Exposing the junta’s efforts to finance its war on Myanmar’s people

Myanmar regime opens bogus bank accounts to bypass Western sanctions on MOGE

The Myanmar regime has established a fraudulent entity to replace the banking details of its oil and gas venture in an attempt to access sanctioned funds outside the country originally paid by foreign partners, according to an internal document leaked to Myanmar Now.

The letter, dated April 19, outlines a request by the regime’s energy ministry to the Central Bank of Myanmar (CBM) to create separate bank accounts in US dollars, Chinese yuan or renminbi, and Thai baht. It asks that the accounts be registered under the name “Kant Kaw”—a type of Burmese flower—at the state-owned Myanma Economic Bank (MEB) in the military capital of Naypyitaw. 

The purpose of the move was to replace the previous banking information of the regime-controlled Myanmar Oil and Gas Enterprise (MOGE), which serves as the primary source of foreign revenue for Myanmar’s military junta, generating hundreds of millions of dollars from natural gas projects.

Since the European Union (EU) imposed sanctions on MOGE last February, more than US$504.3 million has been held in foreign bank accounts by the enterprise, the leaked letter explained. These funds represent the revenue generated from three projects: Shwe Gas, Myanmar-China Oil & Gas Pipelines and Yadana Gas, Myanmar Now has learned.

The creation of new bank accounts under the name of Kant Kaw could facilitate the receipt of the revenue in question, especially in light of EU sanctions on MOGE, the United States government’s sanctions on its managing and deputy managing directors, and the potential for future sanctions, according to the energy ministry. 

Military officials arrested several officials in a raid on the planning department of MOGE on Thursday morning, two days after Myanmar Now published a report in Burmese about the leaked document in question, likely in an attempt to identify the source. However, the information was not obtained from within the enterprise.

Typically, most oil and gas revenue flows into MOGE accounts held outside Myanmar by two regime-controlled banks: the Myanma Foreign Trade Bank (MFTB) and the Myanma Investment and Commercial Bank (MICB). 

However, more than two months after the energy ministry’s request, the US government imposed sanctions on these banks—without sanctioning MOGE as an entity—to obstruct the regime’s international transactions, including foreign currency exchanges. A corresponding statement by the US treasury noted that the junta relies heavily on these funding channels to sustain its violent repression of Myanmar’s people. 

As a result of the EU sanctions on MOGE and the US sanctions on MFTB and MICB, the regime now faces significant obstacles in receiving oil and gas revenues in US dollars and euros. The $504m mentioned in the energy ministry’s letter represents a fraction of the junta’s revenue from the entire oil and gas industry, which could amount to more than $1.5 billion.

Several sources with significant knowledge of Myanmar’s financial policies, including a retired CBM officer and an analyst tracking the country’s natural resource revenue, told Myanmar Now that MEB has become the last option the regime can use to receive foreign currency while avoiding Western sanctions. 

Operating under the junta’s ministry of planning and finance, the MEB has 315 branches nationwide and plays a key role in managing wage disbursements for various regime-controlled administrative departments and in facilitating border trade transactions. While MFTB and MICB have a greater role in handling foreign currencies, MEB also holds corresponding accounts with several foreign banks outside the country.

Tin Tun Naing, the Minister of Planning and Finance for the publicly-mandated National Unity Government (NUG), stated that the US sanctions on MFTB and MICB have significantly impacted the regime’s ability to receive funds generated by MOGE through state-owned banks, despite the sanctions not directly targeting the enterprise.

“In simpler terms, the military regime is facing a major upheaval,” he explained. “We have heard about their desperate situation from other sources—they have been trying a range of tactics to overcome the sanctions, but the situation is no longer as straightforward as before.”

A retired CBM officer echoed Tin Tun Naing’s observations, pointing out that the recent American sanctions on the two regime-controlled banks would cause significant harm to the regime due to the volume of transactions that they typically process. 

“These two banks are responsible for most international transactions. Almost all government department transactions pass through them. Their deposits and withdrawals will be heavily affected,” the former central bank employee said. 

He added that although private banks could potentially be granted licences to carry out major international transactions, implementing such a process would be challenging.

“It cannot be done in a matter of days. Building a mechanism like that is not easy. There would be different regulations and limitations,” he said.

The officer also noted that private banks are facing difficulties conducting business with overseas financial institutions due to the blacklisting of Myanmar by the Financial Action Task Force–a Paris-based intergovernmental monitoring organisation–earlier this year. The task force also recently urged its member countries to exercise enhanced due diligence, particularly when engaging in business relations and transactions involving Myanmar, Iran and North Korea.

“Correspondent banks worldwide are now proceeding cautiously with Myanmar, regardless of whether the bank on our side is private or state-owned. There are more stringent due diligence measures compared to before.”

The military regime has been actively attempting to replace US dollars with yuan, Russian rubles and Indian rupees since the 2021 coup, as dollar-denominated purchases ultimately require the involvement of American banks, and the junta is seeking to eliminate this dependency. In June, military commerce minister Aung Naing Oo described Myanmar as “suffering” under US sanctions and advocated for the immediate implementation of a “rupee-kyat trade agreement” for its exports to and imports from India. 

Talks are also underway with Russia regarding the use of its MIR payment system, although implementation has not yet occurred.

At a June 30 meeting with members of his military council, coup leader Min Aung Hlaing stressed his disdain for sanctions imposed on his regime. 

“When the State Administration Council assumed the State duties, the international community had come to impose sanctions,” he said, referring to the junta. “They resorted to various ways to prevent the country from spending its foreign currencies and getting the sales from its products.” 

An employee working at a foreign bank in Yangon speculated that if Western countries were to impose sanctions on MEB, as the US did with MFTB and MICB, it would present an unprecedented challenge for the regime.

“There are Official Development Assistance programs and loans from foreign governments. The state’s remaining official international transactions would come to a halt,” she warned.

The resource revenue analyst added that new sanctions on MEB would also hinder the regime’s collection of jade revenue, since all income from the annual gems emporiums passes through the bank. She also said that such sanctions would also adversely affect the country’s overall economy.

While the military regime exhausts all available options to access its blocked oil and gas revenue, the NUG and anti-coup activists are also searching for new ways to cut off the military’s income. 

“This is also a form of warfare,” NUG’s planning and finance minister Tin Tun Naing said. “We must obstruct, attack, and impede every possible revenue source of the regime. It is our duty.”

Myanmar junta raids MOGE office over leak; more than a dozen detained

Published on July 7, 2023

By Myanmar Now

The road leading to the offices inside the Ministry of Energy, formerly the Ministry of Electricity and Energy, in Naypyitaw (Myanmar Now)

More than a dozen employees, including two deputy directors, were taken for interrogation following a raid on the head office of the Myanmar Oil and Gas Enterprise (MOGE) in Naypyitaw on Thursday after leaked documents revealed that the regime had opened bogus bank accounts to enable the state-owned company to bypass sanctions.

According to sources familiar with the incident, those arrested include Kyaw Kyaw Aung, deputy director of MOGE’s planning department, Nu Nu Yi, the deputy director of the finance department, and other staff from both departments. 

At the time of reporting, the exact number of arrested MOGE employees and their whereabouts was still unknown, but the sources said that as many as 20 individuals were believed to be in junta custody.

Sources within the Naypyitaw office told Myanmar Now that the junta forces arrived at the MOGE office building on Thursday afternoon with a list of wanted individuals. All MOGE employees were allowed to leave the office only after 6pm, an hour later than their usual time. They added that the employees were individually inspected at the office’s gate while the main entrance remained closed.

The raid and arrests took place two days after Myanmar Now published an article about the leaked information, which revealed that the junta’s energy ministry had requested the Central Bank of Myanmar to register bank accounts under the beneficiary name of Kant Kaw for MOGE. This was done to enable the enterprise to access blocked funds outside the country after the European Union imposed sanctions on the oil and gas enterprise.

The purpose of this move was to replace the previous banking information of MOGE, which serves as the main source of foreign revenue for Myanmar’s military junta, generating hundreds of millions of dollars from natural gas projects. 

Since the EU imposed sanctions on MOGE in February, more than US$504.3 million has been held in foreign bank accounts by the enterprise, as explained in the leaked letter. These funds represent the revenue generated from three projects: Shwe Gas, Myanmar-China Oil & Gas Pipelines, and Yadana Gas.

MOGE operates under the regime’s energy ministry, and its current managing director is Aung Min. Alongside MOGE, there are other main departments under the ministry, including the Energy Planning Department, Myanma Petrochemical Enterprise, and Myanma Petroleum Products Enterprise.

Junta fills coffers with private bank magnates’ bond purchases

Private domestic banks, whose assets consist largely of money deposited by ordinary Myanmar citizens, are effectively using the public’s money to fund the military council’s war effort

Published on 17 August 2023

By Aung Naing

Sample treasury bonds issued by the junta-controlled Treasury Department

Lacking sufficient revenue to fund its expenditures on the military, the Myanmar junta has turned to borrowing, relying on its cronies’ purchases of treasury bonds to cover the costs. 

Myanmar’s military regime has been forced to resort to this new source of financing amid a miscellany of economic woes since the military coup of 2021: the departure of major multinational companies, suspension of foreign development aid and loans, decline in manufacturing production, decrease in export earnings, absence of investment from abroad, and the choking off of once-reliable revenue channels by international sanctions. 

Myanmar Now has found that some of the country’s largest domestic private banks have been collaborating with the military council–against their own apparent economic interests–by buying treasury bonds worth billions of Myanmar kyat.

Treasury bonds and treasury bills serve as a means to borrow money from the public by selling interest-bearing certificates of deposit with a promise to repay the buyer at a later, pre-specified time (the bond’s “maturity”), giving investors a means to buy and ultimately realise a return on the debt of a sovereign state. 

In Myanmar, these bonds are issued by the Treasury Department, which operates as part of the junta-controlled Ministry of Planning and Finance, and are sold by the Central Bank of Myanmar (CBM). 

As outlined in the central bank’s 2021 fiscal year report, treasury bills and bonds are sold directly to state-owned banks, private banks and securities companies, and sold to insurance companies and individual investors by securities companies.

Myanmar’s military displays some of its firepower during a parade marking Armed Forces Day on March 27, 2022 (EPA) 

Shortly after the coup in 2021, when banks closed at the height of the anti-junta protests, public participation in the junta’s treasury bond auctions almost came to halt. However, over time, banks resumed their purchases of the bonds. 

More recently, according to information from the regime’s treasury department, the junta conducted 46 auctions of treasury bonds and bills between April and July of this year, with sales reaching a total value of 17.8 trillion kyat (US $8.5bn). 

According to Tin Tun Naing, Minister of Planning and Finance for the publicly mandated National Unity Government (NUG), which operates as a shadow government opposing the coup regime, the value of treasury bonds and bills issued by the military council since the coup is more than 20 trillion kyat (US $9.5bn).​​

For the current fiscal year, the junta’s military expenditure is just over 5.6 trillion kyat (US $2.7bn), equal to about a third of the value of the treasury bonds and bills sold. 

According to a World Bank report released at the end of June, Myanmar’s budget deficits have increased under the military council, coming to around 5.4 percent of GDP (gross domestic product) in the fiscal year that ended in April 2023.​​

The bulk of the sales of treasury bonds and bills was to state-owned banks and private banks owned and managed by ultra-wealthy businessmen close to the military junta, commonly referred to as “cronies.”

Tin Tun Naing noted that the sale of bonds has become the military council’s chief source of financing, meaning that the major domestic banks buying those bonds, whose assets consist primarily of money deposited by ordinary Myanmar citizens, are effectively using the public’s money to fund the military council’s war effort.

“Who bought the treasury bonds and treasury bills sold by the terrorist army? Domestic private banks purchased them. They bought those treasury bonds and treasury bills with the money deposited in the banks by the general public,” said Tin Tun Naing. 

Who is filling the military council’s coffers?

A crowd of ultra-wealthy donors with close personal and business connections to the junta gathered in Naypyitaw in late June, each giving hundreds of millions of kyat for the ongoing construction of a massive statue of Buddha, with donations ultimately totaling more than 16 billion kyat (US $7.6m). 

Military regime chief Min Aung Hlaing had initiated the project to symbolise his role as protector of Myanmar’s majority religion. Among those pledging contributions were owners of the country’s biggest financial institutions, representing a virtual who’s who of the cronies enabling the regime’s deficit spending by buying its bonds. 

While the junta’s treasury department has released some information about the bond auctions’ outcomes, it has not disclosed the amounts sold to each buyer. However, records of a treasury bond auction held in August of last year showed that 14 financial institutions, including some state-owned banks, bought more than 450 billion kyat (US $214m) worth of treasury bonds.

Moreover, domestic private banks appear to have bid the most for treasury bonds and bills auctioned by the military council, according to information available from securities companies.

Buses stand in a traffic jam in front of the Ayeyarwady Bank (AYA Bank) in downtown Yangon in 2016 (EPA)

Ayeyarwady Bank, a private bank, and AYAtrust Securities Company, both of which are owned by Zaw Zaw, a prominent crony with ties to the military, bought treasury bonds worth 46.5 billion kyat (US $22m), based on tender codes matched to his name.

Zaw Zaw, who had not been seen in public since the coup, was spotted last year welcoming coup leader Min Aung Hlaing to a stadium in Yangon upon his arrival.

Joining other business magnates in donating for the construction of the Naypyitaw Buddha statue, Zaw Zaw personally contributed 297 million kyat (US $140,000).

Zaw Zaw, founder of AYA Bank, donates money to junta leader Min Aung Hlaing for the construction of a giant Buddha statue in Naypyitaw (Cincds website)

Yoma Bank, owned by Yoma Strategic Holdings founder Theim Wai–also known as Serge Pun–was found to have bid more than 10 billion kyat (US $4.75m) for the military council’s bonds.  

Companies owned by Serge Pun are heading an extensive construction project to renovate and convert a former railway headquarters in Yangon into a five-star hotel, shopping centre, and luxury housing, and are preparing to resume activities halted after the coup.

An archive photo of Yoma Strategic Holdings founder Theim Wai, also known as Serge Pun, at an event in Naypyitaw (EPA)

Myanmar Citizens Bank, which is majority-owned by Ko Ko Gyi, the owner of the Capital Diamond Star Group, purchased treasury bonds worth more than 5 billion kyat (US $2.4m).

Ko Ko Gyi was a member of the national economic and social advisory council during the administration of former President Thein Sein and an executive of the Union of Myanmar Federation of Chambers of Commerce and Industry. 

The late businessman Thein Tun’s Tun Foundation Bank (now called Tun Commercial Bank) participated in the August auction last year, buying 2.5 billion kyat (US $1.2m) worth of bonds. 

Thein Tun, who owned a variety of businesses in the beverage and other industries, once funded the publication of a book by Soe Thane, a former minister of the president’s office and retired vice admiral.

In a later book, Soe Thane emphasised his loyalty to the Myanmar military, writing that he would not feel relieved until it seized power in the country again.

While Myanmar Now could not confirm details for each bank’s purchase amount, those listed here are only a few among the private banks owned by junta cronies that bought treasury bonds, filling the military council’s coffers. 

Other top cronies known to have attended the donation ceremony for coup leader Min Aung Hlaing’s Buddha statue were also the owners or executives of banks and securities companies.

CB Bank owner Khin Maung Aye donated more than two billion kyat (US $950,000), and United Amara Bank owner Nay Aung made a joint donation of more than five million kyat (US $2,375) with his brother and current navy chief Adm. Moe Aung.

Myanmar Now contacted Ayeyarwady Bank, Yoma Bank and CB Bank by email requesting comments on their purchase of the military council’s bonds, but did not receive a response. 

Gen. Aung Aung, spokesperson for the CBM, and Win Htike, spokesperson for the junta’s ministry of planning and finance, also did not respond to Myanmar Now’s requests for comment.

A man takes a photograph of an electronic board showing the First Myanmar Investment index at the Yangon Stock Exchange in March 2016.

The military council’s need for cronies’ help

Deteriorating economic conditions in Myanmar since the military coup in addition to sanctions on certain generals and cronies by Western countries and public boycotts, have forced the military council to rely on a diminishing number of revenue sources.

During a meeting last week in Naypyitaw, junta chief Min Aung Hlaing acknowledged the difficulty the regime is facing in accessing foreign currencies, and in fulfilling payments for imports and international trade, due to Western sanctions. 

The military leader said international sanctions have been imposed to impede access to foreign currencies and hamper Myanmar’s generation of revenue from exports. 

The coup leader admitted this within days of the United States government’s announcement of new sanctions against the state-owned Myanmar Foreign Trade Bank (MFTB) and Myanma Investment and Commercial Bank (MICB), the main institutions on which Myanmar entities depend to conduct foreign currency-denominated transactions. 

In one illustrative instance, the junta in Naypyitaw was unable to access more than US $500 million in revenue for the state-owned Myanma Oil and Gas Enterprise (MOGE), paid into foreign bank accounts by its international partners, due to sanctions imposed against MOGE by the European Union. 

In order to withdraw the trapped dollars, the military council requested the opening of secret foreign currency bank accounts at the Myanmar Economic Bank headquarters in Naypyitaw, but Myanmar Now received a leaked document exposing the sanctions evasion scheme before it could be executed.

Due to its dwindling revenues, the military council has been forced to resort to borrowing through the sale of treasury bonds and bills to cover its deficit spending. 

While domestic financial institutions in a given country often hold a sizable share of their governments’ sovereign debt in bonds, economists doubt that the crony bankers’ motivation to buy the bonds stemmed from investment interest or fiduciary considerations. More likely, they say, it was based on pressure from the junta. 

Sein Htay, an economic analyst who served on the economic committee of Myanmar’s ousted ruling party, the National League for Democracy, between 2013 and 2019, remarked that a significant number of the crony bankers in the country had been in league with top generals in accumulating wealth through exploitation of the country’s natural resources. 

“They cannot oppose them,” Sein Htay said, referring to the junta. “This crony class, some so-called merchants and the bankers are in the same league. So, there is no benefit. It hurts the public.”

The NUG’s ministry of planning and finance announced in June that the sale of treasury bonds and treasury bills by the junta is illegal according to the NUG’s amendments to the Public Debt Management Law, and that any future, legitimate administration of Myanmar would not accept liability for the debts the military council had incurred.

Noting the proportion of the borrowed money likely to go towards military expenditures, NUG planning and finance minister Tin Tun Naing also argued that the domestic private banks were effectively fueling internal conflict by lending to the junta.

“An illegitimate body is selling government treasury bonds. Then, the citizens will have to bear this debt. What’s worse is that they are killing their own people with that money. It’s as if the local private banks are forcing people to fight each other,” the minister said.

The NUG, in turn, has issued and sold its own treasury bonds and bills, among a variety of other methods for raising funds supporting the anti-junta resistance. Having started to sell the bonds in November of 2021, they had sold bonds and bills totaling around $45 million by the beginning of this year. 

The revenue from all of the NUG’s fundraising portfolios now totals around $150 million, according to Tin Tun Naing.

The pro-democracy shadow government’s use of bonds for revenue-raising purposes stands as an instructive contrast to the junta’s. Borrowing from the public using bonds is routine for governments around the world, and may be sound policy when the buyers make the investments voluntarily rather than due to top-down pressure or incentives to maintain collusive connections. 

The bank executives’ motives for purchasing the military council’s bonds are impossible to interpret with certainty, especially while they decline to comment on their rationale. However, incidents like the extravagant show of support for Min Aung Hlaing’s Buddha image in Naypyitaw leave little doubt as to the close interdependence between them and the junta generals. 

Also uncertain is whether economic mismanagement will merely perpetuate ongoing, chronic conditions of stagnation, or could ultimately add yet another acute crisis to those already caused by the inadequate response to recent natural disasters and the devastating internal conflict in Myanmar. 

However, what does seem clear against the backdrop of a slow post-coup recovery and hardships aggravated by international sanctions is that the junta’s increasing reliance on domestic banks’ support for its deficit spending is only further impeding a sustainable remedy for Myanmar’s economic ills.

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