Burma: Targeted Sanctions Needed on Petroleum Industry

Foreign-State-Owned Companies Are Major Investors in Burma’s Oil and Gas Fields

– The United Nations Security Council should act to prohibit any new investment in Burma’s oil and gas fields and block company payments that help sustain Burma’s brutal military rule, Human Rights Watch said today.


( " Burma’s generals act as if they are immune from worldwide condemnation because they’re still getting cash from foreign-financed oil and gas projects. It’s time to cut them off. ")

Arvind Ganesan, director of the Business and Human Rights Program at Human Rights Watch

Human Rights Watch said that until the Security Council imposes sanctions, members of the Association of Southeast Asian Nations (ASEAN), China, India, the European Union, the United States and other countries that have economic ties to Burma should act to suspend any further development of Burma’s oil and gas sector. To encourage an end to ongoing repression, Human Rights Watch also called for targeted financial sanctions on companies owned and controlled by the Burmese military or whose revenues substantially benefit the military.

“Burma’s generals act as if they are immune from worldwide condemnation because they’re still getting cash from foreign-financed oil and gas projects,” said Arvind Ganesan, director of the Business and Human Rights Program at Human Rights Watch. “It’s time to cut them off.”

In a detailed new compilation of information on foreign investment in oil and gas released today, Human Rights Watch identified 27 companies based in 13 countries as having investment interests in Burma’s oil and gas fields. Thirteen of those companies are wholly or partially owned by foreign governments, and these state-controlled companies are invested in 20 of the 30 projects currently underway.

Human Rights Watch also made available detailed maps showing the location of the oil and gas fields.

The Burmese military government relies heavily on the oil and gas sector to sustain itself in power. Lucrative revenues from gas sales allow it to ignore demands to return to civilian rule and improve the country’s human rights record. The oil and gas sector is one of the few sectors in the badly managed economy to experience growth in recent years. Funds from this sector help underwrite the military without bringing benefits to ordinary people.

Human Rights Watch urged the UN Security Council to pass a resolution to ban all new investment in Burma’s oil and gas sector and prohibit financial transactions with entities owned or controlled by the Burmese military, or whose revenues are largely used to finance military activities. These entities include the Burmese government’s Myanmar Oil and Gas Enterprise (MOGE), a state company under the Ministry of Energy whose earnings benefit the military.

In the absence of Security Council-imposed sanctions, Human Rights Watch called on governments to take unilateral and multilateral action to freeze bank accounts belonging to military-controlled companies and to block their financial transactions. In addition, it urged governments to require companies headquartered in their jurisdictions that have business ties to Burma to publicly and fully disclose all payments made to the Burmese military, directly or through the entities it controls, and where those payments are made.

Human Rights Watch pushed for robust banking sanctions as the centerpiece of an effort to cut off funds that are used to finance repression by Burma’s military. Banking sanctions complement targeted sanctions on investment and trade because they have the potential to severely constrain the junta’s ability to access income, no matter the origin of the payments. If applied effectively by key financial powers – notably the United States and the European Union – strict financial sanctions could block the junta from using much of the international financial system.

Gas revenues in Burma in 2006 were up US$1 billion from the prior year, in part due to higher prices globally. Revenues are likely to have further increased in 2007 as world prices have surged. Future gas revenues are anticipated to increase further once gas production from a massive offshore gas project known as the Shwe project goes online, projected for 2010. A South Korean-led consortium discovered the gas in the Shwe fields and is preparing to produce it for export. Several buyers vied for the rights to buy the Shwe gas, with India and China among the most serious bidders.

In mid-2007, a Burmese official confirmed that China was slated to import the Shwe gas, though details of a deal have not been finalized. Human Rights Watch has called for a suspension of plans to build an overland pipeline to transport that gas to China, given serious human rights concerns. Indian officials expressed disappointment that India’s bid, which also would have included paying for an overland pipeline, had been passed over.

“Burma’s generals have used the promise of oil and gas supplies to buy the silence of energy-hungry countries, including China and India,” said Ganesan. “Those governments should be told their international standing will suffer if they do business as usual with Burma.”

Burma’s military government, the State Peace and Development Council (SPDC) earned approximately $2.16 billion in 2006 from gas sales to Thailand, which accounted for half of all exports that year, and constituted the single largest source of revenue to the SPDC.

According to Human Rights Watch’s research, outside investors in Burma’s oil and gas industry include companies from:

* Australia

* British Virgin Islands

* China

* France

* India

* Japan

* Malaysia

* Netherlands

* Russian Federation

* Singapore

* South Korea

* Thailand

* United States

According to Human Rights Watch’s findings, a majority of the contracts for the 30 ongoing oil and gas projects were signed after mid-2004 and 10 of the deals were penned between September 2006 and September 2007. This trend signals the government’s move to expand foreign investment in this sector despite ongoing and high-profile human rights abuses. The investment also has come in a period when economic mismanagement and profligate spending on unproductive projects such as the relocation of the capital have drained government finances. Many of the new concessions have been assigned to companies from China, which has long been the most important backer of the Burmese military government.

In some cases, the timing of oil and gas deals coincided closely with political support by the governments whose state-owned companies benefited. For example, a Chinese state-controlled company signed a contract for three offshore gas fields within days of China’s vote at the UN Security Council to veto a resolution on Burma.

Human Rights Watch also issued a selection of company statements about events in Burma. The companies typically said their investments would remain unaffected, irrespective of events in Burma. In several cases, they claimed it would be inappropriate to raise human-rights concerns or claimed that their projects brought benefits to the people of Burma.

Such comments fail to reflect the reality of conditions in Burma, where the vast majority of the population lives under great hardship and does not see any tangible benefit from outside investment in the oil and gas industry. Most Burmese homes lack electricity altogether, and urban residents face frequent power outages, even as Burma’s natural gas is used to power Thailand’s cities. Though some community development programs are under way in areas in the immediate vicinity of certain oil or gas projects, communities in these same areas often have suffered from forced relocation and forced labor by the Burmese military in order to make way for the massive infrastructure projects.

“The companies have made it clear they won’t stand up for human rights on their own,” said Ganesan. “That's why their home governments need to step in and halt the flow of petrodollars that help prop up Burma’s military.”

The companies’ comments do not address the serious concerns that, so long as investments in this sector directly benefit Burma’s military leadership, they provide crucial financing that helps underwrite its abusive governance, or that revenues from oil and gas payments are currently used directly by the military and do not support social spending to meet Burma’s critical human needs. For example:


* Daewoo International of South Korea is the lead company in a consortium exploring and developing the lucrative offshore Shwe gas fields that are expected to greatly boost revenue to the SPDC. On September 28, 2007, Daewoo International said: “[These] are all long-time investments. They can’t be easily changed because of domestic issues. Politics is politics. Economics is economics.” On November 15, a Seoul court convicted the former CEO of Daewoo International and one of his colleagues, along with 12 executives from other companies, on charges that from 2002 to 2006 they illegally exported arms-manufacturing equipment and technology used to build a munitions factory in Burma.


* PTT Public Company Ltd. of Thailand, which in addition to its ownership and operating interests in several fields is also the purchaser of the bulk of Burma’s gas, for export to Thailand, said on October 8, 2007: “We have invested in Burma over the past decade. Despite the political conflict, the benefits from the projects will go to people of both countries.”


* Total of France, which is the lead company in a consortium for the Yadana project that generates significant revenues for the SPDC, said on September 26, 2007: “We are convinced that through our presence we are helping to improve the daily lives of tens of thousands of people who benefit from our social and economic initiatives.”


* Chevron of the United States, which holds a minority interest in the Yadana project, said on October 2, 2007: “Our community development programs also help improve the lives of the people they touch and thereby communicate our values, including respect for human rights.”


* Nippon Oil of Japan, a partner in the Yetagun project, which brings in major revenues, said on September 29, 2007: “We see the political situation and energy business as separate matters.”