Can the ruling Generals continue to resist the global pressure?

(Commentary)
Myat Soe
Mizzima News (www.mizzima.com)
February 7, 2008

The United States on Tuesday targeted the financial network of "Burmese business tycoon and regime henchman" Tay Za, identified as an arms dealer with "close ties" to the Burmese junta. Affected are family members of regime leaders and key additional individuals and businesses that are part of Tay Za's financial network.

As a well-known Chinese proverb “ Kill the chicken to frighten the monkey”, the world nations must apply the same actions what the United States is taking against the notorious Generals who are defiant, determined not to implement fundamental changes. In deed, it has made clear that failing to implement change will support the call for additional targeted sanctions and legal actions against the oppressive regime.

The question is: Can the ruling generals continue to resist the global pressure of unilateral targeted sanctions for democratic reforms? The answer is yes for the time being, but not for so long. As long as international oil firms continue to provide a lifeline to the Burmese junta, the ruling generals will defy the international community and will continue to implement a rule of terror and coercion against its own citizens.

However the current situation in Burma is ready to erupt in violence. Even though massive demonstrations have ceased, more thunderstorms will soon come because of the regime's defiance of the international community, soaring global oil prices and the potential vulnerability of the world economy.

An article written by Jad Mouawad, "Costly Fuel is Never far From a Match," notes how rising oil prices in recent months have created all kinds of headaches as the effects have rippled across the world. Many governments, especially in the developing world, have had to choose between raising domestic subsidies to offset the increase and letting the people bear the brunt of the economic burden. Neither choice is favorable for Burma's ruling generals with their coffers emptying as a result of having to spend millions on fuel in the wake of rising oil prices.

According to the Burmese junta's industry authorities, Burma annually produces about six million barrels (798,000 tons) of crude oil at home, yet it cannot meet its own demand and the country has to import over 200 million dollars worth of diesel and crude oil each year. The current demand for fuel in Burma is increasing and the regime has had to spend more on imported fuel than projected. The regime faces a dilemma of how to compensate for this spending gap, and this problem will land Burma in a deep recession.

Naturally, the greater the oil-price increase, and the longer higher prices are sustained, the bigger the macroeconomic impact. Without doubt, higher oil prices will lead to inflation. It will increase input costs and reduce non-oil demand. Also, higher oil prices typically lead to upward pressure on nominal wage levels. Wage pressures together with reduced demand tend to lead to higher unemployment. The energy price hike would therefore have a negative impact on economic interests, and this economic weakness can make the economy more vulnerable to financial turmoil.

To be sure, soaring global oil prices and the junta's defiance of the international community will impact the whole economy, and economic insecurity can rapidly lead to social and political instability in Burma.

(The writer Myat Soe is the Research Director of Justice for Human Rights in Burma. He graduated from Indiana University, and has a MBA from Indiana Wesleyan University.)