The potential impacts of the United States government’s new sanctions against the Myanmar junta’s Defence Ministry and two military-run financial institutions, announced on Wednesday, have already become a subject of debate within Myanmar.
The US Department of the Treasury announced the sanctions against the ministry and both banks—the Myanma Foreign Trade Bank (MFTB) and the Myanma Investment and Commercial Bank (MICB)—in a public statement.
According to the Treasury Department’s statement, the aim of the sanctions against the banks is to hinder international transactions, such as foreign currency exchanges, on which the junta relies to perpetuate an ongoing campaign of violent repression against Myanmar’s people.
Both banks enable the regime, including the Defence Ministry and entities controlled by the junta such as the Myanma Oil and Gas Enterprise (MOGE), to access international financial markets and procure weapons and other military equipment from abroad, the statement claimed.
Among residents of Myanmar with expertise in banking and economics, opinions differ as to how the sanctions will affect the regime and the country’s economy.
According to one employee of a foreign bank operating in Myanmar, who requested that his identity be withheld, the sanctions’ effects may be weakened by the option to conduct transactions through foreign banks operating in the country.
New foreign investments are rarely transacted through the MFTB and MICB anymore, he said, and only those businesses that regularly used those banks would face any hardship, while most new investors who used foreign banks to operate locally would be unaffected.
“There could be a really big impact if they sanctioned the Myanma Economic Bank (MEB) as it could make cash flows impossible. There are ODA [official development assistance] transfers and government-to-government loans transacted through the MEB,” the foreign bank employee said. “However, this sanction against the MFTB and MICB will have little to no impact on most customers.”
The military had also been trying to make more direct purchases denominated in yuan, rubles and rupees since the coup, he noted, as purchases denominated in American dollars ultimately have to go through one American bank or another, something the military council is urgently seeking ways to avoid.
Other financial experts predicted that the sanctions would have a stronger impact.
According to a former MFTB official and economic analyst, banks with access to foreign currencies are critical for normal business operations, and the American sanctions against the two banks will hamper any entities in Myanmar that depend on them for currency exchanges, including the junta’s ministries.
“This is a main gateway for foreign currency exchanges,” he said, referring to the MFTB. “The only other gateway is the MICB, which was also sanctioned. There could still be some smaller private banks but their activity using foreign currency is negligible by comparison and won’t be enough.”
The MFTB not only handles international purchases made by private commercial enterprises but also those made by regime itself, according to the former MFTB employee, adding that the lack of alternative gateways is the expected result of the military’s earlier decisions to grant the authority to conduct these transactions only to the entities under its control.
“Some private business owners would like to have opened foreign exchange accounts at private banks, but every transaction above a certain amount has to go through the MFTB, I believe,” he said.
According to an expert in international investment, the new American sanctions would be another major blow to the Myanmar economy after the Paris-based Financial Action Task Force (FATF) blacklisted the country in October of last year. The blacklisting by the FATF, an intergovernmental organisation focused on encouraging regulation and legislation to combat financial crimes, caused major delays in payments.
The two sanctioned banks specialise in dollar and euro-denominated transactions, and have opened accounts for international organisations such as the Japan International Development Agency and United Nations affiliates.
“It’s now more difficult to transfer money thanks to the FATF,” the investment expert said. “It’s hard to send and it’s hard to receive. Now that the US has imposed sanctions once again, their allies will also be wary about doing business in Myanmar, and so will intermediary banks.”
He added that there could be more transactional restrictions upon the American companies that are already in the country, and that more money transfers and purchases are now likely to go through intermediary countries like Singapore instead of Myanmar.
“I think the military is still getting a steady flow of funds from oil and gas businesses. However, it could be more difficult for them to purchase weapons now, as any intermediaries connected with the US won’t help them anymore,” he added.
Junta spokesperson Gen. Zaw Min Tun said on Tuesday that the Myanmar regime would not suffer losses from the sanctions, as neither of the two banks had opened accounts for customers in the United States.
“They did this just because of unfounded accusations. They are trying to restrict the flow of revenue into the country,” he added.
The American government has imposed sanctions against 80 individuals and 33 business or regime-affiliated entities in response to the February 2021 coup in Myanmar.
Before the new sanctions were announced, activist and monitoring organisations such as Global Witness, as well as the UN Special Rapporteur on human rights in Myanmar, criticised the existing sanctions regimes imposed by Western governments as insufficient.
They urged a more comprehensive and coordinated approach in order to effectively hold Myanmar’s military regime accountable and stop enabling its abuses of human rights.
