Courtesy of Stratfor (subscription required), analysis of recent U.S. moves to modify its policy toward Myanmar by moving beyond the current sanctions regime to include direct engagement with the military government, a strategy that could weaken China’s influence in a country that is playing an increasing role in China’s overseas energy strategy.  As the article notes:

“…Following a Sept. 23 meeting of the “Group of Friends of the Secretary-General on Myanmar,” an informal United Nations dialogue forum established in 2007, U.S. Secretary of State Hillary Clinton announced that Washington would move “in a direction of both engagement and continuing sanctions,” as sanctions alone have done little to coerce a change in the military government’s policies or actions. Clinton also said that the United States could include humanitarian aid to Myanmar as part of the new policy, and may offer incremental reductions in sanctions for government moves toward reform.

The decision marks a change from the standing policy of isolation and pressure on Myanmar, which had been labeled as one of the “Outposts of Tyranny,” a runner-up list to the Axis of Evil.

Myanmar dissident leader Aung San Suu Kyi has tentatively backed the policy change, according to statements made through her lawyers, on the condition that the United States also include the opposition parties in any dialogue with the government. Suu Kyi has long opposed direct foreign dialogue with the military-backed government, and her changed position reflects a concern that Washington’s engagement policy could undermine her National League for Democracy’s (NLD) attempts to increase its political role in the country. Additionally, Suu Kyi is concerned that Washington’s policy could also reduce her influence and ability to shape foreign perceptions of Myanmar — something that has been a key tool in the NLD’s arsenal to oppose the military government. The U.S. reaction to the elections in Iran and the political situation in Honduras has left many dissidents confused as to whether they can count on U.S. backing if they try to overthrow anti-U.S. governments. The NLD is concerned that Washington may be satisfied with a compromise with the current regime, rather than backing the ouster of the military government and the creation of an NLD-led government.

There are signs that the U.S. announcement is more than just a shift in rhetoric. Myanmar has been sending out feelers over the last several months to see if the United States and Europe may be ready for engagement rather than isolation, and Thailand has assisted in trying to bring about this change in Western attitudes. Perhaps more concretely, Myanmar sent Prime Minister Gen. Thein Sein to the U.N. General Assembly session this year — the first such high-level attendance in 14 years. And less than a week ago, Foreign Minister Nyan Win spent a day in Washington inspecting the Myanmar embassy in preparation of repairs and upgrades, which suggests that normal diplomatic relations with the United States may resume.

Myanmar has long been a human rights and democracy promotion issue for the United States, but for the most part has not been seen as a major strategic priority. The increased U.S. attention may reflect simply the overall policy decision for engagement with “rogue” states, but there are other considerations as well. With the expansion of the global natural gas industry, Myanmar (and neighboring Bangladesh) has become a potential investment target — and China, India and South Korea among others are already active there. Specifically, China has stepped up its activity in the country, investing in the natural gas sector and infrastructure development to link Myanmar economically and strategically to China — which also gives China a land-based shortcut to the Indian Ocean.

Washington has a long-term interest in minimizing the expansion of a Chinese sphere of influence in Asia, and as an early step, is engaged in revitalization ties with Southeast Asia (including countries like Laos, Cambodia and Vietnam). Differences over Myanmar policy have caused problems between the Association of Southeast Asian Nations (ASEAN) and both Washington and the European Union in the past, with Western countries trying to hold ASEAN responsible for Myanmar’s actions or face trade pressure to the whole group.

For China, the change in U.S. policy toward Myanmar, coupled with Washington’s recent willingness to engage North Korea bilaterally, offers both opportunities and concern. Both North Korea and Myanmar are countries that can serve as buffer states for China, and places where Beijing has expanded its influence both within the country, and thereby in the region around them. Following the United States’ premature declaration of “Mission Accomplished” in Iraq, Beijing was worried that Washington would turn its military sights on North Korea or Myanmar, and replaced the border forces with PLA soldiers (the only two places along China’s vast borders where this is the case, border guards patrol the other borders).

If Washington begins to engage directly the government of Myanmar, China may offer its services as a moderator of talks (trying to grab the role before ASEAN does), similar to its position in U.S.-North Korea relations. This ensures China a seat at the table to avoid surprises, and keeps China in a position of leverage toward both countries. At the same time, if the United States does create a more normal atmosphere with Myanmar, then China may lose some of its strategic advantages in the country, particularly in the oil and gas sector, where U.S. companies could have a technological advantage and be used by the Myanmar government to reduce their own dependence on China.”