The Norwegian government will scale back its controversial peace fund initiative in Karen state until the leadership of the Karen National Union (KNU) resolves their political differences, according to the project’s leading consultant.

The move follows news of a serious rift in the senior ranks of the KNU over how to approach ceasefire negotiations with the government, resulting in the dismissal of three senior leaders last week.

“We are actually going to step back for a while in order to allow for these internal discussions to work themselves out,” Charles Petrie, head of the Myanmar Peace Support Initiative (MPSI) told DVB in an interview. “We are not going to push for more pilots, we are not going to bring any visibility to existing pilots.”

Commander-in-Chief General Mutu Say Poe and two leading peace negotiators, David Htaw and Roger Khin were dismissed last Thursday over allegations they colluded with the army to open an unauthorised liaison office in the Karen state capital Hpa-an. Brig-Gen Baw Kyaw Heh was swiftly appointed the new Commander-in-Chief.

The MPSI, which aims to support the peace process through development grants, has previously been accused of pressuring exile groups into joining the government. Last week, the European Karen Network expressed concern over the role of the Norwegian initiative in fuelling the current rift in the Karen leadership – an accusation the MPSI strongly denies.

“We are not actually involved in the establishment of liaison offices, we are working far more on identifying pilot projects in certain areas,” said Petrie. “We have not been asked to do anything in Hpa-an and right now we wouldn’t.”

But Petrie conceded that pushing for further pilot projects before a political resolution was reached “would be seen to be making the arguments of one group.”

In a policy paper released on Monday, a coalition of grassroots organisations criticised the MPSI for fuelling a “division of opinion” within ethnic groups by approaching its leaders on an individual basis.

After a Norwegian delegation visited Karen state in May with KNU leader Paho Htoo Htoo lay, General Secretary Zipporah Sein complained that she had not been informed of the mission. One of the MPSI’s primary consultants, Ashley South, is also a long-term critic of the KNU and is known to have a poor relationship with some of its members.

“They need to approach the KNU as an institution rather than individual leaders of the KNU,” Paul Sein Twa Director of the Karen Environmental and Social Action Network (KESAN) told DVB. “If you approach them from direct channels and information gets shared among the leadership and civil society then the peace is likely to be more sustainable.”

Grassroots voices have repeatedly called for greater transparency and accountability of international peace funds operating in Burma’s border regions.

“We believe that this is a time of many opportunities for our country, but we want donors to invest properly in order to truly support sustainable peace. Economic development cannot be a substitute for a political settlement to long-standing inequality and lack of fundamental rights for Burma’s ethnic nationalities,” said Khin Ohmar.

Local sources suggest the rift in the KNU risks splitting the group into two factions. The central committee was scheduled to meet on Monday to discuss a resolution to the crisis, but it was cancelled at the last minute.

Naw Dah Eh Ker, General Secretary of the Karen Women’s Organisation, told DVB there was endemic confusion over the organisation’s future among community-based organisations, civil society and even the KNU itself.

The KNU has a long history of internal rivalry and factionalism. In 2007, Maj-Gen Htain Maung, who led the KNU’s Brigade 7, defected to form a splinter group loyal to the government, known as the KNU/KNLA peace brigade. The Democratic Karen Buddhist Army also split from the KNU in 1994.

Some exile groups have accused the government of exploiting internal fractures for political gain. But the government’s chief negotiator, Aung Min, on Saturday denied allegations they were involved in “divide and rule tactics”, adding that the peace process would proceed as usual.

”My sense right now is that the government would prefer the KNU to remain one entity – because it’s much easier for them to negotiate with one entity,” said Petrie. “The crux of the concern is linked to political dialogue, some believe that the government is committed to political dialogue and others aren’t sure.”

“It’s important that the groups be given the space necessary to find common ground to address these internal tensions.”

The KNU signed a tentative ceasefire agreement with the government on 12 January.

This article was originally published on 10 October. It has been updated to clarify that only future MPSI activities in Karen state have been put on hold.