US prepares to amend Myanmar trade sanctions

WASHINGTON — The United States is preparing to amend sanctions on Myanmar after banks complained they can't finance trade that goes through the nation's main port terminal because it is run by a blacklisted business tycoon.

State Department officials have been sounding out Congress about remedial policies, which an administration official said could take effect as early as next week.

The administration is keen to promote economic growth with the country also known as Burma, which recently held landmark elections, but its fix could draw criticism from US lawmakers and human rights groups.

It would mean giving the green light to banks to process transactions related to trade that passes through a container port terminal in the main city of Yangon that is run by Steven Law, the son of a deceased heroin kingpin. He heads one of Myanmar's largest conglomerates, Asia World, that flourished under the former ruling junta.

Two associations representing many of the world's largest commercial banks, The Clearing House and The Bankers Association for Finance and Trade, have requested a sanctions work-around to Treasury's Office of Foreign Assets Control. In a July letter they warned that trade with Myanmar could otherwise be impacted badly.

But the request comes at a sensitive time.

Myanmar is in the throes of a historic transition to a civilian-led government after five decades of military domination. The Nov. 8 elections passed off smoothly, with the opposition party of Aung San Suu Kyi, who spent 15 years under house arrest during the junta's rule, thrashing the current pro-military ruling party. But the new government will only be complete by April. Washington won't want to be seen as giving up its leverage, at least until then.

Congressional aides who were briefed by the State Department this past week said the administration is not proposing taking Law or any sanctioned individual or entity off the blacklist and allowing them to trade directly with US companies. But the aides and rights activists expressed concern that an exemption now could be seen as hasty and as compromising sanctions policy.

The aides and the administration official spoke on condition of anonymity because they were not authorized to comment on the plans being discussed. Legislative approval is not needed.

"Loosening a restriction on business persons who were listed by the US government because of their involvement in massive criminal enterprises and support for an abusive military junta isn't a well-tailored idea for improving Burma's economy," said John Sifton, Asia advocacy director for Human Rights Watch. "These sorts of business people are precisely the sorts of people who are responsible for the poor state of Burma's economy in the first place."

Asia World was set up in 1992 by Law's father, the late Lo Hsing Han, who was described by Treasury as one of the world's key heroin traffickers. The father and son were put on the Treasury's Specially Designated Nationals, or SDN list, in 2008. Dozens of senior officials, businessmen and companies linked to the junta remain on the list, and are barred from holding assets in the US financial system or doing business with US companies.

Asia World was awarded contracts to run ports, build highways and oversee airport operations during the junta's rule, and today its subsidiary, Asia World Port Management Co. Ltd, provides the most efficient way of getting goods into Myanmar by sea, handling about 60 percent of the container trade that comes in via Yangon.

There are alternatives. At least two other deep water ports in or near Yangon could be used for US-Myanmar trade, including a terminal operated by Hong Kong-based Hutchison Port Holdings Ltd., 15 miles (25 kilometers) south of the city, but the Asia World facility is reported to be better located and equipped.

It's hard to gauge what impact the difficulties of the banks complying with sanctions has had on trade.

US trade with Myanmar is small, but growing. In 2014, two-way goods trade was $185 million, according to US Census Bureau figures. In the first 10 months of 2015, it totaled $306.1 million.

The Obama administration suspended broad US restrictions on investment and trade on Myanmar three years ago to reward steps toward political and economic reform, but it says it wants to see a smooth postelection transition to a new government before making any dramatic changes to the targeted sanctions that remain.

"We want to see how that transition works, and then I think we would want to consult with the new government as well as Congress closely on any changes," the nominee to be the next US ambassador to Myanmar, Scot Marciel, told his Senate confirmation hearing on Tuesday.

But he kept the door open to tweaks to the sanctions regime in the meantime, adding, "we can always make adjustments when we see unintended consequences or problems."

Because much of the key infrastructure in Myanmar is owned or operated by the military or other sanctioned entities, the remedy that the US government comes up with is likely to apply not just to Asia World but more broadly permit the use of services for purposes of trade that sanctioned entities might provide, like ports and toll roads.

Despite the success of the elections, there's still concern in Congress over Myanmar's future direction because of the military's enduring political clout and the repression of minority Rohingya Muslims, who have fled the majority Buddhist country in droves since 2012 and were barred from voting in the Nov. 8 elections.