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Despite sanctions on Myanmar, the US, UK, and EU imported more than $36 million in timber since the coup, exposing traders to risk of prosecution

March 7th, 2022  •  Author:   Forest Trends  •  5 minute read
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Washington DC 7 March 2022 – Just over one year since the Myanmar military, known as the Tatmadaw, led a coup against the legitimately re-elected government, a new study finds that more than $190 million in imports of timber were reported from Myanmar in 2021, including to countries with sanctions, potentially exposing entities importing from Myanmar to risk of civil and criminal penalties.

In response to the coup and to evidence that revenue from natural resources is funding the junta, the European Union (EU) and four countries (the United States (US), United Kingdom (UK), Canada, and Switzerland), have introduced sanctions that aim to limit the regime’s ability to collect revenue from sectors such as mining, forestry, and most recently, oil and gas.

Since February 1, 2021, Myanmar’s economy has collapsed and the junta has increasingly turned to natural resources to support its regime, financing both military operations and violence against civilians, much like the previous military regime did for decades. The elected government had brought in anti-corruption reforms, but these are being undone.

Sanctions can be effective, if enforced. This is being clearly demonstrated by recent sanctions from the US, UK, EU, and others on Russian banks and freezing assets belonging to Vladimir Putin’s top allies in response to Russia’s invasion of Ukraine on February 24, 2022.

“The role of forests in Myanmar really can’t be overstated,” says Michael Jenkins, CEO and Founding President of Forest Trends, “The return of military control last year was a shocking development as Myanmar was still transitioning from 50 years of harsh military rule to democracy, rule of law, and federalism. In the past, illegal logging, corruption, and illicit trade of wood products ran rampant. Money from illegal logging helped finance Myanmar’s decades long civil war and we need to move past that reality.”

Forest Trends’ new report focuses on the role of forestry sanctions by the US, UK, EU, Canada, and Switzerland on the Myanma Timber Enterprise (MTE), the State-owned Enterprise that monopolized the forestry sector.

Key Findings

  • More than $190 million in trade of Myanmar timber has been reported from February to November 2021: $37 million to jurisdictions with sanctions and $154 million imported into China, India, Thailand, and other countries without sanctions. The provenance of the exported logs is unclear; the MTE does not report on its source, and since the coup, the MTE has only auctioned about 5% of the total that were reported as exported, but none of that wood was auctioned as export grade.
  • Most markets have decreased their imports of timber from Myanmar since the coup, but others, including countries with sanctions have increased imports relative to 2020. In the US, where almost all imports were in the form of sawn teak for the luxury yacht market, the number of companies importing from Myanmar dropped by two-thirds to only 5 importers, yet total trade still increased slightly. Five EU Member States, Austria, Belgium, France, the Netherlands, and Poland, also showed substantial increases in imports. China, which has not imposed sanctions on Myanmar, also increased imports by 35% (or $29 million). All findings are likely an underestimate, as not all countries have reported trade for the entirety of 2021.
  • Given the details of US sanctions, entities importing from Myanmar are already at risk of civil and criminal penalties for violating sanctions. Entities could also potentially be exposed to prosecution for the international war crime of pillage, given 1) the junta is illegitimate and does not have the legal right to sell Myanmar’s timber, 2) any timber sold by the junta is done without consent of the owner (in this case, the legally elected government, overthrown on February 1, 2021, which acts as the State’s representative), and 3) all timber sold is done in the context of armed conflict. There is no statute of limitations to prosecution of war crimes, such as pillage, and due to the gravity of the crime, there is universal jurisdiction, where any country may prosecute offenders.

The US sanctions prohibit even the indirect benefit of the MTE. The Executive Order also has no grace period – the sanctions take immediate effect. The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) has previously prosected entities that used US dollars in payments to sanctioned entities, even if the entities themselves have no other connection to the US.

In other words, all trade with the MTE would be a violation of US sanctions, because teak is purchased in US dollars, even if no US companies are involved. All banks that facilitate these transactions would also be violating US sanctions. So far, only Canada has sanctioned the Myanmar Foreign Trade Bank, which facilitates all MTE US dollar transactions (all are held in foreign banks).

“To close this loophole and make sanctions more effective, countries should expand financial sanctions to include the Myanmar Foreign Trade Bank,” says Kerstin Canby, Senior Director of Forest Trends’ Forest Policy, Trade, and Finance Initiative, “Doing so would help stop spill over to non-sanctioned markets by making it a violation to facilitate this trade with any country. Countries that have not yet imposed sanctions should do so, otherwise they are bankrolling the junta.”

The stakes in war-torn Myanmar could not be higher as the junta continues its violent crackdown against its people. The crimes of illegal harvest, sale, and export of Myanmar’s resources, much of it extracted from conflict areas claimed by the country’s ethnic minorities, are producing revenues that allow the military to perpetrate horrific crimes, not only against the country’s democracy but also its civilians. To date, the regime has killed over 1,600 unarmed civilians and arrested over 12,500 more. Sanctioning the junta – and implementing those sanctions – is one thing the international community can, and should, do to support the people of Myanmar.

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