(07-04) 16:00 PDT Washington - --
Ever since Myanmar's leaders engaged in a bloody crackdown on pro-democracy protests last fall, Congress has pushed to tighten sanctions against the country's ruling generals. And that's put Chevron Corp., the largest U.S. investor in that country, in the crosshairs.
The San Ramon-based energy giant has a 28 percent stake in the Yadana natural gas field and pipeline, which feeds Asia's growing energy appetite but also helps prop up Myanmar's regime. In December, the House passed a bill by the late Rep. Tom Lantos, D-San Mateo, that would have revoked a tax benefit for Chevron to pressure the company to divest from Myanmar, also known as Burma.
"This legislation will turn off a huge cash spigot for the thuggish Burmese regime," Lantos said last year.
But Chevron now appears to have caught a break: As House and Senate negotiators put the final touches on the Burma Democracy Promotion Act, their aides and human rights groups say they plan to drop the provision, which was not in the Senate version of the bill. The legislation will instead focus on slashing the regime's revenue from its trade in gemstones and timber and establishing a new position of U.S. envoy for Myanmar.
In place of the House-passed Chevron measure, lawmakers are pushing compromise language that would encourage Chevron to voluntarily divest from Myanmar. It would be a slap on the wrist from Congress, one unlikely to sway Chevron executives.
The battle over the Chevron provision has been the last sticking point to passing a bill that has broad support on Capitol Hill. Lawmakers of both parties were shocked by the scenes of monks being beaten in the streets of Yangon. The regime's refusal to accept foreign aid after a deadly cyclone in May only reinforced the efforts to put the squeeze on the ruling junta.
A divisive provision
But the provision affecting Chevron has split lawmakers and even divided some human rights groups. The crux of the issue: Would the action against a U.S. oil company have any impact on the regime?
The measure by Lantos, who died of esophageal cancer in February, sought to pressure Chevron by revoking its ability to deduct from its U.S. taxes the tax payments it makes to Myanmar's regime as part of the Yadana project. The goal was to make it more costly for the firm to do business with Myanmar. Congress used the same tactic in the 1980s to battle apartheid in South Africa, and some U.S companies divested.
But Chevron is only a minority stakeholder in the Yadana project, which is managed by France's Total, which holds a 31 percent stake, along with Myanmar Oil and Gas Enterprise, a state entity, and the Petroleum Authority of Thailand.
Chevron's position
Chevron officials have argued that if it was forced to sell its stake, China, India or another energy-hungry nation would gobble it up, with revenues flowing unimpeded to Myanmar's military leaders.
"It's pretty clear that this is a very attractive asset and other people would be interested," Chevron's Vice Chairman Peter Robertson told The Chronicle last year.
House Foreign Affairs Committee Chairman Rep. Howard Berman, D-Los Angeles, has been pushing Lantos' bill, arguing that Chevron should not benefit from a tax deduction for its payments to a repressive regime.
But Sen. Dianne Feinstein, D-Calif., a lead sponsor of a 2003 bill that set stiff sanctions against Myanmar, has taken an opposite view. In a recent interview with Politico, she warned that forcing Chevron to divest could be counterproductive. "Other countries are going to take it over and, most particularly, the Burmese government will take it over. So what is gained by doing this?" she said.
Compromise in works
Feinstein spokesman Scott Gerber said this week that the senator has not been actively involved in the negotiations, but she backs the compromise that's likely to be announced soon. The bill "will strengthen and expand existing sanctions against Burma," he said.
The issue has relevance to the presidential race. The GOP's presumptive nominee, Sen. John McCain of Arizona, introduced an even tougher bill last fall that would have forced Chevron to divest from Myanmar. But the Senate coalesced around a different bill, sponsored by Senate Foreign Relations Committee Chairman Joe Biden, D-Del., and Senate Minority Leader Mitch McConnell, R-Ky., which did not include the Chevron provision.
Jennifer Quigley, who's been lobbying the bill for the U.S. Campaign for Burma, said leaving the House's Chevron tax provision in would likely have doomed chances to get a bill through the Senate this year. Her group was more worried about winning other key provisions, including a crackdown on imports of Myanmar rubies and jade into the United States, which could cost the regime hundreds of millions in revenue each year.
"Some people wanted to take a stand on Chevron. Other people said let's just get this through," Quigley said. "For us, we want the bill. It's very nice to take a stand, but for us what is most important is getting rid of this regime. Priority No. 1 is how to get legislation that is most effective at targeting the regime."
Quigley said the final bill is also likely to include language to help reduce illegal imports of wood products from Myanmar, especially teak, another key source of income for the junta.
Main revenue source
Still, natural gas remains the Yangon government's chief source of revenue, totaling about 45 percent of its $8.7 billion in declared exports in 2007. Despite U.S. and European Union sanctions, the regime has been able to cut lucrative energy deals with its neighbors, including Thailand, China, South Korea, Malaysia and India.
Chevron acquired its stake in the Yadana and Sein offshore gas fields in the Andaman Sea when it bought its rival Unocal in 2005. Congress banned new investments by U.S. companies in Myanmar starting in 1997, but Unocal's ownership stake was grandfathered in because its venture began in 1993.
Marco Simons, legal director for EarthRights International, which has been critical of Chevron over human rights abuses linked to the Yadana pipeline, said he agrees that it's unlikely that forcing Chevron to divest would hurt the regime.
"The fact of the matter is whether Chevron is there or not, those dollars are still going to flow to the generals as long as Thailand is still paying the bills (for the natural gas) and the banks are still processing the payments," Simons said. "It may send a signal that the United States is taking democracy in Burma more seriously, but it's not going deprive them of any money, which is really what these projects are all about for the regime."
E-mail Zachary Coile at zcoile@sfchronicle.com.
