Burma: US gem sanctions bite

By Robert Karniol

(ST) - With Washington rethinking its policy towards the military-run regime in Burma, there are signals that Rangoon is being hard hit by tightened US sanctions on its lucrative gem trade.

The policy review currently under way is aimed at addressing a dreary conundrum acknowledged by US Secretary of State Hillary Clinton during a Jakarta press briefing on February 18. "Clearly, the path we have taken in imposing sanctions hasn't influenced the (Burma) junta. But reaching out and trying to engage them hasn't influenced them either," she said.

Speaking by telephone from Washington, state department spokesman Rob McInturff explained the US objective. "We're going to be looking at all aspects of our relationship (with Burma). The goal is to make the policy effective, to have improved actions on the part of the regime," he said.

American economist Jeffrey Sachs, writing in the Financial Times in 2004, said: "Economic sanctions should be lifted because they do not work." He argued for increased diplomacy and humanitarian aid instead.

Pro-democracy activists instead favour a combined effort. Brian Leber, a Chicago jeweller at the forefront of the gem sanctions campaign, is among those advocating a carrot-and-stick approach. "Economic sanctions and the support of diplomatic efforts working towards reform can go hand in hand," he said.

The key, he added, is to finely target sanctions against a specific sector, company and individual. He, together with others in the US and elsewhere, find in Burma's gem trade the perfect fit.

According to reports citing government data, the gem trade was Burma's third most important export earner in fiscal year 2007/08 with a value of US$647.5 million. It was topped by natural gas at $2.6 billion and agricultural products at $1.1 billion, with forestry and marine products in fourth and fifth place respectively. However, the official figures are somewhat skewed as they fail to account for substantial smuggling activity of unknown worth.

Together with its contribution to state coffers, the gem trade provides specific benefit to Burma's military. Human Rights Watch (HRW) noted in a report last year that the State Peace and Development Council (SPDC), or ruling junta, "has a direct stake in many mines, in some cases through joint ventures with private entrepreneurs".

It added: "It also has a direct ownership interest in many of the country's top gem businesses, including state-run firms such as Myanmar Gems Enterprise and Myanmar Pearl Enterprise. In addition, the military-owned conglomerate Union of Myanmar Economic Holdings Company owns many businesses...including in the lucrative gem-mining sector (so the) gem industry is dominated by the SPDC."

Several countries have imposed sanctions against Rangoon, some broadly based and some more specific. The European Union (EU) sanctions, for example, include more than 400 named individuals and nearly 1,300 state- and military-run companies. The EU, US and Swiss sanction regimes are particularly important because of the substantial markets these represent. But there remains significant trade with China and Japan, and with the gem processing centres in India and Thailand.

The US initiative is especially noteworthy, partly because of Washington's leadership role and partly due to the monetary impact. Its import of ruby and jade alone, according to industry estimates, was previously worth more than $100 million annually. But the broad US sanctions introduced in 2003 were flawed, not least because they included a loophole allowing the import of ruby and jade from Burma if these were processed through cutting and mounting in a third country.

The US Congress moved to tighten its sanctions and shut the loopholes with an amendment to the 2003 law called HR 3890. This was approved last July and came into force two months later, with another month set aside by the US Customs and Border Protection as a buffer period.

Bangkok gem traders began to notice the impact even before HR 3890's implementation last October, as the market anticipated change. "We've been hard hit by the US sanctions and are unable to unload our stockpiles," one trader complained to The Straits Times. "Jade and ruby are particularly affected but less so with sapphire, which isn't specified in the new law."

The Chiang Mai-based periodical Irrawaddy, meanwhile, noted in a recent article that "Mogok, the historic centre of (Burma's) gem industry, is struggling to cope with the effects of (tightened) US sanctions". Citing a source there, it reported that "at least 50 mine sites in the area have decreased production and several have closed completely".

"Our view is that sanctions have a role. The gem ban, together with targeted financial sanctions, are effective," said Arvind Ganesan, director of HRW's business and human rights programme, in a telephone interview from Washington.

Hopefully, Mrs Clinton is listening.