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US eases economic sanctions to reward Myanmar

President Barack Obama on Thursday declared a new chapter in U.S. relations with Myanmar, easing an investment ban and naming the first U.S. ambassador to the former pariah state in 22 years to reward it for democratic reforms.

Both Republican and Democrat senators welcomed the administration's move, but human rights activists said it was premature to reward a government that remains dominated by its military and still holds hundreds of political prisoners.

Myanmar opposition leader Aung San Suu Kyi's election to parliament last month has prompted Western governments to roll back years of hard-hitting restrictions against the Asian nation also known as Burma, which is emerging from decades of authoritarian rule and diplomatic isolation.

After meeting Myanmar's foreign minister, Wunna Maung Lwin, Secretary of State Hillary Rodham Clinton said that the U.S. was suspending sanctions on export of American financial services and investment across all sectors of the Myanmar economy — including in the resource-rich country's lucrative oil, gas and mining sectors. She described it as the most significant action Washington has taken so far to reward Myanmar for its reforms.

"Today we say to American businesses, Invest in Burma and do it responsibly," she told a joint news conference after talks with the foreign minister at the State Department. She said U.S. companies would be expected to conduct due diligence to avoid any problems, including human rights abuses.

Despite the easing of restrictions, U.S. companies would still be barred from doing business with firms associated with the country's powerful military. The White House also announced it was keeping its framework of hard-hitting sanctions in place for now, saying Myanmar's democratic reforms are still "nascent."

Clinton described that as an "insurance policy."

"The United States remains concerned about Burma's closed political system, its treatment of minorities and detention of political prisoners, and its relationship with North Korea," Obama said in a statement.

Voicing similar reservations, but crediting Myanmar's reforms, influential lawmakers supported the administration's announcements, underscoring that policy toward Myanmar is one in which the two parties can see eye to eye.

Republican Sen. John McCain and Mitch McConnell said in a statement that the measures struck "an appropriate balance" between encouraging reform and maintaining leverage to press Myanmar to make more progress. Democratic Sen. John Kerry called it a "logical step forward." Fellow Democratic Sen. Jim Webb urged the administration to go further and lift economic sanctions entirely. The U.S. retains sanctions on trade and against lending to Myanmar by institutions like the World Bank.

One dissenting voice was Rep. Ileana Ros-Lehtinen, Republican chairwoman of the House Foreign Affairs Committee, who said "serious questions remain about Burma's journey toward democracy."

The senators welcomed the nomination of Derek Mitchell, the current special envoy to Myanmar who will become the first U.S. ambassador to be based in the country since 1990. Clinton urged his quick confirmation by the Senate. The U.S. is currently represented by a lower-level diplomat.

Myanmar will also send a full ambassador to Washington, a post to be taken by its current permanent representative to the United Nations in New York, Than Swe.

Suu Kyi, who spent 15 of the previous 22 years under house arrest before her release in late 2010, this week gave cautious backing to the suspension of economic sanctions but warned against undue optimism about Myanmar and said the reforms toward democracy — after five decades of military dominance — were still reversible.

A spokesman for Suu Kyi's National League for Democracy party, Nyan Win, said Thursday: "We welcome the U.S. decision to relax sanctions and the naming of a new U.S. ambassador, particularly Mr. Derek Mitchell."

Human rights groups and exiled Myanmar activists were strongly critical of easing economic controls.

The U.S. Coalition for Burma said the Obama administration was prematurely rewarding Myanmar while its military was escalating violence against the Kachin ethnic minority in the north of the country. The fighting over the past year has displaced tens of thousands of villagers.

"It ignores the reality of the situation on the ground, including ongoing atrocities," said Tom Andrews of the group United to End Genocide. "This is a dangerous decision that is likely to further exacerbate human rights abuses and has left the U.S. government without any leverage in future."

Clinton voiced concern over the continued detention of political prisoners. Western governments say hundreds of such detainees are still held despite a series of amnesties granted by Myanmar's President Thein Sein over the past year.

The Myanmar minister conceded there were some "so-called political prisoners" who have committed criminal offenses, such as murder, rape or are connected to terrorism. He said Thein Sein will grant further amnesties "when appropriate."

The U.S. investment ban has been in place since 1997. U.S. businesses have been pushing the administration to follow the example of the European Union, which recently suspended all its economic sanctions, including on trade — although like the U.S., it retains an arms embargo. American businesses could yet be constrained in their involvement in the oil, gas, mining and timber industries because of military involvement in those sectors.

Human Rights Watch expressed disappointment that standards of corporate responsibility that the U.S. says will ensure transparency and oversight in American business dealings in Myanmar would not be legally binding.

"Human rights problems in Burma are way too serious for self-regulation," said John Sifton, the group's Asia advocacy director. "Preventing corporations from fueling human rights abuses, or strengthening the military regime, is a task for government."