Companies Should Condemn Crackdown
October 3, 2007
Companies doing business in Burma argue their presence is constructive and will benefit the Burmese people, but they have yet to condemn the government’s abuses against its own citizens. Keeping quiet while monks and other peaceful protesters are murdered and jailed is not evidence of constructive engagement.
Arvind Ganesan, director of the Business and Human Rights Program at Human Rights Watch

(New York) - Chinese, Indian, Thai, and other companies doing business in Burma should ensure their operations do not contribute to or benefit from human rights abuses, Human Rights Watch said today. The military government in Burma has launched a violent crackdown on peaceful demonstrators that so far has led to many deaths, enforced disappearances, and mass arbitrary arrests.

“Companies doing business in Burma argue their presence is constructive and will benefit the Burmese people, but they have yet to condemn the government’s abuses against its own citizens,” said Arvind Ganesan, director of the Business and Human Rights Program at Human Rights Watch. “Keeping quiet while monks and other peaceful protesters are murdered and jailed is not evidence of constructive engagement.”

Human Rights Watch said that companies operating in Burma should use their influence with the ruling State Peace and Development Council (SPDC) to put an end to ongoing human rights abuses. In the current environment, companies should urge the SPDC to halt the crackdown, release all political prisoners, and open a real dialogue with opposition and ethnic groups. If the situation does not improve, companies should be prepared to reconsider their operations in the country.

Human Rights Watch said that there is no transparency in Burma about how much the government receives in oil and gas payments, nor clarity about how the funds are spent. The military receives the largest share of the official budget and the SPDC allocates only a pittance to social programs including health and education.

Foreign investment in Burma’s oil and natural gas sector is especially significant. Sales of natural gas account for the single largest source of revenue to the military government. Gas exports accounted for fully half of the country’s exports in 2006. Burma’s gas business brought in revenue of US$2.16 billion in 2006 from sales to its main buyer, Thailand. These funds flow directly to the government and provide the junta with a major source of financing that is completely independent of its citizens.

Current investors in Burma’s oil and gas industry include companies from Australia, the British Virgin Islands, China, France, India, Japan, Malaysia, Singapore, South Korea, Thailand, Russia, and the United States.

The SPDC has greatly expanded investment in Burma’s oil and natural gas industry in recent years. Allowing foreign investment in oil and gas is apparently aimed at bringing in more revenue to keep the government afloat at a time when economic mismanagement and profligate spending on the military and the building of a new capital at Nay Pyi Taw have drained government finances. Natural gas exploration, development and production projects are under way in approximately 30 different gas fields. These projects are organized as joint ventures with the Burmese government’s Myanmar Oil and Gas Enterprise (MOGE).

“Outside investment in Burma’s oil and gas industry has thrown a lifeline to the country’s brutal rulers,” added Ganesan. “The businesses that help finance the military shouldn’t argue that the government’s crackdown is not their problem.”

Details of the Deals

At present the SPDC receives the bulk of its gas money from the onshore “Yadana” and “Yetagun” gas fields. The Yadana consortium is led by Total of France and includes UNOCAL (now Chevron) of the United States and Thailand’s state-controlled PTT Exploration and Production Co Ltd (PTTEP). The Yetagun consortium, led by Malaysia’s state-owned Petronas, includes Japan’s Nippon Oil as well as PTTEP. PTTEP, a subsidiary of the largely state-owned PTT Public Co Ltd (PTT) of Thailand, buys the gas for export to Thailand.

Major offshore natural gas projects are under development. A consortium of South Korean and Indian firms, in partnership with the Myanmar Oil and Gas Enterprise, has made a large gas find off the coast of Arakan State in western Burma. Known as the “Shwe” gas project, it is expected to produce massive revenues once it is in production. Estimates of the gas yield of the Shwe deposits range between US$37 to US$52 billion, and could lead to a total gain in revenues to the junta or future Burmese governments of US$12 to US$17 billion over 20 years.

The Shwe gas consortium is composed of the South Korean company Daewoo International, state-owned companies from India and South Korea, and the Myanmar Oil and Gas Enterprise. Some of the foreign partners also have separate deals with the Burmese government entity for other concessions.

On September 24, for example, India’s state-controlled Oil and Natural Gas Co (ONGC), whose subsidiary ONGC Videsh is a partner in the Shwe consortium, signed a deal with Myanmar Oil and Gas Enterprise to explore for gas in three more offshore blocks. Under the deal, Oil and Natural Gas Co pledged to invest US$150 million through ONGC Videsh.

India’s Office of the President holds nearly 75 percent of the shares in Oil and Natural Gas Co. India’s minister for oil, Murli Deora, traveled to the Burmese capital last week to sign the agreement as thousands of protesters in Burma took to the streets to call for political freedom, an end to the SPDC’s abuses, and economic improvements.

India, like China and Russia – which are also major investors in Burma’s natural gas sector – has provided political and military support to the SPDC. India and China are in competition to buy the Shwe gas. In August, a top Burmese energy official publicly confirmed that China was strongly favored to buy the gas, but indicated that a sales agreement was not yet final.

Chinese firms are also actively seeking to build oil and gas pipelines in Burma. One proposed pipeline would transport gas from the offshore Shwe project to China. A second pipeline would carry Middle Eastern oil across Burma into China, bypassing the busy shipping lanes of the Straits of Malacca. These proposals to build overland pipelines across Burma have raised serious human rights concerns, in light of past experience. Major controversies arose in the 1990s over construction of pipelines and associated infrastructure to transport Yadana-Yetagun gas. UNOCAL and Total were sued in the US and France, respectively, by Burmese villagers who accused them of complicity in atrocities by the Burmese army during operations to remove villagers from areas slated for development and to facilitate pipeline construction. The companies ultimately settled the lawsuits.

Two Chinese companies that have shown strong interest in the proposed new Burma-China pipeline projects are Sinopec and China National Petroleum Corporation (CNPC). Both are Chinese state-owned oil companies and are involved in gas exploration in Burma as well. They also are official “partners” (major sponsors) of the 2008 Olympics in Beijing and are under increased scrutiny for the human-rights impact of their investments in Sudan and Burma.

India and China have been reluctant to criticize the recent crackdown. Russia joined China in blocking UN Security Council action on Burma.

In addition to foreign investors (both state-owned and private), the companies doing business with Burma include banks that arrange financial transactions and companies that import products from Burma. For example, timber exports to China have been substantial. The SPDC also draws significant revenue from sales of gems, notably rubies and jade. These gems are polished in third countries and then find their way to retail stores in Europe and the US, where sanctions permit imports of Burmese-origin goods that are processed in third countries.

The US has imposed new financial sanctions, intended to target overseas accounts of Burmese generals, and some European leaders have called for additional, targeted sanctions if the SPDC fails to halt its violent repression of dissent.

“The junta’s largest trading partners should insist that Burma’s rulers stop stuffing their own pockets and instead use these immense revenues to improve the lives of ordinary Burmese,” said Ganesan.