The sanctions imposed by the US on two state-owned banks will make it harder for the junta to transact in dollars. (AFP)

No ‘silver bullet’: Experts weigh in on America’s latest Myanmar sanctions

New US sanctions on two state-owned banks have made it harder for the junta to access foreign revenue and import weapons, but experts say additional measures are needed to close loopholes.


In late June, the United States announced a new round of sanctions, which some experts say are the strongest to be imposed on the Myanmar junta since the 2021 coup. By adding the Myanma Foreign Trade Bank, Myanma Investment and Commercial Bank and Ministry of Defence to its list of sanctioned entities, the US Department of the Treasury has effectively blocked any of their transactions that go through a US bank.

The US Treasury cited the use of the banks and the ministry to enable “transactions between the military regime and foreign markets”, particularly for the “purchase and import of arms”. It also noted that the state-owned banks “function as foreign currency exchanges” that allow entities like the state-run Myanma Oil and Gas Enterprise, the largest single source of formal income for the regime, “access to foreign markets for revenue generation.”

The only other country that has sanctions against the two state-owned banks is Canada, which chose not to lift restrictions that were imposed back in 2007.

Among those who have praised the latest sanctions is US-based environmental non-profit EarthRights International. Mr Kirk Herbertson, a senior policy advisor at the organisation, called them the “most significant sanctions since the coup began,” second only to the US’s decision to freeze around US$1 billion in federal reserves in February 2021, the month of the coup. 

It’s unclear why the US waited two and a half years to impose these sanctions, but Mr Scot Marciel, US ambassador to Myanmar from 2016 to 2020, speculated that Washington may have finally reached a point where the “benefits of the sanctions in terms of squeezing the junta outweighed the cost in terms of the overall economy”.

He added that Myanmar’s violation of US sanctions against Russia, by exchanging arms shipments with Moscow, since the invasion of Ukraine in February last year likely played into the decision as well.

However, some experts caution that the sanctions might only have a limited impact on the junta’s finances because of their narrow scope and the ease with which they could be circumvented. Myanmar activist groups therefore continue to push for more comprehensive sanctions, especially against MOGE, which is already bearing the brunt of measures from the European Union.

Dollars denied

According to a May report from the United Nations Special Rapporteur on human rights in Myanmar Mr Tom Andrews, sanctions against MFTB and MICB could deprive the junta of an estimated $2 billion per year.

The report said MFTB has at least 72 “nostro” accounts – foreign currency holdings at other banks – in a network of 50 correspondent banks around the world, including in the US, Singapore, the United Kingdom, Malaysia, Bangladesh, Germany and Switzerland. 

Mr Peter Kucik, a former senior sanctions advisor at the US treasury, explained that dollar transactions go through a number of different banks and “ultimately one [of them] has a US presence so that they can clear the dollar transaction”.

“Most US dollar transactions clear through New York and that is what they are now cut off from at [MFTB and MICB],” said Kucik, who is managing director at Washington-based consultancy firm Mercury Public Affairs.

He said MFTB and MICB’s correspondent banks will likely cut ties with them preemptively, before regulators can take any action, to avoid any risk of violating sanctions. Kucik said this means the Myanmar banks would “lose the ability to directly conduct dollar transactions” or retrieve any US dollars still sitting in a US bank.

“There are two things that the US was trying to do,” said Mr Keel Dietz, an independent Myanmar policy analyst. “One is to disrupt the junta’s ability to purchase goods with foreign currency. This includes arms, aviation fuel, dual use technologies – things that the junta has to buy from the international community.” 

“The other goal is for these sanctions to disrupt the junta’s ability to take in money, and I think this is where the sanctions will potentially be more impactful,” he told Frontier. “At the time of the sanctions, MFTB was, with very limited exceptions, the only state bank authorised to receive foreign currency for anything the junta is selling, including natural resources.”


This isn’t the first time that the US has imposed sanctions against Myanmar state-owned banks. Back in 2003, the US targeted MFTB, MICB and Myanma Economic Bank – the only three foreign exchangers in the country at the time – making it virtually impossible for Myanmar businesses to deal in US dollars. 

Kucik said these sanctions “restricted anyone from doing anything” and ultimately hurt ordinary citizens and businesses with no military connections. 

“This is not something that the United States wants to repeat and for good reason. You’re causing economic harm but you’re causing it in a way where the burden is largely borne by the people and not the people that you’re really trying to apply the pressure to. So now you have the inverse but the difficulty is that it’s hard to be both precise and have the level of impact that everyone would like to see,” explained Kucik.

However, today’s more cautious approach has left a number of potential opportunities for the junta to evade sanctions. 

Herbertson from EarthRights said while MICB was likely listed because it could be an alternative to MFTB, the regime could turn to another bank like MEB to deal in foreign currency.

A similar point was made by U Tun*, an independent consultant working with the Ministry of Electricity and Energy of the National Unity Government, the parallel administration set up by representatives ousted in the coup. 

“Previously MFTB and MICB controlled all foreign currency, but MEB can also convert foreign currency so the junta could shift from MFTB to MEB accounts, which could mean for instance that they would receive money from the oil and gas sector through MEB,” he explained. 

This seems to be just what the junta has planned. On July 6, Myanmar Now reported that the regime’s Ministry of Energy requested the Central Bank in April to open an account under the name “Kant Kaw” – a type of flower – at MEB. The junta reportedly raided MOGE’s head offices after the story was published in order to find the source of the leak.

A group of Myanmar activists demonstrate with placards calling the US to sanction MOGE ahead of President Joe Biden’s visit to Japan, in Tokyo on May 22, 2022. (AFP)

But MEB seems to have flown under the radar. The bank has yet to be sanctioned by any country and is rarely named in reports or calls for sanctions. When asked by Frontier whether the US has plans to sanction the bank, a State Department spokesperson said that the US continues to look into “efforts to block revenue to the regime” and “all options are on the table” but would not comment further.

Dietz also said there wouldn’t be anything stopping the junta from licensing a private Myanmar bank to step in as a proxy for MFTB and carry out foreign currency transactions. 

The sanctions would also not prevent transactions directly with Russia in rubles or China in yuan, which the regime is increasingly trying to facilitate.

Russia and China sell most of the military’s imported arms, including fighter jets, advanced missile systems and attack drones. According to the UN Special Rapporteur’s report, Russia accounts for $406 million of shipments to the Myanmar military and China for another $267 million. 

But former US ambassador Marciel said that while possible, using the ruble has serious drawbacks. Unlike the dollar, “it’s not a major reserve currency” and “involves a lot more risk because it’s not a stable currency”, he said.

Using the Chinese yuan is also not without its challenges. Mr John Sifton, Asia advocacy director at Human Rights Watch, told Frontier that while the Bank of China might be an obvious choice for the junta, it has an office in New York and is therefore “not going to be interested in doing business for them” given the risks posed by US sanctions.

But experts agree that the biggest crack that the junta and its partners could exploit when it comes to sanctions is a lack of enforcement.

Dietz said this has emboldened entities to continue transacting with the regime since the coup, pointing to the timber industry as an example. US companies have continued to import hundreds of thousands of dollars worth of teak from Myanmar with no repercussions after Washington imposed sanctions against the Myanma Timber Enterprise in April 2021. 

“As long as the US, the EU and the UK turn a blind eye to sanctions violations, countries will think that they’re not serious about these sanctions and will treat them as such,” said Dietz.

Lax enforcement partly comes down to limited coordination between Western countries, who have not aligned their sanctions regimes.

Asked whether it would join the US in sanctioning MFTB and MICB, the EU Delegation to Myanmar told Frontier by email that it “does not discuss its sanctions plans externally” but “remains committed to apply targeted measures.” A British embassy spokesperson similarly said in an email that it “continues to explore further sanctions targets to hold the regime accountable” but could not comment on what these measures would be.

Letting MOGE off the hook?

Myanmar’s natural gas projects, which are overseen by MOGE, generate more than $1 billion in foreign revenue for the junta each year, according to the report from the UN Special Rapporteur.

But despite persistent pleas from activists and international organisations, only the EU has sanctioned the state-run enterprise. Herbertson of EarthRights said while these European measures were “impactful”, their effect was “undermined when the US did not follow suit.”

Washington has only sanctioned MOGE’s most senior officials, in measures announced on the second anniversary of the coup in February this year. When asked whether the US would sanction the entity as a whole, a State Department spokesperson told Frontier it “does not preview potential sanctions”. The UK and Canada have also yet to impose restrictions on MOGE.

Some have speculated that Washington is worried that sanctions would prompt China to take on a larger role in Myanmar’s oil and gas sector, while others have argued they could cut off the flow of gas from the offshore Yadana project to Thailand, one of America’s oldest allies in Southeast Asia.

Herbertson said direct MOGE sanctions would help close loopholes by targeting “the gas revenues themselves, whereas MFTB sanctions target the networks that are known to carry out these revenues. If the US government sanctioned MOGE, any bank with ties to the United States, including any that make dollar transactions, would be highly unlikely to process MOGE revenues even after the junta tries to circumvent MFTB and MICB.” 

A former senior MOGE employee told Frontier that, as of April, the enterprise has been unable to retrieve approximately $500 million of overseas revenue due to the EU sanctions.

The largest chunk – approximately $326.8 million – is from the Shwe gas project, according to NUG Minister of Electricity and Energy U Soe Thura Tun. 

The project extracts gas from a field off the Rakhine State coast, which is then transported to China’s Yunnan province via an overland pipeline. The project has accounted for 52 percent of the junta’s total revenue from MOGE since the coup, or $568 million annually. The remainder largely comes from the Yadana field in the waters off Ayeyarwady Region.

The Shwe project is operated and 51pc owned by South Korea’s POSCO International with MOGE holding a 15pc share. The China National Petroleum Company has exclusive rights to buy all the gas from the project. 

Soe Thura Tun said an additional $108.82 million from the gas pipeline and a parallel oil pipeline is also being held due to EU sanctions.

The former MOGE employee, who asked not to be named, told Frontier that it was the Bank of China’s decision to “hold the funds in escrow” and that MOGE “has no control”. However, U Tun said that this decision could not be made unilaterally and would have likely required POSCO’s consent as the gas field operator. He added that the Korean government has been putting pressure on POSCO to divert payments to an escrow account. POSCO could not be reached for comment.

But even though MOGE can’t access the revenue, the flow of gas has not stopped. Experts say this is evidence that US sanctions would not hurt the wider economy, as many fear.

“If they shut down gas production, there’s no revenue building up and no money for them to potentially access in the future. Whereas if they continue supplying gas to Thailand and China, even if the revenues aren’t flowing to them right now, they can hope to access it in the future,” Dietz said of the Myanmar regime.

“All of the incentives for the junta point to continuing production. It’s not as though it’s costing the junta a lot of money to maintain production in these fields – they’re rent-seekers. And China and Thailand are two of the junta’s key backers and the junta also uses the gas domestically, so they need to maintain that production,” he added.

But even with limited collateral damage, Kucik cautions that MOGE sanctions alone won’t be enough to topple the regime.

“I don’t think that MOGE is a silver bullet. MOGE could be sanctioned or not and it’s not going to lead to the regime failing by itself. Sanctions have to be a piece of a broader strategy whatever shape that might take,” said Kucik.

*denotes a pseudonym for security reasons

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