Companies Quitting Myanmar Provide Hollow Victories Against Junta

September 27th, 2022  •  Author:   Foreign Policy  •  11 minute read
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The departures of France’s TotalEnergies and Norway’s Telenor have left the military regime with more money and control.

By Ben Dunant, the editor in chief of Frontier Myanmar.

In July, French oil and gas company TotalEnergies left Myanmar almost as controversially as it had arrived three decades ago.

From the early 1990s, the French energy conglomerate’s investment in the Yadana offshore gas field provided a financial lifeline to the country’s previous military junta amid international sanctions. A 1996 report by the U.S.-based group EarthRights International said the Yadana project also contributed to extrajudicial killings, forced labor, and dispossession as the regime laid the ground for a pipeline linking the gas field with Thailand. When a new junta seized power in a coup in February 2021, ending a 10-year period of partial democracy, TotalEnergies was once again in the sights of activists.

Although reserves are declining, oil and gas exports remain Myanmar’s largest source of foreign currency; in August, the junta said cross-border sales had earned it more than $2.5 billion in less than a year. Since the coup, this revenue has been financing a brutal crackdown on a nationwide uprising against military rule, called the Spring Revolution. A Bloody Money Campaign led by a coalition of Burmese activists had a straightforward message for TotalEnergies and other foreign energy companies in Myanmar: “Stop funding crimes against humanity!”

Their core demand was not for divestment but rather a diversion of revenue into trust or escrow accounts until a legitimate democratic government takes power. This option would in theory allow production to continue and the lights to stay on in Yangon, Myanmar’s commercial capital, as well as parts of neighboring Thailand, which receives most of the gas from the Yadana field. However, a joint statement by 462 civil society organizations in August last year said, “If these companies have no leverage or will not use it [to divert revenue], they should divest. Their continued presence legitimizes the regime and does nothing to mitigate the human rights impacts of investment.”

When TotalEnergies and U.S.-based Chevron, which also has a stake in Yadana, announced in January that they would be leaving Myanmar due to the deteriorating human rights situation there, activists largely welcomed the news. Progressive Voice, a Myanmar-focused advocacy organization, called the companies’ decision “a massive win for Myanmar’s Spring Revolution,” adding that their exit must be conducted responsibly and that governments should contribute by sanctioning Myanmar’s oil and gas sector.

However, as TotalEnergies’ six-month withdrawal process got underway, jubilation soon turned to alarm. Far from being a step toward severing a vital income stream for the junta, the company’s exit saw it hand over operations to Thai company PTT Exploration and Production (PTTEP) and offload its shares to project partners. Alongside Chevron and PTTEP, the partners included Myanmar state energy company the Myanma Oil and Gas Enterprise (MOGE), which besides owning shares also collects gas revenue on behalf of the Myanmar state and is now under junta control. TotalEnergies’ departure, therefore, would keep the gas flowing at a time of record prices while increasing the dollar-starved junta’s share of the revenue.

The European Union sanctioned MOGE in February, but TotalEnergies could hand over its shares and continue to facilitate payments to MOGE from Thailand during the withdrawal period thanks to exemptions on transfers necessary for decommissioning projects and terminating contracts. Chevron, meanwhile, has yet to leave and is reportedly seeking to sell its stake in Yadana to PTTEP, which will also help keep the funds flowing.

For civil society groups desperate to isolate and defund the regime, it seemed as if defeat had been snatched from the jaws of victory. Yet campaigners have said TotalEnergies deliberately ignored options for leaving responsibly as well as for remaining in Myanmar while denying revenue to the junta.

A day before the company’s departure on July 20, Human Rights Watch said the manner of its exit would “further enrich the junta at the expense of human rights.” EarthRights had argued in a report in March that while TotalEnergies, as the operator of Yadana, may have been contractually obliged to continue invoicing PTTEP, the Thai buyer of Myanmar’s gas exports, its contract was with the government of Myanmar, and the junta has not been internationally recognized as such. This would be grounds for TotalEnergies to order payments that were normally due to MOGE into an escrow account while the company’s contractual obligations are settled via international arbitration.

A senior official at TotalEnergies disputed these points. Speaking on the condition of anonymity, the official told Foreign Policy that if the company had tried ordering PTTEP to stop paying MOGE, a clause in the contract and the presence of gas delivery meters on the Thai side would have allowed the Thai company to generate invoices on behalf of MOGE. PTTEP might have opted to do this, the official said, due to the “risk that the junta would have simply stopped the gas flowing to Thailand for unpaid deliveries.” The official added that attempts to launch arbitration proceedings would have also foundered because there need to be at least two parties to a dispute. “Had TotalEnergies designated its arbitrator and had MOGE decided not to roll out the arbitration clause, [when] does the arbitration start? The answer is never,” the official said.

The TotalEnergies official did not address the question of the junta’s legitimacy or its control of MOGE. However, in the absence of sanctions that explicitly banned transfers to junta-controlled bodies, the company was able to insist on a conservative interpretation of its obligations. EarthRights and other groups accused TotalEnergies of breaching the United Nations Guiding Principles on Business and Human Rights as well as the Organization for Economic Co-operation and Development Guidelines for Multinational Enterprises, which outline steps for responsible divestment. However, unlike sanctions, these principles and guidelines cannot be legally enforced.

This raises the question of whether Western governments missed a precious opportunity by failing to impose sanctions on Myanmar’s oil and gas much earlier, at a time when the presence of Western companies would have given them more bite. Coming after TotalEnergies had already announced its departure, and with clauses seemingly designed to smooth its exit, the European Union’s sanctions on MOGE were a lame-duck measure in the case of the Yadana project. Conversely, according to a report by The Associated Press that Foreign Policy could not confirm independently, these sanctions have reportedly diverted Chinese payments for gas from the smaller Shwe gas field into an escrow account because these payments were in euros.

The junta’s execution in July of four prisoners—including veteran democracy activists Kyaw Min Yu, known as Ko Jimmy, and Phyo Zeya Thaw—prompted reports that the United States was considering sanctioning MOGE. This could conceivably block Thailand’s gas payments, which are currently in U.S. dollars, although the junta’s decision in March to accept Thai baht in border transactions may have been partially made with U.S. dollar restrictions in mind.

Yet Blood Money Campaign member Ko Ye said he believes TotalEnergies was morally obliged to make amends for propping up the last junta, regardless of legal considerations. “They were enjoying the profits for a long time, and now, at our darkest hour, they’ve abandoned the people of Myanmar and washed their hands of the country,” he told Foreign Policy. “They are pretending that they have no leverage, putting the burden on the people.”

For profit-driven corporations, however, leverage is generally used in pursuit of the bottom line. Ko Ye’s moral appeals highlight the dilemmas facing activists who are trying to influence big business in pursuit of democratic aims. Although Western companies are more susceptible to “blood money” campaigns, reputational risks can make them simply hurry for the exit and thereby do more harm than good.

Sometimes, corporate exits appear to be determined less by activist pressure than their own ethical boundaries—even if crossing some of these boundaries and staying in the country would cause the least harm. A case in point is the Norwegian telecommunications company Telenor, whose departure from Myanmar this year was almost as controversial as TotalEnergies’. The company decided to leave in July of last year after the junta ordered it to activate rights-abusing surveillance technology, which beyond the immediate danger to customer privacy and safety would have put Telenor in violation of European Union and Norwegian sanctions.

The decision was consistent with some activist demands: “If Telenor receives directives that violate people’s digital rights, the ethical thing would be to cut ties with the military and leave the country,” prominent activist Thinzar Shunlei Yi told Frontier Myanmar just days before the company announced it was leaving. However, as with TotalEnergies, the more that Telenor’s exit deal took shape, the worse it looked for Myanmar.

Telenor said it was selling its Myanmar business to M1 Group, a Lebanese conglomerate with existing business ties to Myanmar’s military and a history of operating in war zones and under authoritarian regimes, such as in Syria and Sudan. This alone was enough to stoke condemnation, but the junta-controlled regulator refused to approve the deal until M1 Group found a local partner. This saw the backdoor entry of Shwe Byain Phyu, a Myanmar conglomerate that has partnered with the military to import petrol, mine jade, and even launch a rival telecommunications company since the 1990s. When the sale was completed in March, Shwe Byain Phyu owned 80 percent of the company, renamed Atom, and could access the historical call data of Telenor’s 18 million users in Myanmar.

Concerns about the junta’s growing stranglehold over the telecommunications sector grew further this month with the news that Myanmar’s only other foreign telecommunications company, Ooredoo of Qatar, had agreed to sell its Myanmar subsidiary to a Singapore-based company with indirect links to Myanmar’s military.

Wai Phyo Myint, an Asia-Pacific policy analyst for global digital rights group Access Now, said after a strong record of transparency and consultation in Myanmar, Telenor failed to consult with civil society before announcing the sale to M1 Group and only offered token dialogue afterward. This prevented Telenor from jointly devising measures to protect its old users, who were now more vulnerable to military surveillance.

Wai Phyo Myint told Foreign Policy that civil society groups had first asked Telenor to walk back its decision. “We asked them not to leave the country because Telenor is much more responsible than other operators, and we wanted people to have options and not be left with only military-linked operators,” she said. But if the company still insisted on leaving, she said, they asked it to “shut down” their operations and delete user data.

Telenor said the latter option would have broken local law and put their staff in unacceptable danger. It also denied that it failed to consult with civil society: “When the sale was announced, Telenor immediately reached out to stakeholders, including the civil society community, to ensure transparency, and we have followed up with these contacts since to discuss concerns, receive input, and share our perspective,” Grace Ngoh, head of communications for Telenor Asia, told Foreign Policy. She did not say whether the company consulted civil society before deciding to sell.

Asked whether a smarter choice of buyer might have preempted the regulator’s initial objections and thereby prevented the entry of Shwe Byain Phyu, Ngoh said, “Viable buyers were very limited due to the extreme situation and international sanctions” and that “M1 Group was the least detrimental option.” She also confirmed media reports that several of Telenor’s foreign employees in Myanmar “were barred from leaving the country” without official approval until the “regulatory process” was done, suggesting the junta was strong-arming the company into completing the sale.

As to the possibility of seeking an exemption to the sanctions on surveillance technology to fulfill civil society demands that Telenor remain in Myanmar, Ngoh said the junta’s edicts would still have “conflicted with international and Norwegian law” as well as the company’s own “responsible business practice and international human rights principles.” Ngoh said the need to conform to these standards meant “it was not an option for Telenor to stay in Myanmar.” However, the U.N. Guiding Principles on Business and Human Rights require companies making exits on ethical grounds to also consider “whether terminating the relationship with the entity itself would have adverse human rights consequences.”

This obligation speaks to the complexities of a situation where there are few good options and where different fundamental rights conflict with one another. “The people shouldn’t suffer; the regime should,” said Ko Ye in support of sanctions on oil and gas.

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