradual imposition of sanctions by suspending all U.S. aid to Myanmar, including counternarcotics programs, and stopping all arms sales. Presidents George H.W. Bush, Bill Clinton, and George W. Bush and Congress continually strengthened its sanctions regime in response to human rights violations..

After nearly a quarter century, the U.S. executed a host of presidential determinations, congressional actions, memoranda, proclamations, and policy instruments that limited any engagement with the administration. The sanctions policy became a blunt instrument that impacted a swathe of sectors, industries, and individuals in Myanmar but also limited U.S. diplomatic, military, and economic ties through bans on new U.S. investment, the exportation of financial services, importation of Myanmar goods, travel of designated senior junta and business officials, and restrictions on development assistance, including from USAID, UNDP, and International Financial Institutions (IFIs) – the World Bank, IMF, and ADB. In fact, there would be six separate but overlapping congressional and executive restrictions governing IFI engagement in Myanmar. Through five laws and six presidential executive orders specific to the country as well as non-country specific laws imposed due to nonproliferation and human trafficking violations, Myanmar – along with Cuba, Zimbabwe, Iran, and North Korea – became one of the world’s most sanctioned countries.

However, U.S.-Myanmar relations began to improve starting in 2009. As part of its policy of engagement with Myanmar, the Obama Administration sought to unravel the sanctions regime to go from a blunt instrument to a targeted one. The new policy had to show a careful balance to support reformers and address concerns from human rights and political activists highlighting regressive elements remaining in the system. But the regime the Obama Administration sought to reach out to had to unclench its fist first. And it did.

Unraveling Decades of Sanctions

President Thein Sein and his cabinet kicked off a flurry of unprecedented moves that included outreach to Aung San Suu Kyi, release of political prisoners, and abiding by his constituents demands and suspending the controversial Myitsone dam. Parliament followed suit and enacted and debated reformist legislation that allowed for freedoms of assembly and press. Several U.S. government officials, most notably Secretary Hillary Clinton and Senator Mitch McConnell, traveled to Myanmar to see the changes for themselves. The U.S. sought to appropriately respond to the changes on the ground in Myanmar, ensure policy would encourage further reform, and maintain options should any of the regressive elements reverse or stand in the way of its course.

To do so, policymakers had to unravel and pull apart the strands of the sanctions spaghetti to form a rational and appropriate policy. Each piece of legislation and executive order outlined the desired changes, most of them applied to the NLD and Aung San Suu Kyi. U.S. sanctions and general bilateral policy would not be just about opening and flooding the country with aid. After decades of poor relations, precedence for political instability and non-adherence to international norms of governance, U.S. policy had to maintain tools to ensure Myanmar was progressing and not regressing. In order to do this, the U.S. had to further rationalize its sanctions regime to try to remove the repetitiveness and make it more streamlined. The sanctions policy would be a targeted one, no longer a blunt instrument.

On the positive side of the sanctions coin, the most significant easing of sanctions followed Myanmar’s successful April 2012 parliamentary by-elections that brought the NLD and Aung San Suu Kyi into government, release of hundreds of political prisoners, and peace agreements with Myanmar’s armed ethnic militias. In the months that followed, the U.S. allowed for new investment, removed the ban on the exportation of financial services, suspended most restrictions on Myanmar imports, and removed President Thein Sein and U Shwe Mann from the Department of Treasury’s Specially Designated Nationals (SDN) list. The U.S. also opened a USAID office to help manage and direct assistance money and programming and expanded opportunities for cultural and educational exchanges.

On the leverage side, sanctions policies sought to include and anticipate concerns regarding ethnic minority rights, military ties to North Korea, and corrupt business activities. Part of the solution was to refine the SDN list through criteria established in a new executive order from President Obama released in July 2012.The U.S. also kept all underlying authorities that could reimpose the eased sanctions as an “insurance policy.” Additionally, the U.S. would require U.S. businesses to submit reporting requirements if their investment exceeds $500,000. The reporting requirements reflect due diligence issues that would not only assist U.S. companies in preventing potential long-term issues of land confiscation, corruption, or engagement with SDN entities but also prevent further exploitation and abuses of Myanmar citizens.

Staying on the Right Path, For Both Sides

Once sanctions are put into place, it can be extremely difficult to ease even if there is enormous goodwill on the part of the sanctioning government. The U.S. contended with South African sanctions long after apartheid and the Cold War era Jackson-Vanik amendment was finally repealed in December 2012, nearly a quarter century after the Berlin Wall fell. Myanmar was no exception; the sanctions easing process was more complex than its imposition due to overlapping provisions of the laws and executive orders and administration’s determination to attune a policy to best address changes in the country.

U.S. Myanmar policy benefitted from having a dedicated team that had the right knowledge on the country and sanctions programs, could connect with all key players on the Myanmar and U.S. side, and genuinely cared about putting together a balanced and flexible policy that would aid Myanmar’s transition, be explicit about U.S. concerns, and most importantly, be flexible enough to quickly address changes occurring in the country.
There are many critics that claim sanctions achieved little and stood and continue to stand in the way of better relations. I would argue that the sanctions were critical in the country’s transition and with this more finely-tuned policy, the U.S. government can utilize this tool to ensure Myanmar’s opening is not felled by the factors that have stunted so many other emerging economies’ growth and shape the kind of “gold standard” of business practices the country deserves.

The following is a brief guide on Myanmar-specific legislative and executive sanctions that were imposed from 1988-2012 as well as amendments to each. Additionally, this document highlights non-Myanmar specific sanctions or acts that impact U.S. investment and engagement in the country.
 

Erin Murphy

Prior to founding Inle Advisory Group, Erin served as the Sepcial Assistant for the first ever Special Representative and Policy Coordinator for Myanmar. In that position, she participated in the most significant U.S policy shift on Myanmar in decades including joining Secretary Clinton on her historic trip to Myanmar in December 2011, overseeing the easing of economic sanctions, and advising and supporting the Office of the Special Representative during the unprecedented warning of U.S.- Myanmar ties. She is based in Washington, DC.

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