Derek Chollet, Counselor for the U.S. Department of State, is visiting Thailand this week “to address the worsening crisis in Burma.” As the junta increasingly resorts to airstrikes and artillery attacks on civilians, Counsellor Chollet surely knows that Myanmar citizens continue to protest the fossil fuel industry’s funding of Myanmar’s brutal military junta and call on the U.S. government to sanction the junta’s access to gas revenues. These protesters risked taking to the streets in Sagaing region, just days after the bodies of 16 people abducted by junta were found bearing signs of rape and torture. Counsellor Chollet should listen to them.
The junta has also ramped up airstrikes and artillery attacks on civilians. Meanwhile, the international fossil fuel industry continues to make monthly payments of hundreds of millions of U.S. dollars to bank accounts hijacked by the junta. The junta relies heavily on these funds to commit atrocities like those in Sagaing.
The U.S. government could cut off, or at least significantly disrupt, the junta’s ability to access these funds. For more than two years, Myanmar democracy leaders, civil society, and international allies have called for the U.S. to use its sanctions powers to stop the flow of offshore gas revenues from reaching the junta’s pockets, only to be met with silence.
In 2022, the European Union sanctioned the Myanma Oil and Gas Enterprise (MOGE), an important step in the right direction. Still, the U.S. needs to take similar action to have maximum impact since many of the transactions occur in U.S. dollars. In February, the U.S. government announced sanctions on the director and deputy director of MOGE, but these are symbolic without real-world impact – as if the U.S. is recognizing the significance of MOGE, but is unwilling to act.
Why has the U.S. government hesitated, despite overwhelming evidence and political support for such measures? Here are three key points to help shed light on the situation:
1. A Thai fossil fuel company, PTT, is primarily responsible for controlling revenues to the junta. Thailand has reportedly lobbied against U.S. sanctions on MOGE.
PTT is a state-owned fossil fuel conglomerate in Thailand with significant investments in Myanmar’s offshore gas. PTT purchases all the gas exported from three of Myanmar’s four offshore projects for use in Thailand. The infrastructure means it cannot go anywhere else. Its subsidiary, PTTEP, operates two of these projects. As the lead operator of these two projects, PTTEP orders monthly revenue payments to MOGE and other consortium partners. Payments to MOGE go directly into the pockets of the junta.
The U.S. has the ability to design sanctions that target the military junta’s share of gas revenues without disrupting gas operations. However, a top priority of the Biden administration’s foreign policy in Southeast Asia is to build strong alliances with regional governments to counter China’s rising influence. Thailand has historically been a close economic and military partner of the U.S. Additionally, the U.S. relies on Thailand’s cooperation to channel humanitarian assistance to the Myanmar people along the Thai-Myanmar border. That makes it more difficult for the U.S. to act against Thailand’s wishes; the Thai government has reportedly expressed its opposition to MOGE sanctions to the U.S. government.
2. PTT is misrepresenting the leverage that it has in conversations with the international community.
PTT – like the other multinational fossil fuel companies involved in Myanmar’s offshore gas industry – has repeatedly told investors and governments that it has no choice, but to keep making payments to government accounts that have been seized by the junta.
We have set out why this claim was never true. Gas companies in Myanmar all signed contracts with the Government of Myanmar, represented by MOGE. MOGE is a government agency, not an independent state-owned enterprise, as the name suggests. As the United Nations Special Rapporteur on Myanmar highlighted, last month, the junta has no legitimate claim to be the Government of Myanmar and, thus, has no legitimate claim to the government’s contracts.
Fossil fuel companies could choose to act responsibly and divert revenue payments owed to the Myanmar government into escrow accounts until they can identify the rightful counterparty to their contracts. Instead, they are choosing the path of least resistance, pretending that the junta is their legitimate counterparty. This contradicts the international community’s condemnation of the junta and renders the gas companies complicit in the junta’s atrocity crimes. U.S. sanctions could help force them to change.
As a buyer of gas, PTT has also failed to use two additional contractual mechanisms that would reduce the amount of gas it purchases and thus the amount of revenue it provides to the illegal junta:
(1) PTT could reduced gas imports to the minimum volume required by the sales contract; and
(2) PTT also could have reduced imports by relying on previous over-purchases. According to contracts for the Yadana project, PTT can reduce its current purchasing obligations below the minimum required by the contract by offsetting imports from the last five years that exceeded the contractual minimum. This is known as “Carry Forward Gas.” (It is effectively like a homeowner benefiting from overpayments on a mortgage).
Data published by the Thai government, however, shows that for 2021 and 2022, PTT decided to maintain import volumes to Thailand, which maximizes revenues going to the junta. All evidence suggests that PTT has misled its investors and the international community regarding its leverage and motives.
3. The Thai government is exaggerating the harm that MOGE sanctions could cause to Thailand’s energy security in its diplomatic engagement with the US.
Thailand has reportedly communicated to the U.S. government that its opposition to MOGE sanctions stems from the risk of harm to Thai energy security. This concern is misleading.
MOGE sanctions would not automatically result in a cut-off of gas production but only block the payment of the Myanmar government’s share of gas revenues from going to the junta. The junta would have to make a deliberate decision to cut off gas production. While the junta’s behavior is not predictable, all evidence to date suggests that such a response would be unlikely. As Myanmar civil society has pointed out, cutting off gas production would create a self-inflicted wound, damaging the crony factories and businesses that fuel the junta’s war machine. Cutting off gas exports to Thailand could also damage the junta’s relationship with one of its staunchest international allies.
Even in the event of a stoppage of gas production, EarthRights’ own analysis has shown that Thailand does not need Myanmar gas. Thailand has been planning for years to shift away from Myanmar gas and already has the infrastructure in place to do so. The only impact Thailand would potentially experience would be an increase in energy prices. The Thai energy sector currently has inflated prices due to a significant over-capacity problem, yet it continues to procure unnecessary fossil gas power plants as others lie idle across the country. If Thailand genuinely wants to reduce energy prices, it should address this capacity issue rather than funding atrocities in Myanmar.
U.S. inaction has sent record funding to the junta and actively increased energy insecurity in Myanmar.
Almost immediately after the Myanmar military launched its coup in February 2021, the U.S. government acted decisively in freezing $1 billion in assets held at the Federal Reserve Bank of New York. Two years of inaction on MOGE has more than canceled out this victory. Since the coup began, gas prices have soared, and the military junta has seized around $3 billion in gas revenues owed to the Government of Myanmar. That amount continues to increase each month.
The fossil fuel industry touted adverse humanitarian impacts on Myanmar as a major reason for funding the junta, ignoring calls from inside Myanmar to cut revenues. It also ignored the reality that fossil fuel revenues propped up military rule in the 1990s and early 2000s, leading to abysmal humanitarian outcomes. It also ignored the fact that the junta is now dragging Myanmar into an energy crisis.
Most concerningly, allowing the junta to access revenues is incentivizing a hit on Myanmar’s domestic energy security.
In the spring of 2022, production at the Yadana gas project – which is nearing the end of its life – began its expected decline. But exports remained constant. So the junta is now retaining less gas for domestic use, choosing instead to maximize its revenues and protect PTT’s profits. That is reflected both in anecdotal evidence of power cuts and satellite data showing increased blackouts across Myanmar. In practical terms, the junta is likely prioritizing electricity for the industries and ‘crony’ allies that support its war on the Myanmar people while rationing supply to residential areas for everyday citizens.
Last month, an EarthRights’ report highlighted the international community’s failure to implement a coordinated, effective sanctions policy. The failure of the U.S. government to sanction MOGE is at the core of this and rests on the misguided fear of damaging its relationship with Thailand. All evidence suggests that Thailand will not bear significant costs as a result of MOGE sanctions.