Energy Politics in the New Myanmar

The ongoing transition in Myanmar has thrown up several issues to the forefront — questions on federalism within the nation state, strengthening the economy to sharing of resources. The decision by Myanmar’s military junta to hold general elections and move the nation-state towards democracy was welcome albeit, underpinned by heavy skepticism. The cynicism stemmed from the long drawn rule by the military which has centrally controlled the politics and economy of the state. The cynicism is compounded by the fact that these issues impact not only the domestic political scenario but, influence Myanmar’s neighbours as well.

The ensuing change in Myanmar is complicated by ethnic conflict and communal violence. Significantly, ethnic conflicts in the borderlands have a history as long as independent Myanmar is concerned. Therefore, the ongoing peace negotiations need to be inclusive. The peace process is intrinsically linked to the questions of federalism and governance wherein the ethnic minorities are given an equal footing in the new system that Myanmar is seeking to move towards. The new system especially requires an inclusive access to resources.

The impending changes and reforms in Myanmar are impinged on the crucial issue of resource sharing. Myanmar has a rich reserve of minerals, jade, timber, oil, gas, hydropower etc which make up nearly 70 per cent^[i] of its exports. Of this, energy resources namely oil and gas coupled with hydropower contribute most to its foreign exports. Although, geo-strategic interests have largely driven the discourse on its energy reserves, it must be noted that Myanmar is one of the oldest oil exporters in the world. The first oil barrel exported by Myanmar dates back to 1853.^[ii] The energy sector comprising oil, gas and hydropower has seen almost 35 per cent of foreign direct investment in 2015, making it the largest sector in Myanmar to receive Foreign Direct Investment (FDI).^[iii]

Energy exports in Myanmar rose during the 1990s with the military-led government using the natural resources to survive in the face of foreign sanctions. Reports of widespread displacement coupled with human rights and environmental violations for the natural gas pipeline between Thailand and Myanmar led to international controversy.^[iv] It must be noted that the natural resources are concentrated in regions stifled with ethnic conflict and a large part of the discord revolves around the need to control these resources. This has led to the rise of crony capitalism within the nation-state that has benefited regional military commanders, ethnic minority elites and foreign investors, leaving the bulk of the population in poverty. This is significant to understand as it has a bearing on the current transition process where Myanmar’s economy is opening up and seeing several foreign investors making a foray. The major foreign players in the energy sector are China, South Korea, Thailand, India, etc.

Special attention must be paid to China and India, as their energy requirements have increased given their burgeoning economies and population. Both the nations have shown keen interest in Myanmar’s energy market and even competed for it. For instance, China won the bid to obtain exclusive access to A1and A3 blocks in the Shwe gas fields, much to the disappointment of India back in 2008. China has also built a 1,800 km long gas pipeline from Kyaukpyu sea port in Rakhine state to Kunming in China. It has transported four billion cubic meters of methane^[v] from both Myanmar and West Asia. Apart from the gas pipeline China has also built an oil pipeline running through two conflict-torn regions — Rakhine and Shan states. The pipelines provide China with an option to diversify its energy imports and overcome its reliance on the Malacca Straits.

However, challenges exist as one cannot overlook that the pipeline is a physical investment as much as a strategic tool. The pipelines not only pass through treacherous geographical terrain but, also through conflict ridden regions which have semi-autonomous armies fighting against the Tatmadaw. This evidently poses challenges for China on how it balances its strategic interests with the domestic politics ensuing in Myanmar. Attempts have been made in this regard by China relating to the peace process. China which has both explicit and implicit links with the Arakan Army, Ta’ang National Liberation Army and Kokang group has utilised its influence and assured the National League for Democracy (NLD) leader, Aung San Suu Kyi of the participation of these groups in the new Panglong Conference held on August 31, 2016.

While, China had obvious advantages in its access to the energy resources in Myanmar under the military government some level of uncertainty has set in with the coming of the new NLD led government. As stated earlier the energy sector has paid the most dividends to sustain Myanmar’s earlier military government and will continue to hold a significant place in the current context with the Htin Kyaw administration. This means that a major shift in bilateral ties is unlikely. Foreign Minister Su Kyi chose China as her first foreign destination to visit outside Southeast Asia during which Chinese President Xi Jinping maintained, “We hope and believe that the Myanmar side will also maintain a consistent stance on the China-Myanmar relationship and be committed to advancing friendly ties, no matter how its domestic situation changes.”^[vi]

On the other hand, India appears to be increasing its presence in Myanmar since, the onset of the transition process. NLD leader has close links with India and recent visits by PM Modi and Foreign Minister Sushma Swaraj’s indicate this thrust. As a part of the ‘Act East Policy’ India is seeking to widen its investments in Myanmar specifically in energy and connectivity (by land, sea and air). This remains difficult to achieve given the slow decision making processes in India and the lack of close ties with the former military government. It is also unfair to a degree to compare China and India’s influence in Myanmar given how India for over a decade cut ties with military junta and has lost out in crucial projects to China. Moreover, China also has more experience in the international energy market as opposed to India. Therefore, one can say that China has had the ‘early bird’ advantage over India in the energy milieu so far. Although, India did not reap the benefits of investing in Sittwe given the lack of infrastructure, it has learnt from its mistakes and is now focusing on upgrading the Thanbayakan Petrochemical Complex. India’s ONGC Videsh Ltd (OVL) won two of the 18 onshore blocks in Myanmar in 2013. Private Indian companies such as Reliance Industries (RIL) also won offshore oil and gas blocks along with shallow-water blocks^[vii]. Therefore, the landscape seems to be more favourable for India in the recent past. Significantly, Indian companies are partnering with other international companies and winning stakes in the energy resources. Challenges confront India in how it will take forward its larger projects such as the India-Bangladesh-Myanmar pipeline.

The geopolitical and strategic interests of both China and India in Myanmar’s energy resources are evident. However, both must pay attention to the ongoing domestic imbroglio specifically relating to reforms. The need for transparency in reforming the energy sector is two-fold. Firstly, transparency ensures that the people of Myanmar (at the borderlands and mainland) become the foremost beneficiaries. Secondly, it also improves the climate of business, a climate where projects run by foreign companies and states will we perceived positively rather than with suspicion. The nationally driven interests of China have led to a ubiquitous notion of it being a resource exploiter amongst the people of Myanmar. The shutdown of the Myitsone Dam project becomes a case in point, along with the criticisms the oil and gas pipeline projects received from the public. But China promised to give Myanmar’s government 53 billion dollars in royalties in 30 years for the damage caused during the construction of the pipelines and also offered 25 million dollars to local armed groups. These remain short-sighted measures and India is better poised in this regard as it can take steps to build positive public image in Myanmar.

Coming full circle, the article began by outlining the internal challenges facing Myanmar in the current context. This is crucial for India to analyse as it seeks to become an active foreign investor.  Non-alignment and non-interference in domestic issues of other states have been the cornerstones of India’s foreign policy. However, with regard to Myanmar, given how the domestic scenario impacts India’s interests, a need for revaluation is required. A step in this direction has been India’s official role in Myanmar’s peace process. Mizoram’s former Chief Minister Zoramthanga is the envoy trying to broker peace between the Kachin rebels and Myanmar’s central government. Although, several countries including China are seeking to play an active role in the peace talks, India is better positioned as it was invited by the ethnic minorities themselves. Therefore, such measures can stand India in good stead to develop closer and stronger bilateral relations with Myanmar.

End Notes

P S Ramya, PhD Research Scholar, South Asian University, New Delhi.