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Burma: It’s the Oil and Gas, Stupid
Melinda Liu, Newsweek (web-only)
World leaders may be condemning the junta’s crackdown, but foreign businesses don’t want to lose their pieces of Burma’s energy pie. Why the latest sanctions are unlikely to work.
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Analysts describe it as the Burmese paradox: How can the rulers of a country so rich in energy, teak, minerals and gems be in such financial trouble? Even as it sits on top of 19 trillion cubic feet of natural gas and billions of barrels of crude oil reserves, the junta had to abruptly hike fuel prices so high in August that it triggered the popular uprising led by Buddhist monks.
Part of the explanation is simply bad governance. The Burmese regime is so arrogant-and inept-that it doesn’t expect citizens to rebel even when they watch their hard-won savings disappear overnight. That’s what happened in the summer of 1988, when the regime’s surprise demonetization of the local currency, the kyat, meant a lot of money was suddenly not worth the paper it was printed on.
…today, the country’s infrastructure is so decrepit that the regime cannot adequately exploit its own resources without outside help. Despite the country’s lucrative oil and gas sectors, the domestic refining industry is a mess due to half a century of mismanagement, lack of investment and neglect. Local refineries aren’t suited to processing the high sulfur content in Burmese oil. As a result, the government has to import nearly all of its diesel, to the tune of nearly 20,000 barrels daily by 2004.
Combine that hunger with today’s high prices, and you can easily see how the need to import diesel could help prompt a price rise. This wasn’t the first time the regime imposed such a hike, either; two years ago fuel prices shot up ninefold. You don’t have to be a rocket scientist-actually Burma’s junta supremo Than Shwe is a former postal clerk-to know people might be mad about the abrupt Aug. 15 doubling of diesel prices and fivefold increase in the cost of compressed natural gas, a hike passed on to passengers using public transport.
…Burma’s economic picture would be depressing enough without the involvement of Big Oil. One of the key reasons why sanctions against the regime are unlikely to work is because the junta’s foreign partners hope to maintain business as usual. Foreign firms have been scrambling for a piece of Burma’s oil and gas industry since the regime liberalized investment rules in 1988.
These are not obscure players or small-time plays. Burmese natural gas, worth $2.8 billion, generates one fifth of Thailand’s electricity. China wants to build pipelines and roads through Burma that would allow its oil imports to bypass vulnerable chokepoints in the Malacca Straits, which could be blocked by the U.S. Navy in the event of Sino-U.S. tensions.
State-run Chinese firms are also bidding for contracts in Burmese gas fields, as are South Korean and Indian competitors. India’s oil minister, Murli Deora, was present in Rangoon for energy cooperation talks with junta leaders when antigovernment protests broke out last month. Burma’s partners aren’t all Asian either. When earlier European Union and U.S. economic sanctions were levied against Burma, Total of France and Chevron remained involved in the Yadana gasfield. (At the time, existing investments were exempt; Chevron has a 28 percent stake because of its takeover of Unocal, Total’s original partner.)
Now we hear that the EU has just toughened its sanctions against Burma, expanding the visa bans for junta leaders and suspension of some imports such as timber and gems. But such measures-similar to those announced last week by the United States-will be toothless unless key oil and gas firms climb onboard. Today French Foreign Minister Bernard Kouchner hinted that Total-which extracts more than 17 million cubic meters of natural gas daily from its Burmese fields, according to its corporate Web site-“will not be exonerated” from post-crackdown sanctions. Total officials have argued that the firm has made no new capital expenditures in Burma since 1998 and that any “forced withdrawal” by Total would simply pave the way for rivals to take its place. Which is why China, Thailand, India and Russia have been muted in their condemnation of Burma’s recent bloodletting. They may hate the junta’s repression, but they love the thought of biting off a bigger piece of Burma’s energy pie.
(3 October 2007)
An excellent background article which goes beyond the superficial coverage of Burma. Sadly, this column is “web-only” – apparently it won’t appear in the print version of the magazine.
According to her Newsweek bio, Melina Liu is one of Newsweek’s most experienced foreign correspondents and now serves as Newsweek’s Beijing bureau chief.
Chevron’s Pipeline Is the Burmese Regime’s Lifeline
Amy Goodman, truthdig
The image was stunning: tens of thousands of saffron-robed Buddhist monks marching through the streets of Rangoon [also known as Yangon], protesting the military dictatorship of Burma. The monks marched in front of the home of Nobel Peace Prize winner Aung San Suu Kyi, who was seen weeping and praying quietly as they passed. She hadn’t been seen for years. The democratically elected leader of Burma, Suu Kyi has been under house arrest since 2003. She is considered the Nelson Mandela of Burma, the Southeast Asian nation renamed Myanmar by the regime.
After almost two weeks of protest, the monks have disappeared. The monasteries have been emptied. One report says thousands of monks are imprisoned in the north of the country.
No one believes that this is the end of the protests, dubbed “The Saffron Revolution.” Nor do they believe the official body count of 10 dead. The trickle of video, photos and oral accounts of the violence that leaked out on Burma’s cellular phone and Internet lines has been largely stifled by government censorship. Still, gruesome images of murdered monks and other activists and accounts of executions make it out to the global public. At the time of this writing, several unconfirmed accounts of prisoners being burned alive have been posted to Burma-solidarity Web sites.
The Bush administration is making headlines with its strong language against the Burmese regime. President Bush declared increased sanctions in his U.N. General Assembly speech. First lady Laura Bush has come out with perhaps the strongest statements. Explaining that she has a cousin who is a Burma activist, Laura Bush said, “The deplorable acts of violence being perpetrated against Buddhist monks and peaceful Burmese demonstrators shame the military regime.”
Secretary of State Condoleezza Rice, at the meeting of the Association of Southeast Asian Nations, said, “The United States is determined to keep an international focus on the travesty that is taking place.” Keeping an international focus is essential, but should not distract from one of the most powerful supporters of the junta, one that is much closer to home. Rice knows it well: Chevron.
Fueling the military junta that has ruled for decades are Burma’s natural gas reserves, controlled by the Burmese regime in partnership with the U.S. multinational oil giant Chevron, the French oil company Total and a Thai oil firm. Offshore natural gas facilities deliver their extracted gas to Thailand through Burma’s Yadana pipeline. The pipeline was built with slave labor, forced into servitude by the Burmese military.
The original pipeline partner, Unocal, was sued by EarthRights International for the use of slave labor. As soon as the suit was settled out of court, Chevron bought Unocal.
Chevron’s role in propping up the brutal regime in Burma is clear. According to Marco Simons, U.S. legal director at EarthRights International: “Sanctions haven’t worked because gas is the lifeline of the regime. Before Yadana went online, Burma’s regime was facing severe shortages of currency. It’s really Yadana and gas projects that kept the military regime afloat to buy arms and ammunition and pay its soldiers.”
The U.S. government has had sanctions in place against Burma since 1997. A loophole exists, though, for companies grandfathered in. Unocal’s exemption from the Burma sanctions has been passed on to its new owner, Chevron.
(2 October 2007)
The hardship that sparked Burma’s unrest
Jonathan Head, BBC News
On 22nd February, a small group of around 25 people attracted little attention at first in the crowded Rangoon market. Then they brought out home-made posters, and began shouting.
Residents go on their daily business on Monday Oct.1, 2007, in Rangoon
Many Burmese simply concentrate on survival
Their complaints seemed innocuous enough. “Down with consumer prices,” read one poster. “We want 24-hour electricity,” read another. They pointedly avoided saying anything critical about Burma’s military government.
That did not spare them. Nine were rounded up and jailed, accused of acting “totally against the law”. They were later released, but they had touched a very raw nerve.
Though small, these were the first street protests seen in Rangoon for at least a decade.
And they highlighted the growing economic distress that was beginning to push huge numbers of Burmese families to the brink of destitution – distress caused by the government’s incompetence.
…Towards the end of last year, prices of basic commodities began rising sharply in Burma. Rice, eggs, and cooking oil all went up by around 30-40%.
For a population that on average spends 70% of its income on food, this was very difficult to absorb. It is not clear why this happened, but the inherent distortions and rigidities in the military’s economic management can easily lead to sudden bottlenecks in the supply and prices of basic necessities.
Then came the rise in fuel prices on 15 August. There was no warning. Gas prices rose by 500%, and diesel – which more or less powers everything in Burma, from transport to the essential generators – doubled in price.
The impact was immediate. People could not afford to go to work, and the increased cost of transport started pushing food prices even higher.
Within days activists were out on the streets in protest. When they were arrested, the monks – who can accurately measure economic distress by the food put into their begging bowls every morning – took their place.
Like so many decisions made by the reclusive generals, the sudden hike in fuel prices is hard to fathom.
The IMF had advised weaning the population off subsidised fuel, because with rising world oil prices it was becoming an unsustainable burden for Burma, which although rich in natural gas, relies on imports for almost all of its refined petrol and diesel.
But it is unlikely the IMF would have supported such a dramatic, and unannounced price rise.
At the time some speculated that perhaps the generals were trying to provoke an uprising, to see who their enemies were.
(2 October 2007)
Costly Fuel Is Never Far From a Match
Jad Mouawad, New York Times
THERE are deep roots to Myanmar’s current unrest, pitting its repressive regime against Buddhist monks, but the immediate spark was the junta’s unexpected decision in August to double fuel prices. Overnight, diesel prices skyrocketed, and compressed natural gas rose fivefold.
In this respect, Myanmar is not an isolated case. Rising oil prices in recent years have created all kinds of headaches as they have rippled across the world. Many governments, especially in the developing world, have had to choose between raising domestic subsidies to offset the increases or letting the people bear the brunt.
Neither choice – higher government spending or the risk of popular discontent – has great appeal.
In oil-rich Iran, civil unrest spread through Tehran this summer after the government rationed gasoline in an effort to curb the country’s addiction to cheap fuel; gasoline in Iran, imported because the country lacks refining capacity, is heavily subsidized and cost about 40 cents a gallon at the time. After two days of upheaval, the Islamic theocracy restored order and kept the policy.
In Nigeria, the outcome was different. Striking oil workers in June threatened to shut down the country’s oil production if fuel subsidies were dropped. Faced with the threat of losing its biggest source of revenue, the government quickly backed down.
Fuel prices go to the heart of people’s ability to move, stay warm or feed themselves. So it is no surprise that governments around the world have tried to blunt the effects of oil prices that have tripled in the past four years.
But interfering with energy markets can be a risky and costly game. Prices kept high by market forces and taxes dampen expectations of cheap fuel. Fuel subsidies do the opposite, and countries that rely on them play with fire.
(30 September 2007)
Excellent article which takes up an aspect of peak oil that few others have examined – how rising fuel prices create political instability. Although energy journalist Jad Mouawad has not yet gotten on the peak oil bandwagon, one should not ignore his otherwise excellent reporting.
UPDATE. Already posted this two days ago, but it deserves re-posting. -BA
Oil versus monks
Farrukh Saleem, Daily Times (Pakistan)
America is hungry for Iraq’s oil. Burma is all about oil too. China and India are hungry for Burma’s oil. America loved the Iraqi dictator for as long as the dictator was in America’s economic interest. China and India love the Burmese military junta because the junta has promised them oil (and gas).
Imagine, the day that 20,000 maroon-robed monks marched the streets of Rangoon, the day that the Burmese military shot at the unarmed rally with live bullets was also the day that the Indian Oil Minister Murli Deora was in Rangoon. In Rangoon signing oil and gas exploration contracts between ONGC and the Burmese military junta. China’s interest in the survival of the military junta is two-fold: there’s oil, plus Burma is China’s gateway to the Indian Ocean.
In 1962, Burma was a country whose citizens had one of the highest standards of living in the whole region. Then the general took over.
…In 1948, upon gaining independence, Burma was the wealthiest country in the region. Burma had the Burmah Oil Company, a major shareholder in British Petroleum. Burma produced 75 percent of the global supply of teak, the tropical hardwood, and was the world’s largest exporter of oil.
In 1962, the soldiers nationalised every single industry outside of agriculture. The soldiers now control oil, forestry, heavy industry, energy, gems, and rice trade. After 45 years of complete military control, Burma no longer has an economy. Burma has no infrastructure, very few roads are paved and 97 percent of total food grain production is rice. Inflation is rampant; the UN has designated Burma as the ‘least developed country’ and Transparency International has ranked Burma as the ‘most corrupt’ country on the face of the planet.
Dr Farrukh Saleem is an Islamabad-based economist and analyst
(3 October 2007)
Global Hypocrisy on Burma
Satya Sagar, ZNet
As the Burmese military brutally cracks down on a popular uprising of its citizens demanding democracy the question on many minds is – so what is the world going to do about it?
From the trend visible so far the answer is simple- nothing at all.
Nothing, that is, beyond the usual condemnations and pious appeals for ‘peaceful dialogue’ and the posturing at international forums in support of the Burmese people.
Nothing more than sending a lameduck UN envoy to negotiate with the paranoid Burmese generals. Negotiate what? Funeral services for their innocent victims mowed down like rabbits on the streets of Rangoon?
It is not that nothing can be done at all – to begin with, how about kicking the illegitimate military regime out of the UN seat it continues to occupy and replacing it with the country’s elected government-in-exile? Why should Burma continue to be a member of ASEAN or for that matter, by default, also of the Asia-Europe Meeting or ASEM?
What about international sanctions on foreign companies doing business in Burma- including dozens and dozens of Western companies apart from those from Asia? Why should large oil companies like the US based Chevron, the Malaysian Petronas, South Korea’s Daewoo International Corp or the French Total continue to be involved in Burma without facing penalties for their support of one of the world’s most heinous dictatorships?
The answers to these elementary questions are quite elementary too- it is Burma’s abundant natural resources and investment opportunities that really matter. Which government really gives a damn for corralled Burmese citizens desperately battling a quasi-fascist regime that is open to foreign enterprises and shut to its own people.
Following the bloodshed in Burma the new French President Nicholas ‘Napoleon’ Sarkozy for instance grandly called on French companies to freeze all their operations in Burma. Close on his heels Foreign Minister Bernard Kouchner clarified however that the French oil giant Total, the largest European company operating in Burma, will not pull out for fear they will be ‘replaced by the Chinese’.
Gordon Brown, the British Prime Minister also expressed ‘outrage’ at the Burmese government’s despicable behaviour but was mum about UK companies merrily investing away in Burma. Between 1988 and 2004 companies based out of British territories invested over £1.2bn in Burma, making Britain the 2nd largest investor in this supposedly ostracised country. The sun it seems has not only set on the British Empire but-on its way out- also deep fried the conscience of its politicians.
The Japanese government, another monument to global hypocrisy, shed crocodile tears at the cold-blooded killing of Kenji Nagai, a Japanese journalist shot by a Burmese soldier after he had fallen to the ground while photographing a fleeing crowd of protestors. Mustering all the courage at its command Tokyo asked for an ‘explanation’ and got the response ‘ooops….very sorry” from the Burmese Foreign Minister who must have also muttered ‘that was easy – Moroni San’.
On the question of cutting off aid to the murderous Burmese regime of course the Japanese made their position quite clear- ‘ it is too early’ for such action. They are probably politely waiting for the regime to murder an entire posse of Japanese pressmen before doing anything – Burmese deaths being of no consequence anyway.
The most predictable rhetoric of course came from US President George Bush…
All this leaves China and India, two of Burma’s giant neighbours, who for long have showered the Burmese junta with investments, aid and sale of armaments and whom the world now expects to use their ‘influence’ over the generals.
China’s active support for the Burmese regime is not surprising at all for a country with its own sordid record of suppressing democratic movements at home and shooting civilian dissenters. I don’t however think the Chinese are really worried about Burmese democracy triggering off another Tiananmen-like event in their own country- not immediately at least and not as long as Chinas’ consumerist boom keeps its population hypnotised.
In fact the Chinese, pragmatic as they are and conscious of protecting their many investments in Burma, may also be among the first to actively topple the Burmese junta if they feel that the tide of protests for democracy is about to win. Their future position on Burma will surely seesaw like a yo-yo depending which cat, black or white, is catching the mice.
Of all the countries around the world the most shameful position is held by India, once the land of the likes of Mahatma Gandhi but now run by politicians with morals that would make a snake-oil salesman squirm.
Satya Sagar is a writer, journalist and videomaker based in New Delhi.
(1 October 2007)
UPDATE. Just posted this.
