July 15, 2012

Michael Green was senior director for Asia at the National Security Council during the George W. Bush administration. He is a senior adviser at the Center for Strategic and International Studies and an associate professor at Georgetown University. Daniel Twining, a member of the secretary of state’s policy planning staff during the Bush administration, is senior fellow for Asia at the German Marshall Fund of the United States.

“The heart of our [Asia] strategy, the piece that binds all the rest of it together, is our support for democracy and human rights,” Secretary of State Hillary Clinton declared last Monday. Two days later, the Obama administration lifted prohibitions on U.S. investment in Burma . American companies are now free to partner with the state-owned energy conglomerate — the Myanmar Oil and Gas Enterprise (MOGE) — whose revenue has underwritten the military regime’s repression of its people and ongoing wars against ethnic dissidents.

Why now? Burma (also known as Myanmar) is undergoing a managed political opening designed to legitimize its regime, transform its growth prospects and enlist Western partners as a hedge against China. U.S. policy has encouraged this through graduated engagement: As Clinton said this year, Washington would pursue the “targeted easing” of U.S. sanctions over time to retain leverage while incentivizing genuine political reform. The administration did this because officials know that despite measurable progress, Burma’s political opening is fragile and reversible. The military retains firm control over parliament, stands ready to repress organized dissent and continues military campaigns against ethnic minorities. The administration also remained, as President Obama put it on Wednesday, “deeply concerned about the lack of transparency in Burma’s investment environment and the military’s role in the economy.”

Lifting elements of the investment ban is a sensible part of a U.S. strategy to encourage Burma’s progress toward greater openness and help make life better for its long-suffering people. The human and geopolitical stakes are high for both countries. But such an approach must be premised on creating greater economic and political space outside the control of the regime — or at least improving transparency and accountability by entities controlled by the regime. And the new U.S. policy does not do that.

Until now, the Obama administration has marched in lock step with Aung San Suu Kyi, the Nobel laureate, winner of Burma’s last free national election and leader of a party that won 95 percent of open seats in recent parliamentary elections. The administration’s graduated approach to easing sanctions had chimed with her warnings not to make an all-or-nothing bet on Burma’s permanent and irreversible democratization. That was smart policy, as she remains the most effective lever for positive change within Burma. It also ensured that there would be congressional support for engagement of Burma, something that has been difficult to achieve in the past. Aung San Suu Kyi was never opposed to easing sanctions, but she explicitly warned foreign governments against investment in state-owned energy until Burma adopted internationally accepted measures of transparency and accountability. “Other countries could help by not allowing their own companies to partner [with] MOGE unless it was signed up to such codes,” she said last month.

With its recent decision to lift broad elements of the investment ban on energy, the Obama administration has ignored this appeal, insisting only on weak reporting requirements for U.S. companies operating in Burma. Aung San Suu Kyi, a clever politician who realizes that she cannot afford to be isolated from Washington, said Thursday that the end of investment restrictions was “nothing significant” — while reiterating her call for the international community to press MOGE to adopt the International Monetary Fund’s code of conduct.

Those who advocate lifting the investment ban maintain that U.S. companies will set higher standards on transparency and corporate social responsibility. This is true — though less clear is whether that will have an impact on non-U.S. investors or the Burmese regime. U.S. business and government leaders’ argument that nearly unconstrained investment in Burma’s natural resource sector will promote human rights and welfare will face skepticism from Burmese democrats who have committed their lives to this cause, and who believe it will not.

The Obama administration reportedly rushed this decision through a divided deputies committee of the National Security Council, and ignored strong opposition from key members of Congress opposed to a full-scale repeal of the investment ban, to have something ready for Clinton’s visit to the region this week. By publicly splitting with Burma’s democratic opposition on such an important issue, the administration will find that Aung San Suu Kyi no longer provides political cover for U.S. policies. The White House will find itself held more accountable for the Burmese military’s continued violence against ethnic minorities, as well as any nuclear ties with North Korea and the Burmese people’s dashed expectations for lasting political change.