Myanmar: EU oil and gas sanctions risk being ineffectual

25/02/2022
Press release
en es
Alexandre Lallemand

Brussels, Paris — FIDH and its member organisation ALTSEAN-Burma welcome the EU’s latest sanctions on junta-linked entities, but are alarmed by the derogation (exemption), which expressly allows EU oil and gas operators remaining in Myanmar to pursue financial transactions with Myanmar Oil and Gas Enterprise (MOGE).

On 21 February 2022, the EU announced the adoption of additional sanctions against individuals and entities for their involvement in serious human rights violations in Myanmar. MOGE, one of the listed entities, is a state-owned enterprise that has fallen under the control of the military junta since last year’s coup.

“The EU’s decision to freeze economic and financial flows to MOGE could have been a critical opportunity to reduce the violence unleashed by the brutal junta on civilians. Regrettably, by adopting a derogation, EU Member States undermine their own credibility and claims to support human rights and democracy.”

Debbie Stothard, coordinator of ALTSEAN-Burma

Until now, the natural gas sector had remained untouched by international sanctions despite generating between USD 1 and 1.5bn per year for the military and representing up to 50% of the regime’s foreign currency inflow. EU sanctions against MOGE were expected to significantly hamper the military’s access to foreign currency, including from French oil giant TotalEnergies, which had been a key investor in this sector in Myanmar.

However, the listing of MOGE is undermined by a dangerous derogation, which would enable existing transactions between EU operators and MOGE to be pursued despite the sanction regime. This derogation—which appears to be tailors-made to respond to Total Energies’ concerns in the context of its announced withdrawal from Myanmar—would enable EU operators to provide financial support to MOGE by authorising them to continue paying taxes and duties, and transfer shares and assets, to MOGE.

FIDH and ALTSEAN-Burma believe this derogation is a huge missed opportunity for the EU, its member states, and its business sector to uphold their international human rights obligations. Freezing any financial and economic support to the junta must be a priority for the EU to avoid being complicit in widely documented crimes.

In addition, the derogation may amount to an abuse of power and appears to be illegal, as it seems to violate EU treaty provisions and essential procedural requirements. If implemented, this derogation could be nullified by relevant jurisdictions.

“We call on EU member states, including France, as well as European business entities such as TotalEnergies, not to make use of this illegal derogation clause—or risk being in violation of their international obligations.”

Antoine Madelin, FIDH’s advocacy director

On numerous occasions, FIDH and other civil society groups had called on the EU to adopt sanctions against MOGE. Over the past year, the EU has adopted several rounds of sanctions in response to the situation, but these measures are merely symbolic, as they have not targeted the largest sources of foreign currency used by the junta to purchase military equipment deployed against civilians.

Background

TotalEnergies is a French company present in Myanmar, where it explores and extracts gas in the offshore Yadana field. The field is operated by a consortium that includes other foreign companies, such as Chevron (US) and PTT Exploration and Production (Thailand), in addition to MOGE. In this framework, TotalEnergies transfers large amounts of foreign currency, which directly or indirectly benefit MOGE, including revenue related to the gas exploitation, but also taxes and other duties.

Although in January 2022 TotalEnergies announced that it would withdraw from Myanmar due to the human rights situation, this announcement does not stop the financial flows to the junta. As part of the withdrawal, the decommissioning of oil and gas wells would include the payment of related taxes and duties. In addition, the transfer of shares and interests in the context of the termination of contracts may both provide financial resources directly or indirectly to MOGE. During the six-month period before the two companies’ physical departure, and in the absence of sanctions, it is estimated that an additional USD 250 million could be transferred from the consortium to the military.

EU sanctions are only applicable to EU citizens, EU entities, or individuals and entities present on EU territory. As a result, targeting MOGE, a Burmese entity, can be effective only vis-a-vis its relationships with EU entities.

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