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Gas Revenues Fund Burma Nuke Program

Simon Roughneen, July 7, 2010

Burmese villagers queue for water.

Billions of dollars in gas revenues have been siphoned away by the Burmese military junta and are helping fund a clandestine nuclear weapons program, according to a new report released on Monday in Paris by international environmental group EarthRights International (ERI).

Titled "Energy Insecurity: How Total, Chevron, and PTTEP Contribute to Human Rights Violations, Financial Secrecy, and Nuclear Proliferation in Burma (Myanmar)," the report comes hot on the heels of an exposé by exiled Burmese news agency Democratic Voice of Burma (DVB)—based on material from Burmese army defectors—which added credence to allegations that the military rulers of Burma are seeking nuclear weapons technology and are in breach of U.N. Security Council resolutions on North Korea.

ERI says that this activity is likely to be funded by revenues from the Yadana Gas field in the Bay of Bengal. Former International Atomic Energy Agency Director Robert Kelley described the nuclear activity taking place in Burma as "useful only for weapons."

Total, Chevron and Thailand's PTTEP are the three foreign companies involved in the Yadana project, which has generated more than $9 billion since it came on-stream in 2000. According to ERI, Burma's ruling junta has pocketed more than $5 billion of this, which has apparently been squirreled away in Singaporean banks.

The three companies are refusing requests by former heads of state to disclose nearly 20 years of payments to the Burmese military dictatorship, while the two banks involved—OCBC and DBS—deny that they act as facilitators, as the offshore repositories for the junta's revenues accruing from the Yadana gas project. ERI says that money hidden in overseas accounts can evade international sanctions and be used to fund illicit activities, such as the alleged nuclear program.

The link between the seemingly opaque gas revenue accounting and Burma's military spending may re-cast the ongoing sanctions debate. ERI says that these revenues represent "untapped leverage" for the international community, which has failed to pressure the junta into meaningful reforms. The United States offered to relax some of its existing sanctions on the junta in exchange for progress on democratization, release of political prisoners and other goodwill gestures suggested to Naypyidaw.

However, the junta responded by publishing highly restrictive electoral laws while still refusing to announce when the elections will be held. Thailand, which is highly dependent on Burmese gas for electricity needs, initially responded to the U.S. overture by saying that engagement with the junta was the best way to promote political reform in Burma.

However, given increasing military spending in Burma and the military rulers' apparent breach of U.N. Security Council resolutions on North Korea, Thailand and neighboring countries may have to rethink their hands-off approach, given the implications for regional security. Targeting the gas revenues seems a viable pressure point, and ERI is "calling on the international community to apply multilateral pressure on the regime's gas revenues, including perhaps restricting the regime's access to international capital markets and freezing relevant accounts."

Defectors featured in the DVB report said that gas and oil revenue from the Yadana field has given the regime the financial resources necessary to increase military spending. This income is set to increase in the coming years as the much larger Shwe Gas field comes on-stream. According to the Shwe Gas Movement Web site, "Burma's military regime would stand to gain $24 billion over the 20-year contract, or $1.2 billion per year," from the Shwe field, from which gas will be piped to China.

With the junta allegedly spending around $3 billion on building a network of military tunnels aided by North Korean military advisers, gas revenues appear to be underwriting a strengthened military regime inside Burma even as lip service is paid to democratization. The country is gearing up for elections sometime in 2010, but some opposition parties are boycotting due to restrictive electoral laws, which are, in turn, based on a controversial 2008 constitution.

Yadana money is not helping the majority of Burmese people, many of whom live in poverty despite the country's ample natural resources. Human rights abuses are reportedly being committed as part of the resource extraction process. The new ERI report finds that the oil companies are complicit in the targeted killings of two ethnic Mon villagers and in ongoing forced labor. According to ERI, "These violent abuses were committed by Burma Army soldiers providing security for the companies and the pipeline within the last year," adding that Total and Chevron can possibly be sued in their home countries for complicity in these abuses and killings.

Some sleight-of-hand with regard to the exchange rate helps the junta hide the revenues from the country's public accounts. By using an outdated rate—6 kyat to the dollar, while the de facto rate is closer to 1,000—the junta declares a small fraction of its oil and gas revenues to the state budget, enabling it to siphon-off the balance.

According to a confidential 2009 report by the International Monetary Fund, this revenue "contributed less than 1 percent of total budget revenue in 2007/08, but would have contributed about 57 percent if valued at the market exchange rate."

The upshot is that the revenue does not appear in official statements about how much money the junta has at its disposal and is creating a false picture about the lack of social spending in Burma. A 2006 estimate of the child mortality rate in eastern Burma was 221 per 1,000, higher than the 205 recorded in the war-ravaged Democratic Republic of Congo. The World Health Organization ranks Burma's health system as the second worst on the planet, while according to UNICEF more than 25 percent of the population lacks access to potable water.

Sean Turnell, editor of Burma Economic Watch and an economist at Macquarie University in Australia, said, "The ERI reports are impeccably researched accounts into the great scandal of present-day Burma—of a rich regime ruling with contemptuous indifference over the poorest people in Southeast Asia. With now in excess of $6 billion in international reserves, a sum that increases by about $1 billion every six months, Burma's regime has the financial resources that could make a difference to the lives of the people in whose name they profess to rule."

This article was originally published by The Irrawaddy: http://www.irrawaddy.org/.

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