Originally published on Mohinga Matters
On June 21, the U.S. Treasury department imposed its biggest sanctions yet on Min Aung Hlaing’s military regime, which calls itself the State Administration Council (SAC). This has disrupted his ability to finance its terror campaign by sanctioning two state-owned banks in charge of foreign currency exchanges. The statement by the U.S. government reads as follows: “Myanmar Foreign Trade Bank (MFTB) and Myanmar Investment and Commercial Bank (MICB) are state-owned financial institutions in Burma that primarily function as foreign currency exchanges and enable the conversion of Kyat to U.S. dollars and Euros and the reverse. This conversion allows Burma’s revenue-generating state-owned enterprises, including Myanmar Oil and Gas Enterprise (MOGE), access to international markets using offshore accounts and to transact more easily with foreign entities. While MFTB and MICB allow MOGE and other state-owned enterprises access to foreign markets for revenue generation, these financial institutions also enable Burma’s Ministry of Defense and other sanctioned military entities to purchase arms and other materials from foreign sources”.
With the announcement, the market panicked. Within days, the Kyat (MMK) to USD exchange rate which was trading at the levels of 2,850 MMK for $1 USD. In the last quarter of 2022, $1 USD reached 3,200 MMK. Worse, the market fails with no seller and lots of buyers. Since the 2021 military coup, mismanagement and disregard for economic performance by the military, coupled with gradually increasing international sanctions, have strangled the economy, deprived investor confidence, and drove millions of Myanmar citizens into poverty. On the other side, the generals who dreamt of a country where they can steal at will are now finding increased costs and decreased revenue.
Of all the economic indicators, nothing is more vivid to people’s eyes than the exchange rate. In a country where most of the essential commodities such as fuel and medicine are imported, a fall in MMK means a rise in price for basic commodities. By the end of June, people became weary that the exchange rate fluctuations had arrived early this year. The exchange rate, around $1 USD to 1,300 MMK before coup, has faced two sudden increases: one in August 2021 and another in August 2022. In 2021, the USD rate which was declining gradually since the coup suddenly dropped from 1,650 to 2,700 MMK in one week. When the MMK began to stabilize, it was at 1,850 MMK – higher than before the drop. In 2022, the MMK price dropped again from 2,300 to 4,500–5,000 MMK and stabilized below 3,000 MMK. The pain and the loss of value for the local currency is still fresh in people’s mind.
The most devastating blow to people (and disproportionately to the poorest in society) is the inflation caused by these sudden drop in value for MMK. For instance, while it eventually recovered to 5,000 MMK in less than 10 days, the jump in prices of essential imports such as medicines and commodities did not fall at all until 2023, and even then the price fall was not proportionate to the recovery in exchange rate. With the sanction on MFTB and MICB creating higher costs for foreign trades and further weakening MMK, there are genuine fears that people of Myanmar would have to bear the cost of sanctions against the military.
However, the general sentiment of the people of Myanmar, in regards to the sanctions, was: “Why so little? Why so late?” As opposed to the peace-loving and kind members of the international community who are urging cautions against sanctions to the military be- cause any sanctions would harm the poor most of all, Myanmar people are in favor of putting harsher sanctions against the military with little regard to their own well-being. At a glance, this seems like madness. What kind of lunacy would compel to favor more poverty over less poverty? However, on a deeper examination, it is a rational desire, and the international community should heed their calls.
It is true that crippling sanctions are imposed by so-called democratic countries over various authoritarian countries from time to time, and it is also true that ordinary citizens who have no love for these regimes of sanctioned countries suffer the most. Worse, with dictators generally uncaring to the people, the sanctions usually fail to nudge these authoritarian regimes to soften their stance. Likewise, not a lot of sanctions intended to promote regional stability work well (Has North Korea given up furthering its nuclear ambitions despite sanctions wreaking havoc on its people’s wellbeing?). When a dictator does not care about the people, and when the people are not in a position to challenge a dictator’s power, sanctions would only hurt the already suffering people more.
In Myanmar, people are challenging the military’s grip over the country. They are willing to suffer now because there is genuine possibility that its regime would fall. The changes in territorial controls over the country between February 2021 and now reflect how the regime is losing ground across the country. When the military’s authority is not as firm, any efforts to stifle its war efforts have concrete potential for regime change.
Despite the call from the National Unity Government (NUG) and other pro-democratic forces of demanding military aids from western democracies by citing Ukraine as an example, there is no realistic way of this happening because Myanmar is not Ukraine and would never get even one percent of the strategic and media attention Ukraine gets.
However, the Myanmar regime is also not Russia and that gives more reason to sanction it effectively. When energy and other major commodity supplier such as Russia could be sanctioned at the risk of disruptions in the global supply chain and global economy, the economic turbulence of sanctioning Myanmar would be paltry to nothing in comparison. For those who are citing all-encompassing compassion towards the people of Myanmar as a reason for not putting further sanctions, similar kindness should be shared towards the people of Iran, Russia, North Korea, and other heavily sanctioned countries whose authoritarian governments have repeatedly demonstrated that they do not care for the people’s wellbeing.
The impossibility of military aid towards people dying for a just future is unfortunate, yet understandable of the practical constraints. Empowering the military by withholding, or delaying, more sanctions is just hypocrisy.
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