Three years ago on February 1, 2021 the Tatmadaw ousted Aung San Suu Kyi led National League for Democracy (NLD) government by State Counsellor. Senior NLD leaders were detained and coup leader General Min Aung Hlaing appointed himself prime minister of a provisional government. The military Junta is engaged in a violent civil war with pro-democracy ethnic groups.
In the past few months the military has lost control of several hundred bases, outposts and even command centres across the country to resistance forces. In what marks the largest single defeat for the Junta since the 2021 coup, 2,400 regime troops, including six brigadier generals, surrendered to an alliance of ethnic armies and other resistance groups in Kokang region, northern Shan State on January 5. Since the Brotherhood Alliance, which launched Operation 1027 across northern Shan State, continuous fighting across northern Rakhine State and Paletwa Township in southern Chin State, and the latest surrender of the Kokang Self-Administered Zone, have sort of alerted us to the possibility that the regime may be more vulnerable than traditionally understood. There is intense speculation over how much longer Myanmar’s Junta leader Gen. Min Aung Hlaing can hold on to power.
The US has implemented a range of sanctions, including arms embargoes, trade embargoes, asset freezes, travel bans, and investment bans. Additionally, UK and Canada, building on earlier sanctions targeting the Junta’s ability to buy weapons, have blacklisted individuals and entities. Marking three years of the coup, the US Treasury on January 31, 2024, imposed sanctions on military personnel and entities. The sanctions target 10 individuals, including Myanmar’s acting president, and three companies. Steps are also being taken to block access to $1 billion of government funds held in the US.
Last November the United States imposed sanctions on the Tatmadaw’s main source of foreign revenue, the Myanma Oil and Gas Enterprise (MOGE), describing it as “the biggest single source of foreign revenue for the military regime, providing hundreds of millions of dollars each year.” Washington had earlier in June ‘23, imposed sanctions on the Junta-controlled Myanma Foreign Trade Bank (MFTB) and Myanma Investment and Commercial Bank (MICB) along with its Ministry of Defense. The two banks MFTB and MICB are the main routes for the Junta’s foreign-currency exchange businesses allowing the Tatmadaw-owned enterprises access to international markets using offshore accounts. The Junta used the two banks to facilitate payment for weapons and materials.
Following the sanctions on the two banks, Singapore’s United Overseas Bank (UOB) decided to shut all of Myanmar Junta-linked Myanmar Airways International (MAI)’s bank accounts by August 15. Singapore has long been a haven for sanctioned Myanmar businessmen, a preferred destination of Junta rulers both for medical and recreational purposes. One of the largest sources of foreign investment in Myanmar, many Singaporean companies have commercial ties with the Junta and its conglomerates.
Soonafter in August 2023, under pressure from the US to take action against the sanctions banking entities, Bangladeshi’s state-owned bank, Sonali Bank PLC had to freeze the accounts of MFTB and MICB, which together had at least US$ 1.1 million deposited at the bank. This may prove to be and Bangladesh was US$ 16 million from April 1 to June 30. In fiscal year 2022-23, trade reached US$ 180 million, the highest in five years.
In nearly 20 rounds of sanctions on Myanmar, the US has “targeted” the country’s most lucrative state-owned enterprise, Myanma Oil and Gas Enterprise (MOGE) that provides hundreds of millions of dollars in foreign revenues every year to the military regime, the Union Election Commission, mining enterprises and energy officials. It has also announced sanctions on Myanmar oil and gas Enterprise, which is a key source for the Junta’s foreign reserves and incoming revenue, roughly amounting to over a billion dollars a year. The Myanmar Central Bank opened new accounts to get around existing sanctions by European governments.
Early on after the coup, the Special Envoy of the Secretary-General on Myanmar, Ms. Christine Schraner-Burgene had warned the military that it was likely to face strong measures from some countries and isolation in retaliation for the coup. deputy military chief Soe Win’s answer was, “We are used to sanctions, and we survived…We have to learn to walk with only few friends.”
Nevertheless, there are indications that the economic sanctions, cutting financial aid, blocking access to assets, and reversing investment flows are now beginning to bite. Deputy Finance Minister Mong Mong win blamed financial instability in the country on American sanctions saying that they’re hurting our government’s programs such as education, Health and infrastructure building importers and exporters and any person or organisations using foreign banking services. ASEAN has not been able to reach a consensus around the need for stronger economic action on Myanmar so the Junta benefits from that division. Under scrutiny and pressure from the US, Singapore’s government has finally begun cracking down on the regime’s access to overseas funds.
The economic sanctions of the ’90s and 2000s which saw universal trade embargo were largely perceived as hurting the ordinary people of Myanmar and not actually affecting regime change or political moderation. There is little willingness or appetite to enforce broad ranging blanket sanctions, in Washington or other international governments.
Even so, the impact of the current rounds of sanctions has been severe with unintended consequences on the people in Myanmar, leading to the closure of businesses, reduced foreign investment, and disrupted trade. Many people have lost their jobs as companies struggle to operate, affecting people’s purchasing power. Medical supplies are scarce due to trade restrictions. With the value of the Myanmar kyat plummeting, prices for essential goods have soared. For instance, the price of low-quality rice more than tripled since January 2021, from $8.40 per sack to $27 per sack—an increase of over 220 percent.There are frequent food shortages forcing people to queue in markets, where it is rationed. The biggest impact of the sanctions has been on the prices of both gasoline and diesel. In December 2023 importers couldn’t pay in dollars, causing delays unloading fuel tankers in major cities. The regime was no longer able to sell to importers the US dollars they needed to purchase fuel. In three years the Myanmar Kyat has depreciated by over 160 percent from 1,330 per USD to 3,500 kyats/USD.
The instability caused by sanctions, and the raging war has forced many people to flee Myanmar, with thousands seeking safety in neighbouring countries. Interestingly, Myanmar’s civilian National Unity Government (NUG) has called for tougher sanctions and diplomatic pressure. NUG foreign minister Daw Zin Mar Aung told the media, “We aim to increase our efforts to lobby the international community to impose more economic sanctions and more diplomatic pressure upon the military council, which is oppressing the people and committing violence.”
The Junta has been looking for means to bypass the sanctions regime. For instance, it has been exploring a direct bilateral payments mechanism with Russia, allowing the use of the kyat and ruble in trade and bank transactions. Addressing the Moscow Conference on International Security last year, Junta leader Gen. Min Aung Hlaing said that the US was using the dollar to bully smaller economies. Russia and Myanmar currently use the yuan in their transactions. Russia has provided an abundance of arms and weaponry to the Myanmar military which is critical to its asymmetric air advantage over resistance forces.
China’s support to the Junta is multifaceted and it remains Myanmar’s largest trading partner and its second largest source of FDI after Singapore. China is alert to the implications of the instability, particularly for its investment projects but is yet to develop a policy response that checks the Junta. Rather it has fueled instability by arming both ethnic armed groups and the Myanmar military, thereby sustaining the conflict.
Japan has always been the largest provider of development assistance and remains engaged in the country economically. India’s Myanmar policy is marked by pragmatism and is more security oriented. It has continued to partner with the Myanmar military even after the 2021 coup. Although trade with India remains somewhat limited, the Kaladan multimodal Transit transport project does signal a major opportunity for increased cross border trade. India and Thailand share borders with Myanmar and are concerned about humanitarian disaster in affecting their security, as well as the cross border flow of drugs and other illicit substances.
Amid its deepening isolation from the Association of SouthEast Asian Nations (ASEAN), has banned Myanmar officials from attending regional summits after the Junta ignored the bloc’s five-point peace plan, the Junta is seeking to join the BRICS group which includes three of its main allies China, Russia and India.
The Junta’s interest lies solely in regime survival. So ultimately battlefield dynamics may be the determining factor for political change in the country. On that score, the recent defection of thousands of Myanmar regime soldiers signals declining morale and doubts about Junta chief Min Aung Hlaing’s capacity to maintain control. But any speculation over the Myanmar military’s impending collapse should be tempered with the fact that six or seven ethnic armed organisations including the Brotherhood Alliance and Kachin, Chin, Karenni, Karen, and Rakhine all claim victory if the Tatmadaw collapses. And the possibility of these groups reaching consensus in the event of the Junta’s collapse is unlikely, which will raise new security dilemmas.
