Fashioning a Forward-Looking Approach on Burma Part I

Promoting Political Freedoms in Burma:
International Policy Options

Brahma Chellaney[*]

(Prepared for presentation at the Burma workshop of the Swedish Institute of International Affairs, Stockholm, May 8-9, 2008.)

In a year that marks the 60th anniversary of Burma’s independence, the country’s junta is holding a national referendum on a new Constitution, as part of a touted seven-step “roadmap to democracy.” With the military ensconced in power for 46 long years, few believe it will hand over power to civilians after promised elections in two years’ time. It took the military more than 14 years just to draft a new Constitution,[1] which grants wide-ranging powers and prerogatives to the military, including 25 percent of the seats in the federal and provincial legislatures.

U.S. President George W. Bush has not only denounced the Constitutional process as fatally flawed, but also on May 1, 2008, slapped yet more sanctions on Burma. The latest sanctions are targeted at state-owned companies that produce timber, pearls and precious gem — firms that are, in Bush’s words, “major sources of funds that prop up the junta.”[2] The United States earlier had imposed sanctions on companies controlled by private individuals in the airline and hotel businesses in an effort to smother foreign tourism flow to Burma.

Such is the tragedy that Burma symbolizes that, in one week, it has been battered both by new sanctions and a tropical cyclone from the Bay of Bengal that reportedly killed thousands of residents along the southeastern coast. On the one hand, impoverished Burma is economically vulnerable and thus seemingly susceptible to outside pressure. On the other hand, Burma has proven to be a complex and exceedingly difficult case on what the outside world can do.

What role external actors can play in promoting a democratic transition, however, is an issue not limited to Burma. Autocratic rule abounds in the world, including around Burma. International principles and policies deemed appropriate to help bring about democratic transition in Burma should ideally be such that they permit application in other settings, if promotion of democracy is not to be seen as a political tool to target bad autocracies while shielding those that are perceived in one’s self-interest to be good autocracies.

Yet the temptation to look at Burma in isolation, as if it uniquely exists in a tight compartment, has been so overpowering that the country has been held to special standards and subjected to unrelenting demands that are rarely invoked against stronger, more-entrenched autocracies that still flout near-universal human-rights norms. These other autocracies, unlike Burma, actually pose a challenge to the liberal international order. But such selective targeting may be one reason why international efforts to demilitarize Burma’s polity have been a signal failure. It is helpful to look at Burma in a larger regional and Asian context.

Today, a qualitative reordering of power in Asia is challenging strategic stability and reshaping major equations. A new Great Game is underway, centered on building new alliances, ensuring power equilibrium, gaining greater market access, and securing a larger share of energy and mineral resources. From war-games on the high seas to the establishment of exploratory enterprises like the Shanghai Cooperation Organization and the Quadrilateral Initiative, the ongoing developments are a reminder of that high-stakes game. With the center of gravity in international relations clearly moving toward the Asia-Pacific, this Great Game could indeed determine the future world order.

Asia has almost 60 percent of the world’s population spread across a 43.6 million-square-kilometer area. Geographically, Asia comprises 48 separate nations, including 72 percent of the Russian Federation and 97 percent of Turkey, although in popular perception it seems to comprise only the area from the Japanese archipelago to the Indian subcontinent. Asia encompasses very different and distinct areas — from the sub-arctic, mineral-rich Siberian plains to the subtropical Indonesian archipelago; and from oil-rich desert lands to fertile river valleys.

Asia is also very diverse. It has countries with the highest and lowest population densities in the world — Singapore and Mongolia, respectively. It has some of the wealthiest states in the world, like Japan and Singapore, and also some of the poorest, such as Burma, North Korea and Afghanistan. It has tiny Brunei, Bhutan and the Maldives and demographic titans like China, India and Indonesia. The smallest country in Asia in terms of population, the Maldives, also happens to be the flattest state in the world. In sharp contrast to the low-lying states like the Maldives, the Philippines and Bangladesh that are threatened by the potential rise of ocean levels due to global warming, Asia has mountainous nations like Nepal, Afghanistan and Kyrgyzstan.

Parts of continental Asia are extraordinarily resource-rich. The desert lands of West Asia, the barren wastes of Central Asia, the Russian shelf in Asia and the Burma’s Bay of Bengal coast together hold nearly 60 per cent of the world’s proven oil and gas reserves. Burma, rich in natural resources, sits on potentially vast quantities of natural gas. There are vast coal reserves in China and the Russian Far East. Siberia holds ores of almost all economically valuable metals, including some of the world’s largest deposits of nickel, gold, lead, molybdenum, diamonds, silver and zinc. The belt running down from the Malay Peninsula to Indonesia contains huge deposits of tin.

Asia, however, is largely a water-stressed continent. Large parts of Asia depend on monsoon precipitation and on the glacially sourced water reserves of the Himalayas and Tibetan highlands, the riverhead of Asia’s waters. Climate change will have a significant impact on the availability and flow of water resources in Asia and thus become an important factor in the national-security calculus of several states, including the world’s two most populous countries — China and India. The geopolitical importance of the Tibetan plateau, whose forcible absorption in 1950 brought the new Chinese state to the borders of India, can be seen from the fact that most of the great Asian rivers originate there. If the demand for water in Asia continues to grow at the current rate, the interstate and intrastate disputes over water resources could potentially turn into conflicts in the years ahead.

Another area of sharpening Asian geopolitics is energy. Competition over oil and gas resources, driven by rapid economic growth in Asia, indeed constitutes one key dimension of the emerging Great Game. The ongoing global shifts in economic power are manifest from the changes occurring in the energy and materials sectors, with the growth in demand moving from the developed to the developing world, principally Asia. Energy prices are going to stay high and volatile for the foreseeable future, given these shifts and the soaring demand in countries like China and India, which together are projected to double their oil demand between 2003 and 2020.

Despite the total consumption of energy in the Asia-Pacific having grown by 70 percent between 1992 and 2005, per capita energy consumption is still relatively low by international standards: 749 kg of oil equivalent in 2005, compared with the global average of 1,071 kgoe. Not only will per capita consumption grow sharply in Asia, “on the supply side, Asia’s strong demand environment for energy and basic materials, coupled with its low labor costs, means that the region will increasingly become a global producer of aluminum, chemicals, paper, and steel.”[3]

Slaking the tremendous thirst of the fast-growing Asian economies and meeting the huge demands of the old economic giants in the West are at the core of the great energy dilemma facing the world in the 21st century. Finding an energy “fix” has become imperative if the Asian and other emerging economies are to continue to grow impressively and if the prosperous countries are to head off a slump. Such a “fix” would have to be rooted in three essential elements: low-cost, preferably, renewable alternatives to fossil fuels; greater energy efficiency; and minimizing or eliminating greenhouse-gas emissions. The ongoing structural shifts in global energy markets carry important long-term political and economic implications, besides challenging the stability of these markets.

Employing their large oil and gas resources, energy-rich countries have positioned themselves as key players in the Asian Great Game. Russia, for example, has used its oil and gas exports to revive its fortunes, succeeding in becoming an important geopolitical player again. But for its huge oil and gas wealth, Iran would not have been able to play its nuclear card in defiance of the United Nations Security Council resolutions. In a more modest way, Burma has been able to use gas deals with Thailand and China to earn hard cash in the face of tightening international sanctions. External players like the United States, the European Union and Turkey have sought to influence the pipeline politics in Asia. The United States has not only strengthened its military arrangements in West Asia, but also set up new bases or strategic relationships stretching from the oil-rich Caspian Sea basin to Southeast Asia. In this larger picture, southern Asia (of which Burma is a part) is a strategic gateway between the Gulf and the Far East, and between Central Asia and the Indian Ocean rim.

In the coming years, the voracious appetite for energy supplies in Asia is going to make the geopolitics murkier. The present geopolitical maneuvering is an indicator of that. What is striking is that the new flurry of alliance formation or partnerships in Asia is being led by Asia’s rising powers, not by the United States, which has policed Asia since the end of World War II. In this larger context, Asian cooperation and security will be very much influenced by the equations between and among the major players. The need to secure stable energy supplies will drive the major players in Asia to increasingly integrate their energy policy with foreign policy, as they consciously promote diplomatic strategies geared toward seizing energy-related opportunities overseas.

Energy-driven competition should not be allowed to aggravate interstate rivalries in Asia. Mercantilist efforts to assert control over oil and natural gas supplies and transport routes certainly risk fuelling tensions. Given the lack of regional institutions in Asia to avert or manage conflict, the sharpening energy geopolitics makes the need for Asian energy cooperation more pressing. A challenge for states in Asia is to manage their energy needs through more efficient transport and consumption and more cooperative import policies. Multinational cooperation on the security of sea-lanes is essential to avert strategic friction in Asia. Where maritime claims overlap, the answer to any such dispute cannot be unilateral drilling or production by one side. Disputes over what are legitimate zones of energy exploration in open seas need to be managed through an agreed code of conduct.

Multilateral energy cooperation in Asia indeed can pave the way for establishing a common Asian market and distribution network for petroleum products, with an Asian benchmark crude oil (similar to Europe’s Brent blend) to serve as a pricing yardstick for other types of crude. Multilateral cooperation can also help to both regulate the competition to buy foreign energy assets and to hedge risks in the event of any supply disruption, whether politically induced or accidental, like a major refinery fire. And just as Europe wants Russia to open its energy industry to European investment to create a two-way relationship, the major oil-and-gas exporters and the major Asian importers should invest in each other’s energy infrastructure.

It is against the larger Asian landscape that one should examine Burma because no country or sub-region can be tightly compartmentalized and seen in isolation. Energy-rich states almost everywhere tend to have non-democratic governments, many of them repressive autocracies. In that sense, Burma is not an exception.

Even though it has significant gas reserves that are coveted by its neighbors, a sanctions-hit Burma has not reaped the energy dividends that most other autocratically ruled energy-rich states have. Also, it is nobody’s case that Burma’s curtailment of basic rights is worse than Saudi Arabia’s.

While it is easy to criticize Thailand for boosting the Burmese junta’s revenues through gas imports and to condemn China for signing a 30-year gas deal with Burma, it should be remembered that no democracy has compunction in buying oil from Saudi Arabia, even though such purchases help fatten the House of Saud, which played a lead role in fanning the spread of Islamist ideology in the world. It bankrolled jihad as part of its aggressive export of the medieval theology of Wahhabism, named after the revivalist movement founded by Muhammad Ibn’Abd al-Wahhab in 1744.

Burma’s resources and vantage location

Burma is a significant state in size and strategic importance. Bordered by Bangladesh, China, India, Laos and Thailand and by the Andaman Sea and the Bay of Bengal, Burma comprises an area of 678,000 square kilometers, making it the country with the largest landmass in the Indochina belt. It currently has a population of nearly 58 million, with a large and capable workforce.

Few can overlook Burma’s strategic location. It forms the strategic nucleus between India, China and Southeast Asia. In other words, Burma is where Asia’s main regions converge — South Asia, Southeast Asia and East Asia.

Projects to establish an ‘Asian Highway Network’ and a ‘Trans-Asian Railway’ have only underlined Burma’s strategic-bridge role. It is a country that geographically bridges Asia’s major economies. In the Asian highway project, Burma will help connect five important countries – India, China, Bangladesh, Laos, and Thailand. The Asian Development Bank has been negotiating a cross-border transport agreement among the six Mekong River-linked countries – China, Thailand, Laos, Cambodia, Vietnam and Burma.

Burma’s bounteous natural resources include natural gas, precious metals and gems, high-quality tropical hardwoods, and marine fisheries. Given that profile and position, Burma can hardly be ignored.

With major rivers and bountiful rainfall, Burma has fertile soil. But for recurrent flooding and cyclones, shortages of fertilizers and pesticides, and general mismanagement by the military-run government, its agricultural output could be much higher. Agriculture, including fisheries, forestry, livestock, rice and sugarcane, made up almost 57 percent of its GDP in 2005.[4] In the past decade, Burma has emerged as a major exporter to India, for instance, of lentils, which — rich in protein — are an integral part of the diet of vegetarians. India has the world’s highest concentration of vegetarians. Last year, Burma supplied around one million tons of lentils, or half of India’s total imports, according to official data.

Burma is a significant producer of antimonial lead, copper matte, nickel speiss, and precious gemstones. Much of the copper exports go to Japan. It also produces barite, carbonate rocks, chromite, clays, coal (lignite), copper, feldspar, gold, gypsum, lead, natural gas, nickel, silver, tin, tungsten and zinc. Among processed mineral products, Burma produces polished precious gemstones, refined gold, refined lead, petroleum products and crude steel. Minerals, however, constitute a tiny fraction of its GDP.

With its exports totaling $3.1 billion and imports adding up to $3.5 billion in 2005, Burma’s main trading partners are its neighbors — Thailand, China, India, Singapore and Malaysia. In merchandise trade, Thailand ranks No. 1. But if the opaque arms trade (for which no reliable figures are available) and services are included, China is perhaps Burma’s largest trading partner.

Through sanctions and officially encouraged disengagement, Burma has become marginal to the foreign-policy interests of the West, thus reinforcing the Western approach emphasizing high-minded principles over strategic considerations, and isolation over engagement. Today, the West has little financial stake left in Burma. About 95 percent of Burma’s trade in fiscal 2007-08 was with other Asian countries. The West also doesn’t have to live with the consequences of its actions. Burma’s neighbors, however, will not escape the effects of an unstable Burma. The imperatives of proximity thus dictate a different policy logic. That has spurred criticism that Asia is helping Burma beat sanctions. [5]

Rich in natural gas, Burma — according to one estimate by Alexander’s Gas & Oil Connections (a site for the gas, oil and affiliated industry) — has recoverable onshore and offshore reserves of 2.46 trillion cubic meters. But with greater foreign investment in exploration, more rich gas deposits could be discovered, especially in Burma’s offshore areas in the Bay of Bengal.

In January 2008, the state-owned China National Petroleum Corp (CNPC) signed production-sharing contracts with the Burmese Ministry of Energy covering deep-sea blocks off Burma’s western Rakhine coast. CNPC is about to begin construction of a trans-Burma pipeline to take the gas from the Shwe field in Rakhine to China’s Yunnan province and beyond. Burma is already exporting natural gas worth $1.2 billion a year to neighboring Thailand from the Gulf of Martaban.

Daewoo International, the South Korean company, is the largest investor in the Shwe gas site. Two Indian energy firms, ONGC Videsh Ltd. and Gas Authority of India Ltd. (GAIL), own a minority stake in that Burmese field, A-1, and in the adjacent A-3 block. This Indo-Korean consortium of Daewoo, ONGC Videsh and GAIL had earlier discovered additional gas deposits in the Shwe site, and consequently revised the Block A1’s total gas estimates to 566 billion cubic meters.

Burma, however, took India unawares by signing an accord with CNPC to export gas to China from the A-1 and A-3 fields over a 30-year period. To New Delhi’s acute embarrassment, Burma first disclosed its intent to sell the gas to China no sooner than India had announced an agreement-in-principle with Beijing to jointly cooperate on securing energy resources overseas, so as to prevent the Sino-Indian competition from continuing to drive up the international price of such assets in third countries.

In recent years, Burma has stepped up piped gas exports to Thailand from its two offshore fields in the Gulf of Martaban — Yadana and Yetagun. But the new rich gas finds in the Bay of Bengal will help generate far more revenue for Burma than the current gas flow from the Gulf of Martaban. According to provisional data, gas exports to Thailand from the Gulf of Martaban fields were estimated to be worth $1.2 billion in fiscal 2007-08 that ended March 31. But because the official exchange rate pegs the kyat, Burma’s currency, to an artificially low rate of 6 to 1 against the U.S. dollar (when the black-market rate is in the vicinity of nearly 1,000 kyat to a dollar), the gas-export earnings are much underreported in the public accounts in kyat — nearly 200 times below the unofficial exchange rate.[6]

France’s Total S.A. (with a 31.24 percent holding) is the main operator at the Yadana gasfield, and its other partners are Chevron Corp. of USA (with a 28.26 percent stake), Thailand’s PTT Exploration and Production Public Company Limited (25.5 percent), and the state-run Myanmar Oil and Gas Enterprise (MOGE) (15 percent).

In the Yetagun gasfield, the main operator is Malaysia’s Petronas (40.91 percent), with MOGE (20.45 percent) and Thailand’s PTTEP and Japan’s Nippon Oil Exploration (19.32 percent each) as its partners. Gas imports from Burma are critical to Thailand’s power generation, with one-fifth of Bangkok’s electricity supply coming from that source.

Interestingly, the United States, while prohibiting new investment by American citizens or entities, has protected the business interests of Chevron Corp., which acquired a stake in the Yadana gas project in Burma when it bought Unocal Corp. in 2005. Because Unocal’s investment in the project predated the imposition of U.S. sanctions, Chevron has used a grandfather clause to stay put in Burma — one of the few large Western companies left there.

On the gas front, Burma has shown that interstate pipeline politics can be played not only by strong states but also by weak states. The junta in Burma has deftly played pipeline politics to keep the veto-empowered China on its side at the United Nations Security Council. Since the early 1990s, the junta has relied on China’s veto power to shield itself from international intervention. It was China that helped beat back an early 2007 U.S.-led attempt to impose a Security Council diktat on the junta to improve its human-rights record.[7]

The junta then proceeded to thank Beijing for torpedoing that sanctions move by withdrawing the status of India’s GAIL as the “preferential buyer” on the A-1 and A-3 blocks, and signing production-sharing contracts with China’s CNPC instead. For India, this was a discomforting diplomatic setback for two reasons: (i) it had sought to sweeten the deal both with a US$20 million “soft credit” and by proposing to construct a power plant in Burma; and (ii) the A-1 and A-3 are partly owned by two Indian state-run companies.[8]

Burma also has some onshore and offshore oilfields, with reserves estimated to be 3.2 billion barrels of recoverable crude oil. It produced 8.133 million barrels of crude oil in 2005, compared with 7.160 million barrels in 2004.[9] At least three oil companies from neighboring countries, including India’s privately owned Essar, are presently exploring for additional oil finds in Burma by conducting feasibility studies involving collection and analysis of geologic and seismic data.

Foreign investment in Burma’s energy sector, however, has not been too significant compared to the sector’s actual potential. Had Burma not been an isolated, sanctions-hit country, the picture would have been different, with international oil majors seeking exploration and production rights there. Sanctions have actually prevented Burma (like Iran) from accessing liquefaction technology to become a major exporter of liquefied natural gas (LNG). That has left Burma largely with one choice: to export natural gas by pipeline. And to whom can it sell natural gas by pipeline? Naturally, to its immediate neighbors, as it is currently doing to Thailand and is going to do to China once the new pipeline is complete. India till date has failed to secure a single production-sharing contract to buy Burmese gas.

Burma’s vantage location has also added its energy-related importance in a different way — at least for China. In addition to importing Burmese gas, China is setting up an energy corridor through Burma involving an oil pipeline to transship crude oil it imports from the Middle East and Africa. In other words, Burma is both a source of energy as well as a transshipment route for China. China presently is finalizing technical details for the construction of the oil pipeline, which — running the length of Burma — will go at least up to Chongqing, a new province carved out of Sichuan, according to one report.[10]

This energy pipeline is part of a strategic corridor — the Irrawaddy Corridor — that China is setting up to link its southwestern provinces with the Bay of Bengal and the Indian Ocean through Burma. The corridor establishes road, river, rail and energy links from China’s Yunnan and Chongqing provinces to Burma’s Chinese-built harbors at Kyaukypu and Thilawa. Along with Beijing’s onshore and offshore strategic assets in Burma, this corridor signifies an enlarging Chinese footprint in that country.

The energy pipeline and strategic corridor through Burma need to be seen in the context of the other Chinese moves and actions in southern Asia that have far-reaching strategic implications for India, Japan, the United States, Australia and other players in the Indian Ocean rim region. Besides the intent to transfer Gulf and African oil for its consumption by cutting the transportation distance and minimizing its exposure to U.S.-policed sea-lanes, China has important strategic objectives in mind in fashioning new transportation routes.[11] A fourfold Chinese strategy is currently being implemented:

1. The north-south strategic trail that the Irrawaddy Corridor represents, granting China access to the Bay of Bengal and the Indian Ocean.

2. A second strategic corridor in a north-south axis being fashioned in southern Asia is the trans-Karakoram corridor stretching from western China down to Pakistan’s new, Chinese-built Gwadar port, at the entrance to the Strait of Hormuz, through which 40 percent of the world’s oil supply passes. Opened in the spring of 2007, the deepwater port at Gwadar represents China’s first strategic foothold in the Arabian Sea. China’s plan is to make Gwadar a major hub transporting Gulf and African oil by pipeline to the Chinese heartland via Xinjiang. Such piped oil would not only cut freight costs and supply time but also lower China’s reliance on shipping lanes through the Malacca and Taiwan Straits. Pakistan has already signed a memorandum of understanding with Beijing for “studies to build the energy corridor to China.”

3. China is shoring up an east-west strategic corridor in Tibet across India’s northern frontiers, as illustrated by the $6.2 billion China-Tibet railway from Gormu to Lhasa that opened in July 2006. Beijing is now extending the Tibetan railway to the Nepalese capital of Katmandu and also to two other points: the tri-junction of the India-Bhutan-Tibet frontiers (in the Chumbi Valley) and the intersection of the India-Burma-Tibet borders.

4. China’s incremental efforts to build a “string of pearls” along the Indian Ocean rim symbolize Beijing’s desire for a fourth strategic corridor. It seeks to assemble this “string of pearls” — a term first used in a report for the Pentagon by U.S. defense contractor Booz Allen Hamilton — through forward listening posts, naval-access agreements and Chinese-built harbors stretching from Pakistan and Sri Lanka to Bangladesh and Burma. The Chinese interest in the Indian Ocean rim now extends to the Seychelles.

For China, Burma is a critical entryway to the Bay of Bengal and the Indian Ocean. Chinese strategic positioning in Burma also needs to be seen against the backdrop of Burma overlooking vital sea lanes of communication through the Strait of Malacca. Not unsurprisingly, the Irrawaddy Corridor has brought Chinese security personnel to Burmese sites close both to India’s eastern strategic assets and to the Strait of Malacca. With the Irrawaddy Corridor stretching to the Bay of Bengal, Chinese security agencies have positioned personnel at several Burmese coastal points, including the Chinese-built harbors.

These security agencies already operate electronic-intelligence and maritime-reconnaissance facilities on the two Coco Islands in the Bay of Bengal. India transferred the Coco Islands to Burma in the 1950s, and Burma then leased the islands to China in 1994. Today, despite denials by the Burmese junta, there is documented evidence, including satellite imagery, showing that China operates a signals intelligence (SIGINT) collection facility from the Great Coco Island.

The Irrawaddy Corridor holds important strategic implications for several players in the Indian Ocean rim region. Such transportation and strategic links, for example, give China leeway to strategically meddle in India’s restive northeast, including the state of Arunachal Pradesh, which China claims to be Chinese territory. Operating in India’s northeast through the plains of Burma (which was part of the British Indian empire) is much easier than having to operate across the mighty Himalayas.[12] It is no wonder that during World War II, both the Allied and the Axis powers classified Burma as the “back door to India.” The potential for Chinese strategic interference has to be viewed against the background that the tribal insurgencies in India’s northeast were all instigated by Maoist China, which trained and armed these rebels partly by exploiting the Burma route. Today, India has an 850-kilometer-long porous border with Burma, with insurgents operating on both sides with the help of shared ethnicity.[13] (Continued below)

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