WASHINGTON — The United States on Monday announced a work-around in its Myanmar sanctions regime to allow trade through ports and other infrastructure run by cronies of the former ruling junta.
The action by the Treasury Department’s Office of Foreign Assets Control, or OFAC, follows complaints from banks that they could not finance trade that goes through the nation’s main port terminal in Yangon because it is run by blacklisted business tycoon Steven Law, who has been accused of ties to the drugs trade.
Senior Obama administration officials said the six-month waiver is designed to clear a roadblock to trade and prevent U.S. banks pulling out of the Myanmar market because of the risk of sanctions violation and increased compliance costs. U.S. companies are still barred from trading directly with blacklisted companies but human rights groups oppose the waiver as a retrograde step.
Law heads one of Myanmar’s largest conglomerates, Asia World, that flourished under the junta. It 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.
The U.S. rolled back broad restrictions on investment and trade with Myanmar in 2012, but dozens of senior officials, businessmen and companies linked to the junta remain on the list, and are barred from holding assets in the U.S. financial system or doing business with U.S. companies. Sanctioned companies and the military are major players in Myanmar’s undeveloped economy and run key infrastructure such as ports, toll roads and airports.
Historic elections last month won by the opposition party of Aung San Suu Kyi were a landmark in Myanmar’s shift from five decades of military rule and could galvanize calls for further sanctions relief, but the administration will be under pressure from Congress to tread carefully, particularly until the new government is fully in place next April.
The administration officials who briefed reporters on condition of anonymity about Monday’s measure before it was announced said that the sanctions waiver was not a reaction to the election, although they characterized it as a step that could create “breathing space” for Suu Kyi’s party as it forms the next government.
It was not immediately clear if Suu Kyi was consulted.
Two associations representing many of the world’s largest commercial banks, The Clearing House and The Bankers Association for Finance and Trade, requested a sanctions work-around in a July letter to OFAC, with particular reference to the Asia World terminal in Yangon, warning that trade with the country also known as Burma could otherwise be impacted badly.
The administration officials said that the number of transactions that have been held up was likely in the low hundreds. Companies and financial institutions from third countries have also been affected, they said.
Now, individuals, companies and financial institutions will be allowed to conduct most transactions, otherwise prohibited by sanctions, that are “ordinarily incident to the export of goods, technology or non-financial services to and from Burma.” That refers to transactions such as financing for trade, port fees and shipping and handling charges for sending goods in and out of Myanmar. U.S. financial institutions are also authorized to unblock transactions that have been held up.
The six-month duration of the general license, as the waiver is known, is intended to give the administration time to assess the results and provide the flexibility on a decision to renew it, the officials said.
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