Obama has powerful tool to pressure Myanmar

By FOSTER KLUG (AP) –

WASHINGTON — If talks with Myanmar over democratic reforms fail, the Obama administration could tie up large amounts of money that the country's ruling generals stash in international banks from the sale of natural gas.

So far the administration has been hesitant to go that route.

But pressuring banks to avoid doing business with Myanmar's leaders could be a powerful economic weapon — one that already is being used elsewhere. It's an approach, for example, that has been used to try to push North Korea to give up its nuclear weapons ambitions.

Congress already has provided the power for the administration to go after the banks and some rights groups want President Barack Obama to use it right away, or at least if direct talks fail.

U.S. officials have just started face-to-face negotiations and want to give them more time to show results. Imposing the banking sanctions would be expensive and time-consuming, and Myanmar isn't a top priority on a crowded foreign policy agenda that includes Afghanistan and Iran.

Still, the administration has warned of tougher action if engagement breaks down with Myanmar, also known as Burma. And the mere threat could add force to the U.S. negotiating position.

"We will reserve the option of tightening sanctions on the regime and its supporters to respond to events in Burma," Obama's top diplomat for East Asia, Kurt Campbell, told lawmakers in September.

Myanmar has one of the most repressive governments in the world and has been controlled by the military since 1962. For years, the United States has used punishing sanctions to try to force change on the country, with little success. Former President George W. Bush's administration favored shunning Myanmar, and Bush's wife, Laura, and many in Congress were strong advocates of the nascent democracy movement there.

Now, the Obama administration has reversed the isolation policy in favor of engagement, which it hopes will persuade the generals to grant greater freedoms to opposition parties and minorities and to free political prisoners.

Myanmar has since made a few symbolic gestures of good will, letting detained democracy leader Aung San Suu Kyi meet with Campbell, for instance, and releasing some political prisoners. At the same time, it has continued to persecute ethnic minorities, journalists and student activists.

Obama himself spoke of a possibly stronger position on Myanmar in his Nobel Peace Prize acceptance speech. There will be engagement and diplomacy with Myanmar, he said, "but there must be consequences when those things fail."

Activists say financial measures that hinder Myanmar's ruling generals' ability to access the international banking system might do what broader economic sanctions have failed to do.

"What the Burmese government values is not its commerce with the outside world but the financial proceeds of that commerce," said Tom Malinowski of Human Rights Watch. "Once the Burmese government deposits the checks in its bank accounts, there's a lot the United States government can do to prevent that money from being used in the international banking system."

Treasury officials have targeted 40 people and 44 entities since the Myanmar junta killed and arrested protesters during demonstrations in 2007. Being added to the sanctions list prevents people from making transactions in the banking system of the United States.

But a 2008 law grants the Treasury Department authority to impose conditions on banking relationships, meaning sanctions could affect activities of international banks.

Myanmar has lucrative natural gas deals with its neighbors and with some European and U.S. companies, with revenues going into foreign banks. Under its new authority, the U.S. can let these banks know it has concerns about their association with Myanmar that could hurt these banks' ability to work with U.S. financial institutions, said Jennifer Quigley, advocacy director for the U.S. Campaign for Burma.

Supporters of the banking sanctions often raise North Korea, saying that the United States effectively froze the North out of the international banking system in 2005, hurting leader Kim Jong Il.

For the moment, the Obama administration is urging patience as it pursues talks.

Next year's elections in Myanmar will provide a good look at the junta's intentions. A big question will be whether high-level U.S.-Myanmar talks lead to true participation by minorities and opposition groups or merely let the generals consolidate power.