Pressure to impose measures against the major oil and gas companies in Myanmar is significantly rising, four months since a military coup ended over a decade of democratic transition.
Despite a violent crackdown against civilian dissidents and a rising death toll of over 800 civilians, major oil and gas companies are still operating in the country. The sector represents a major source of revenue for the military, known as Tatmadaw, with $1.4 billion annual income during the 2017-2018 period, most of it originating from offshore gas.
THE YADANA PROJECT
The Yadana project alone, a gas field operated by Total, Chevron, and the Petroleum Authority of Thailand Exploration and Production Company Ltd. (PTTEP) in collaboration with Myanmar Oil and Gas Enterprise (MOGE),produces 8% of the electricity in Thailand and approximately half of the electricity in Yangon, the biggest city in Myanmar.
Located in the Andaman Sea, the gas field began commercial production in 2000. The gas is then conveyed to the Thai and domestic markets via a pipeline by a different legal entity, the Moattama Gas Transportation Company (Yangon Branch) (MGTC), which has the same stakeholders.
The French newspaper Le Monde recently revealed that this company is registered in Bermuda, a country known to be a tax haven. According to Le Monde, the tax optimization scheme aims at deflecting millions from the ministry of finance directly to the MOGE controlled by the Tatmadaw.
With a 15% stake in the Yadana gas field, MOGE is well known for its opacity and does not publish its account. As highlighted by Justice for Myanmar, this lack of transparency increases the risk of corruption.
While Total alleges that ‘there are no extraordinary profits’ and that ‘this is a classic arrangement’, financial records leaked by Distributed Denial of Secrets revealed that MGTC made a profit before taxes of $1.23 billion from 2017 to 2019. According to Justice for Myanmar, it is equivalent to a profit margin of 97 percent before taxes.
On May 26th, Total announced that the payment of dividends to the partners in the pipeline company, MGTC, would be suspended. Nevertheless, the gas production and other payments will continue.
The firm added that it “will comply with any decision that may be taken by the relevant international and national authorities, including applicable sanctions issued by the EU or the US authorities.”
Chevron released a similar statement in which the firm, after condemning the human rights violations in Myanmar, warned that “any actions should be carefully considered to ensure the people of Myanmar are not further disadvantaged by unintended and unpredictable consequences of well-intentioned decisions.”
The move has been welcomed by the international community. Yet, the decision does not include all revenue payments made to the state.
Justice for Myanmar considers that it is “only a minor portion of the revenue that the junta is receiving from Total’s operations in Myanmar, which also includes the state’s share of gas revenues, royalties and corporate income taxes” and renewed its call for sanctions against the MOGE.
Chevron, one of the largest American companies, through its subsidiary Unocal Myanmar Co. Ltd, has been present in Myanmar for nearly 30 years and has a 28.26 percent stake on Yadana, generating between $100 and $150 million annual profit.
Despite condemning the human rights violations in Myanmar, the firm argues that, due to its non-operating status, it does not directly control payments to the MOGE, and that if it was to cease payments of taxes to the government, it would put their employees at risk.
In April, The New York Times reported that to counter the growing call for sanctions against Myanmar oil and gas industry, Chevron mobilized a heavy lobbying apparel. Reuters calculated that Chevron’s payments to the MOGE could amount to $560 million from 2015 to 2019. For the same period, the company paid $50 million to the government of Myanmar.
The operating actor on the Yadana gas field is the French giant Total S.A., acting through its subsidiary Total E&P, with a stake of 31.24%. In 2019, Total paid $51 million to the government and $178.6 million to the MOGE. Even though the volume of natural gas extracted in Myanmar is relatively small, 0.3% of Total’s overall output, it represents a total of $786.5 million paid to the ministry of finance and MOGE between 2015 and 2019.
International and local NGOs have called out Total on its longstanding relationship with the Myanmar junta. In 2009, two reports published by Earth Rights accuse Total and its partners in the Yadana pipeline of complicity of serious human rights violations, including forced labor and torture.
Thailand’s national oil and gas company, the PTTEP, is the third partner in the Yadana gas field and pipeline with a stake of 25.5%. Reuters estimates that the Thai company paid $640 million to the MOGE and the ministry of finance.
The Yadana project is not the only source of revenue for the military regime in the extractive industry and other major oil companies are involved in the country. However, some, such as the Australian Woodside Petroleum, suspended their operations in Myanmar.
Similarly, Petronas, a Malaysian oil company, decided to adjourn production at the Yetagun gas field by declaring Force Majeure.
Despite numerous calls for sanctions against MOGE, western countries still haven’t included it in the list of companies and individuals banned from doing business with.
So far, the EU has adopted a set of restrictive measures against 35 individuals linked to the Tatmadaw and two military-owned companies, Myanmar Economic Holdings Public Company Limited (MEHL) and Myanmar Economic Corporation Limited (MEC), including a travel ban and an asset freeze. This comes to complement an arms embargo in place since 1990.
Since February 1st, the US has imposed targeted sanctions against individuals and companies associated with the military. This includes key members of the Tatmadaw, but also significant military-owned businesses such as MEC, MEHL but also Myanma Timber Enterprise (MTE), Myanmar Pearl Enterprise (MPE), and Myanma Gems Enterprise.
On May 17th, the US, together with the United Kingdom and Canada, added 16 individuals and an entity, the State Administrative Council (SAC) to the list of those targeted by sanctions. The SAC is a political entity controlled by the military and is the official name of the junta in the country.
However, no sanctions have been set against Myanmar’s oil and gas sector. On February 24th, 445 individuals and organizations from Myanmar civil society jointly called for the end of revenue payments to the military in the oil and gas sector. The Committee Representing Pyidaungsu Hluttaw (CRPH), Myanmar’s legitimate government, also condemned the funding of the Tatmadaw by Total and other major oil and gas companies. U Tin Tun Naing, CRPH acting minister for Planning, Finance, and Industry, urged “all stakeholders’ to ‘coordinate immediately to achieve democracy”. Thomas H. Andrews, UN Special Rapporteur on the situation of Human Rights in Myanmar, in a call to the Senate for coordinated bilateral sanctions, asserted in March that MOGE “is now effectively controlled by a murderous criminal enterprise.”
As of May 21st, the Assistance Association for Political Prisoners confirmed that 812 civilians were killed and 5,254 were arrested since the coup. In this context, the funding of the military by major international oil and gas companies goes against international law standards such as the United Nations Guiding Principles on Business and Human Rights.
The suspension of dividends to the stakeholder of the Yadana pipeline is a first move but, by itself, it is not enough to stop cash from flowing to the Junta. Coordinated sanctions against the MOGE appear to be part of the solution to effectively pressure the Tatmadaw and fully support the civil society in its call to reinstate democracy and human rights in the Golden Land.