Myanmar Update: U.S., UK and EU Continue to Expand Sanctions for Companies with Ties to the Military
U.S., UK and EU authorities continue to expand sanctions targeting the Tatmadaw, Myanmar’s armed forces, following the February 17, 2021, military coup in Myanmar (also known as Burma). Over the past month, the United States and its European allies have imposed blocking and other sanctions on (a) the two major Tatmadaw-controlled conglomerates in Myanmar that provide financing for the armed forces; (b) additional gem, pearl and timber industry companies that provide sources of funding to the coup regime; and (c) further coup regime and Tatmadaw officials.
U.S. Sanctions Designations
On March 25, 2021, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated Myanma Economic Holdings Public Company Limited (MEHL or MEHPCL) and Myanmar Economic Corporation Limited (MEC) as specially designated nationals (SDNs). MEHL and MEC are designated pursuant to Executive Order (E.O.) 14014, “Blocking Property With Respect to the Situation in Burma,” for being owned or controlled by the military or security forces of Myanmar. Both companies also are designated on the Entity List under the U.S. Export Administration Regulations.
MEHL and MEC are conglomerate holding companies involved in a wide range of business interests spanning Myanmar’s economy, including banking, trade, logistics, construction, mining, agriculture, tobacco, food and beverage. The two companies are actively involved in joint venture partnerships with foreign businesses. It is believed that their profits directly finance the Myanmar military with little or no public accountability. MEHL and MEC also are active in Myanmar’s commercial real estate industry, which can impact foreign companies renting office space in Myanmar.
OFAC has issued four general licenses that authorize specified transactions with persons blocked pursuant to E.O. 14014. With regard to MEHL and MEC, General License 4 provides for a wind down period until June 22, 2021, for U.S. and non-U.S. persons, during which time dealings that are ordinarily incident and necessary to the wind down of transactions involving these companies, or their subsidiaries, are authorized or not subject to secondary sanctions. Wind-down transactions that are authorized by General License 4 may be processed through the U.S. financial system and may involve U.S. persons until June 22, 2021. General Licenses 1 through 3 authorize certain transactions by the U.S. government, international organizations and non-governmental organizations in relation to parties sanctioned under E.O. 14014.
On April 8, 2021, OFAC added Myanma Gems Enterprise to the SDN list. This is a state-owned entity with broad responsibility for gemstones in Myanmar, a key source of revenue in international trade.
On April 21, 2021, OFAC designated Myanmar Timber Enterprises (MTE) and Myanmar Pearl Enterprise. Both are state-owned enterprises under the Ministry of Natural Resources and Environmental Conservation (MONREC), and both previously had been sanctioned under the prior U.S. regime before the designations were removed in 2016.
Where U.S. primary sanctions jurisdiction applies, the SDN listings will prevent all transactions with and services for these Burmese companies and state enterprises, as well as companies in which they have a 50 percent or greater ownership interest, directly or indirectly (and individually or in the aggregate with other SDNs). The prohibitions apply to U.S. dollar transactions that clear the U.S. financial system, other activity in the United States, and U.S. persons acting anywhere in the world. Signing documents with SDNs and blocked affiliates will be prohibited for U.S. persons and any persons acting within U.S. jurisdiction.
The designation of MEHL and MEC, along with the growing number of sanctioned companies and individuals in Myanmar, presents risk management issues for non-U.S. companies acting outside of U.S. jurisdiction. E.O. 14014 authorizes sanctions again any persons that have “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of any person whose property and interests in property are blocked” under the Executive Order, or that are owned/controlled by or act on behalf of the Tatmadaw or blocked persons under the Executive Order.
UK Sanctions Designation
On March 25, the UK’s HM Treasury Office of Financial Sanctions Implementation (OFSI) imposed similar asset-freeze sanctions against MEHL, and on April 1 OFSI imposed asset-freeze sanctions against MEC. These sanctions prohibit UK persons and any person within the UK from dealing in funds or economic resources of, or making funds or resources available to, MEHL or MEC, or any entity they own or control.
EU Sanctions Measures
On April 19, 2021, the EU also imposed sanctions on MEHL and MEC, along with 10 members of the coup regime and Tatmadaw. For MEHL and MEC, the sanctions include an asset freeze and a ban on EU citizens and companies making funds available to the two entities and any entity owned or controlled by MEHL and MEC.
The U.S. government appears determined to continue to add sanctions pressure while the coup continues and the Myanmar military continues to harm civilian protesters. Thus, more sanctions and potentially export control Entity List announcements are expected. The U.S. government will continue to coordinate with UK and EU counterparts on sanctions, as well.
These latest sanctions add to already existing U.S., UK and EU actions targeting Myanmar’s military. In early March, the Commerce Department announced additional export controls on exports, reexports, and transfers to Myanmar and OFAC imposed blocking sanctions targeting the adult children of the commander-in-chief of Myanmar’s military forces, as discussed in our prior blog post. Also, on March 22, 2021 the EU added 11 Burmese officials responsible for the military coup to its sanctions list as discussed in our blog post.