The Myanmar government has approved a $2.5 billion energy project which observers say is likely a Chinese investment under the Belt and Road Initiative. If so, the move shows Beijing’s latest efforts to work with the junta despite the political crisis and attacks on existing Chinese investments in the country.
On May 7, Myanmar’s junta announced the approval of a US$2.5 billion liquid natural gas (LNG) power project, the first large-scale investment project approved by the Myanmar Investment Commission since the February 1 coup.
Though the commission didn’t offer specifics about the project, Myanmar media outlets say it’s likely to be the Mee Lin Gyaing power project, a Chinese-backed 1,390 MW development in the Irrawaddy river delta. The plan has been a key part of China’s Belt and Road Initiative (BRI) agenda in Myanmar and its approval shows that Beijing and the new junta are moving ahead with China’s projects in the country regardless of the ongoing crisis.
China’s extensive interests inside Myanmar have become the target of intense criticism and even violence as many of those opposed to the military regime claim China was aware of or possibly supported the coup.
China began working with the military junta almost immediately after the coup and Beijing has long had a close relationship with Myanmar’s military—which predates the ousted democratic government of Aung San Suu Kyi. Along with Russia, China blocked the UN Security Council’s efforts to condemn the coup or take tangible action against the junta.
Most allegations of Chinese support for the coup are so far unsubstantiated. It does seem clear that Beijing knew the coup—or something similar—was coming; Taiwan’s intelligence agency reportedly found that the Chinese military brought around 12,000 soldiers to the Myanmar border area prior to the coup.
Public relations aside, Myanmar expert Bertil Lintner has said China is on track to continue pursuing its interests in the country. “So far there is nothing to indicate that the PRC is willing to reassess its old policies of dominance and exploitation of Myanmar’s resources,” he wrote for Asia Times.
The approval of a new US$2.5 billion LNG project suggests that, in addition to staying the course in Myanmar, China is finding ways of working with the junta despite the unstable political situation.
LNG project approved while anti-junta groups continue to target Chinese investments
Justified or not, anti-Chinese sentiment is rising inside Myanmar, with some anti-junta activists calling for boycotts of Chinese companies and for action to target Chinese investment projects. In March, at least 30 Chinese-owned factories in Yangon were burned, though anti-junta activists never claimed responsibility.
On May 5, an unknown group of men carrying machetes and swords attacked and killed three guards at a station along the China-Myanmar oil and gas pipelines in Mandalay Region. The parallel pipelines are one of China’s largest investments in the country: they run almost 800 kilometers from Kyaukphyu, on the coast of Rakhine State in western Myanmar, to China’s Yunnan Province and can carry 22 million tons of crude oil and 12 billion cubic meters of gas per year.
The attack constitutes a direct show of opposition to China’s current stance towards the junta. China also saw this coming; in April, The Irrawaddy reported that China was voicing concerns to the junta about the safety of its pipelines, especially where they are vulnerable to attacks by ethnic armed groups.
Foreign investment stagnates
While China seeks to secure its existing investments in the country and move its planned projects forward, other foreign investors are reconsidering their commitments and some are pulling out entirely over the coup and human rights concerns.
The coup has severely jeopardized foreign investment in Myanmar as a whole and many investors have put their plans in Myanmar on hold. The Asian Development Bank (ADB) has suspended funding for a large number of government projects, including in the energy sector, and the World Bank has stopped payments for existing development initiatives in the country.
The government of South Korea—which signed a deal with Myanmar’s previous government to provide over US$1 billion in loans—said it will pause all financing for infrastructure projects until 2022. Thailand’s Amata Corporation has put a hold on a US$1 billion industrial hub over concerns about possibly violating sanctions from Western governments.
One of the first industries to feel the effects of this is the energy sector, in part because it’s crucial both to Myanmar’s development and the junta’s finances.
In 2020, the World Bank estimated that Myanmar needs to invest as much as US$2 billion per year in power production in order to sustain economic growth and meet growing demand. Only around half of the country is connected to the national grid and Myanmar’s electricity consumption is growing by somewhere between 11 and 19% per year, depending on the estimate.
The energy sector is also a key source of revenue for the junta. Joint ventures in the energy sector, like those with Total and Chevron, are among the biggest sources of foreign exchange for the military—possibly the biggest.
Because of this, the energy sector has seen some of the strongest calls for action against the military and its business interests. A group of US Senators has called on President Joe Biden to place tighter sanctions on the junta to cut off revenues of the state-run Myanmar Oil and Gas Enterprise (MOGE), part of the country’s Ministry of Energy.
French energy multinational Électricité de France (EDF) announced it has suspended a US$1.5 billion hydropower project in Shan State; EDF said it was putting the Shweli-3 project on pause due to human rights concerns about the military regime’s treatment of civilians. Other companies say they’re cautious about provoking the junta; Total has claimed that any move to deny revenues to the military could put employees at risk for prosecution.
Though Beijing openly works with the junta, its leadership has expressed public support in favor of stability and peaceful resolution. In mid-March, Chinese ambassador to Myanmar Chen Hai said Myanmar’s crisis is “absolutely not what China wants to see” and that his government hopes “all things go well in Myanmar”. But Beijing’s public stance also indicates that its first concern is preserving its interests in the country.
Following the recent regional summit, China has now come out in favor of an ASEAN-led response in Myanmar, saying the regional bloc is best positioned to find a solution to the crisis, despite the fact that it has never taken substantial action on any domestic issue.
In May, Chinese ambassador to the UN Zhang Jun suggested that the crisis in Myanmar is primarily a legal dispute.
“We should really be creating a more favorable environment for bringing the country back to normal and finding a political solution through dialogues among the relevant political parties within the constitutional and legal framework,” he said. “It’s mainly an issue relating to the difference on the election…The political parties should be able to find a solution on that, so that’s why China prefers… more diplomatic efforts.”