Myanmar’s Balancing Act

Courtesy of STRATFOR (subscription required), a detailed analysis of the geopolitical significance of U.S. Secretary of State Hillary Clinton’s three-day visit to Myanmar, which represents a major step in the United States’ re-engagement in Asia and furthers Washington’s plan to counterbalance China’s regional strategy.  As the report notes:

“…U.S. Secretary of State Hillary Clinton is visiting Myanmar from Nov. 30 through Dec. 2. Clinton is the highest-ranking U.S. official to visit Myanmar since 1962, when a coup swept a military regime into power in the country (then called Burma). With no official ambassador in the country since 1990, the United States is once again recognizing Myanmar’s strategic importance.

The stated purpose of Clinton’s visit is to gauge the intentions of the country’s new government — nominally civilian but military-backed — since it has taken measures that could indicate a willingness to reform and bring some amount of democracy (and foreign investment) to Myanmar. However, the visit also has geopolitical importance since it marks a new step in U.S. President Barack Obama’s diplomatic campaign aimed at increasing the United States’ involvement in the Asia-Pacific theater.

The United States’ Intentions

After taking office, Obama announced his intention to re-engage with Asia, including using a dual-track approach — talks and sanctions — with Myanmar. This policy did not elicit much of a response in Myanmar until the country’s 2010 elections, which brought the current government to power and represented an advanced step in the State Peace and Development Council’s “roadmap to democracy.”

After the new government was sworn in March 2011, it began taking actions the West has demanded for years, including releasing political prisoners like opposition leader Aung San Suu Kyi, easing media restrictions and promoting an image of democratic reforms. These steps have been designed by Myanmar’s leadership to adapt and strengthen its hold on power. The country’s leaders seek to gain strength domestically and internationally by improving relations with the West, bringing in foreign investment from multiple countries, reducing its dependence on China and — most important — presenting an image of internal cohesion. To accomplish this last goal, the country’s leaders have made overtures to ethnic rebels and sought to integrate Suu Kyi into the political process, which they hope might prevent her from being a rallying figure for dissidents demanding sanctions on the regime.

As gradual as these measures might be, Washington has welcomed the changes and used them as an opportunity to legitimately increase contacts with Naypyidaw. A visit by a diplomat of Clinton’s rank is an opportunity to resume relations with a regime that has been isolated by the international community for most of the last 20 years. Furthermore, Myanmar is a natural resource-rich country in a very strategic position, lying on the Indian Ocean and bordering India and China. International companies, particularly from sanctions enforcers like the United States, stand to profit from freer access to Myanmar’s vast natural wealth and cheap labor.

Washington hopes to increase its ties to Myanmar in order to lure Naypyidaw away from its close relationship with Beijing, complicating China’s regional strategy by injecting more trade and investment alternatives (as well as political influence) into this strategic Chinese neighbor. The United States also hopes to persuade Myanmar to be more transparent about its relationship with North Korea and to reconsider its ballistic and nuclear cooperation with Pyongyang. This gambit would be quite important diplomatically, as it would both signal progress in Naypyidaw while further isolating North Korea (thereby showcasing the effects of more active U.S. involvement in Asia). Moreover, Myanmar is a member of the Association of Southeast Asian Nations (ASEAN), a political-economic grouping of nations that has become an important part of Washington’s Asia strategy. (In fact, Obama announced Clinton’s visit to Myanmar at the ASEAN and East Asia Summit meetings in mid-November, a move indicating Washington’s willingness to use ASEAN as a multilateral mechanism for broadening its re-engagement in the Asia-Pacific region.) Myanmar is slated to chair ASEAN in 2014 as a reward for its round of reforms.

China’s Position

Though Clinton’s visit could lead to diplomatic dividends for the United States in Asia, Myanmar is a key country for China’s foreign policy. Moreover, China certainly is paying close attention to these developments, as it considers Myanmar integral to its energy and resource strategy.

Myanmar sits on a strategically important corridor connecting China’s Yunnan province to the Indian Ocean. China is working on two pipelines in the area: one for crude oil, with a capacity of 22 million tons per year (approximately 4.8 percent of China’s total current consumption) and one for natural gas, with a capacity of 12 billion cubic meters per year (approximately 9 percent of China’s total current consumption). Myanmar’s rapprochement with the West could challenge China’s large stake in Myanmar’s energy resources. Myanmar has its own mineral and hydrological energy sources, along with a plethora of other natural resources. China has sought to develop some of these resources — particularly the Myitsone dam, which would add to China’s energy supply. In recent years, Myanmar resources and access to the Andaman Sea have been primarily contested by China and India. India could use these ports to link its isolated northeastern provinces, and China could use them to avoid the logistic bottleneck at the Strait of Malacca.

China has been able to keep Myanmar’s leaders close, giving them support during the regime’s international isolation in exchange for cooperation in the development of strategic infrastructure assets as well as an area in which to pursue Beijing’s strategic interests without U.S. competition. In strategic resources, China has gained the upper hand over India. Nevertheless, Naypyidaw has realized the need to balance China’s growing influence in the region, especially as China has become a significant player in Myanmar’s economy and holds political influence over some of the rebel ethnic groups that can threaten stability. Myanmar President Thein Sein’s audience with Clinton brings the future of China’s interests into question.

In 2011, Naypyidaw made careful attempts to move away from Beijing — suspending the controversial Myitsone dam project and signaling to the international community its willingness to reform and do business — while making sure Beijing did not feel too slighted. Myanmar Gen. Min Aung Hlaing’s visit to Beijing just two days prior to Clinton’s trip to Myanmar and the signing of a defense cooperation agreement with China are telling signs of the careful diplomatic game that Naypyidaw is playing. Furthermore, Belarusian Prime Minister Mikhail Myasnikovich’s visit to Myanmar received more domestic attention than Clinton’s visit — possibly an attempt by the regime to downplay the significance of Clinton’s visit in Beijing’s eyes and to reassure China that Myanmar is not making any sudden moves away from Beijing and toward the West.

Myanmar is working to break out of its international isolation and dependence on China while trying to prepare for gradual integration with the global economy. While it needs the inflow of foreign business and an increase in its strength and reputation, Naypyidaw is taking a measured approach in order to secure its position. India, China, ASEAN and the West all have an interest in the country, and Myanmar’s government is trying to balance those interests. If Naypyidaw is successful in convincing the international community to reduce sanctions as well as develop direct relations, it will gradually attract business and capital and bolster its international and domestic legitimacy (while enriching Myanmar elites). Naypyidaw would like to carry out a similar controlled modernization program to that of China or other East Asian countries in the last three decades. However, its ability to accomplish this goal remains to be seen.

Beijing has reasons to be concerned, as Myanmar’s opening threatens its privileged position in the country and supports the notion that the United States is encircling China. However, Myanmar will also continue relations with China in an ongoing balancing act — not only for investment and security reasons but also to prevent excessive U.S. influence and pressure.

This entry was posted on Friday, December 2nd, 2011 at 6:31 pm and is filed under Myanmar.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

Comments are closed.

Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

Focusing primarily on The New Seven Sisters - the largely state owned petroleum companies from the emerging world that have become key players in the oil & gas industry as identified by Carola Hoyos, Chief Energy Correspondent for The Financial Times - but spanning other nascent opportunities around the globe that may hold potential in the years ahead, Wildcats & Black Sheep is a place for the adventurous to contemplate & evaluate the emerging markets of tomorrow.