Myanmar’s military may finally be starting to feel the strain of international sanctions, with foreign banks freezing the accounts of Myanmar’s state-owned banks, limiting the junta’s ability to access critical foreign currency reserves. More than two and a half years on from the 2021 coup, the junta continues to rely on the political, military, and diplomatic support of authoritarian partners in Beijing and Moscow who have remained loyal to the generals despite ongoing international outcry and recent gains by Myanmar’s resistance. However, their patronage may not be sufficient for the generals to hold onto power as momentum on the battlefield shifts and overseas banks restrict the regime’s access to critical funds.
Sanctions Start to Bite
At a press conference in late August, the Myanmar military junta’s deputy finance minister Maung Maung Win blamed recent financial instability on U.S. sanctions, which he said were “hurting our government’s programs such as education, health, and infrastructure building…importers and exporters, any person or organizations using foreign banking services.”
The sanctions, announced by the U.S. in June, targeted Myanma Foreign Trade Bank (MFTB) and Myanma Investment and Commercial Bank (MICB), state-owned entities which essentially “function as foreign currency exchanges” for the military junta, allowing it to import arms and other military equipment. Analysts say that the sanctions are aimed at blocking the junta’s ability to conduct purchases in foreign currencies as well as receive incoming foreign currency transactions.
Two recent developments signal that the sanctions are beginning to have their desired effect of constraining the junta’s ability to generate and use cash. Firstly, Myanmar military-linked cronies are blatantly creating new entities to get around existing sanctions. A recently leaked letter from Myanmar’s energy ministry instructed the Central Bank of Myanmar to open new accounts to handle foreign currencies in place of Myanmar Oil and Gas Enterprise (MOGE), which is under European sanctions and whose top leaders are sanctioned by the U.S. Treasury Department. On August 10, Shwe Byain Phyu Oil and Gas Co. Ltd., a subsidiary of Shwe Byain Phyu (SBP) conglomerate and a top supplier of fuel to Myanmar’s military, dissolved, presumably to evade sanctions. Its owner Thein Win Zaw holds shares in a number of companies already impacted by targeted sanctions imposed by the European Union, the United States, and the United Kingdom.
Secondly, foreign banks have begun to cut Myanmar state-owned banks’ access, depriving the junta of much-needed foreign currency reserves. In early August, Singapore’s United Overseas Bank (UOB) notified Myanmar banks that it would limit their access to funds and would only allow transactions between UOB accounts. The following week, a state-owned bank in Bangladesh announced it was freezing MFTB and MICB accounts comprising more than US $1.1 million in assets. These moves have triggered further financial instability in Myanmar as the kyat continues to depreciate, with the Central Bank of Myanmar trading it well below the market value. Restricting the generals’ ability to use reserves in foreign bank accounts to acquire weapons will hurt their capacity to wage endless war and could give resistance forces the upper hand.
The Junta’s Strategy
The junta, or State Administration Council (SAC), has failed to restore investor confidence, and has been unable to quell resistance to its rule. It is now spread thin on the battlefield, and anecdotal evidence suggests that the junta is heavily reliant on aging Russian fighter jets to sustain its asymmetric advantage over resistance forces to mask its lack of control over territory on the ground.
Recent moves by Singapore and Bangladesh to cut the junta’s access to reserves may test its ability to outlast the nationwide grassroots uprising which seeks to oust the generals once and for all. Forced onto the defensive, the junta now relies on a limited network of supporters, most notably China, Russia, and India (as well as several authoritarian Southeast Asian states such as Cambodia, Laos, Thailand, and Vietnam), to prevent international consensus from forming which could threaten its hold on power.
This overarching strategy, born of a pragmatic acceptance of isolation, was captured in Deputy Senior General Soe Win’s response to a warning from UN Special Envoy Christine Schraner Burgener the month after the coup: “We have to learn to walk with only a few friends.”
The sit-tat, as Myanmar’s military is known, likes to signal its cool-headed preparedness and project its confidence to weather international condemnation and relative isolation. This strategy helps sustain the pretense in international diplomatic circles that the military will win in the long run and foreign governments will have to re-engage eventually. It simultaneously erodes resistance morale and undercuts the likelihood of further defections.
However, the regime’s confidence is in part based on a bluff which downplays the reality of its vulnerability. Concerted efforts by the international community to deprive the junta of access to financial assets have alarmed the military and underscore the extent to which it depends on a few authoritarian friends to avert regime collapse.
China’s Central Role in the Conflict
Beijing appears to have come around to fully backing Myanmar’s armed forces in the civil war, unable to envision a future scenario without them. China continues to provide the junta with the arms it requires to prolong the war. Despite a non-binding UN Resolution prohibiting the flow of weapons to the Myanmar military, a recent UN report found that Beijing in fact sold US $267 million worth of military equipment to Myanmar’s armed forces in 2022–2023.
China remains the country’s largest trading partner and second largest source of foreign investment after Singapore. Bilateral trade exceeded US $2 billion between April 2022 and January 2023. More than half of China’s investments in Myanmar are in the power sector, while it also has major interests in oil and gas (18 percent of China’s overall investment in Myanmar) as well as the mining sector (17 percent).
Beijing’s political support is also essential to deflect pressure at the United Nations. While China abstained from a UN resolution in December 2022 that expressed “deep concern” with the situation in Myanmar and called for an “immediate end to” violence, Chinese diplomats have stepped up public engagement with the junta since the end of last year.
Beginning with special envoy Deng Xijun’s meeting with Senior General Min Aung Hlaing in Naypyidaw in December 2022, there have been monthly high-level meetings between the two sides. Deng also hosted a delegation of ethnic armed groups in Yunnan in December. Beijing has applied pressure on several armed groups with whom it has influence not to support the National Unity Government (NUG), thus prolonging the junta’s ability to wage war on armed groups in other parts of the country. In May 2023, then Foreign Minister Qin Gang met Min Aung Hlaing in Naypyidaw, becoming the most senior Chinese official to meet the junta leader since the coup. During the visit, the two sides pledged to “further promote comprehensive strategic partnership between the two countries.”
How Russia Helps the Junta to Hedge Against China
As part of its strategy of pragmatic isolation, Min Aung Hlaing’s regime has also relied on Russia as an important partner. In particular, the junta leader looks to Moscow as a trusted friend and important source of leverage to offset overreliance on Beijing. Deepening the Russia-Myanmar partnership is part of Min Aung Hlaing’s hedging policy to avoid falling too much into China’s orbit. The Myanmar military has traditionally feared and distrusted China’s intentions dating back to many of the senior generals’ experience as young combatants fighting against ethnic armed groups with ties to the Communist Party of Burma in the country’s north who had Beijing’s support during the Cold War.
Therefore, Min Aung Hlaing has gone to great personal lengths to cultivate the relationship with Moscow, visiting nine times since becoming commander-in-chief in 2011. He has met Russian Defense Minister Sergei Shoigu roughly half a dozen times, and in September 2022, Min Aung Hlaing met with Putin for the first time at the Eastern Economic Forum in Vladivostok. During a visit by Russian Foreign Minister Sergey Lavrov to Naypyidaw in February 2023, the two sides signed an agreement on nuclear energy cooperation involving Russia’s State Atomic Energy Corporation ROSATOM.
Russia has also been a major source of defense technology for Myanmar, providing more arms than China from 2018–2022 (42 percent of total imports compared to 29 percent from China). According to the UN report mentioned above, Russia sold US $406 million worth of military equipment to the Myanmar military in 2022–2023.
Other players: Thailand and India
Unlike Russia and China, whose direct military assistance sustains the junta’s grip on power, Thailand and India play more indirect roles in propping up the SAC. Bangkok’s recent Track 1.5 diplomacy has threatened to overtake Indonesia’s “quiet diplomacy” via ASEAN. In March, Thailand hosted talks with the junta and several autocratic regional partners, including Cambodia, Laos, and Vietnam, as well as China, India, Bangladesh, and Japan. The following month, India hosted a second Track 1.5 dialogue that included Cambodia, Laos, Thailand, Vietnam, Bangladesh, and China.
Thailand and India’s rogue initiatives threaten to derail progress under Indonesia’s chairmanship of ASEAN by normalizing SAC participation in international diplomacy. Jakarta has been holding regular closed-door talks with all stakeholders (including representatives of the junta as well as the NUG) in hopes of bringing about inclusive diplomatic negotiations between the military and ousted civilian leaders.
India has also maintained high-level engagement with the Myanmar military since the coup and continues to cooperate in joint counterinsurgency operations along its shared border. Furthermore, the two sides recently heralded the opening of the Kaladan Multimodal Transit Transport Project, a decades-long shipping route to increase commerce between the two neighboring countries. Beyond shared border concerns and interest in eradicating ethnic armed insurgents, Indian policymakers also fear that Myanmar is gravitating deeper into China’s orbit. Therefore, New Delhi has refrained from condemning the military’s brutal crackdown on civilians, instead limiting itself to expressions of concern about the spiraling conflict. Given close security cooperation and senior-level military engagement, India offers the SAC another pole in its hedging strategy vis-à-vis China.
However, there are important developments in Myanmar’s regional environs. Recent elections in Thailand and Cambodia have significant implications for the junta’s foreign relations. While carefully managed elections in both authoritarian countries are unlikely to bring about significant change to either’s foreign policy, the junta will no doubt be anxious to shore up its standing with new leaders in both Bangkok and Phnom Penh lest they adopt a new approach to Myanmar’s conflict.
In Thailand, the recent brokered election of Pheu Thai candidate Srettha Thavisin as Prime Minister could introduce modest change to Thai foreign policy, though the Thai military still retains control through the 2017 constitution. The outcome represented a compromise between the military-dominated senate and a coalition of opposition parties, including Pheu Thai and the Move Forward Party, the latter of which won the majority of the vote but whose candidate for Prime Minister, Pita Limjaroenrat, was prevented from forming a government. Therefore, Srettha’s leadership is unlikely to radically alter Thailand’s generally supportive relations with the Myanmar military junta.
Nevertheless, Bangkok’s delicate balancing act as a U.S. ally and friend of the junta suggest that the SAC will want to retain channels of communication with the new government to avoid becoming a pawn in larger powers’ diplomatic games. The junta relies on lucrative cashflows from Thailand’s gas imports (US $2.4 billion in 2022, roughly 20 percent of Myanmar’s exports), giving Bangkok—and U.S. sanctions—inordinate leverage over the military regime’s economic survival.
Cambodia’s August elections, which paved the way for Hun Sen to transfer political power to his son Hun Manet, also added to the mix of uncertainty within ASEAN. The 45-year-old leader is a relatively unknown entity for the region and external powers. While he was recently invited to meet top leaders in Tokyo, there are few clues as to whether his leadership might bring about real change in Phnom Penh’s foreign policy. As he received his education in the United States at West Point and New York University and holds a PhD in economics from Bristol University in the United Kingdom, there are some hopes that the young Hun may be more progressive than his authoritarian father and even introduce a diplomatic realignment away from Beijing’s orbit.
Looking Ahead
Regardless of how these regional chess pieces move on the board, the junta has made clear it will not be deterred by international condemnation and that its foreign policy remains an afterthought to its core mission: regime survival. Therefore, internal battlefield dynamics are the most likely variables to determine the senior generals’ calculations of whether and when to seek off-ramps. The regime is prepared to weather international isolation. Yet as long as the international community remains divided, the junta’s few close friends ensure it is not totally alone.
Cutting off the junta’s economic lifelines and its ability to access reserves held in overseas banks will be vital to restricting its ability to wage endless war against the people of Myanmar. There are finally indications that the military may be beginning to feel the pinch of targeted sanctions making life more difficult, but there is still a long way to go in terms of bringing the junta down or forcing it to negotiate with the resistance. For now, the NUG and People’s Defense Forces are settling into a protracted, years-long conflict to wipe out the military once and for all. If that eventuality materializes, the junta’s external patrons—namely China, Russia, and India—might come to regret their no-strings-attached support for the ruthless dictatorship.
Hunter Marston (@hmarston4) is a PhD candidate at Australian National University, an Adjunct Research Fellow at La Trobe Asia in Melbourne, and Australia Associate at 9Dashline.
Many Sanctions, Few Friends: Junta Grapples with its Grip on Power
By Hunter Marston
Southeast Asia
Myanmar’s military may finally be starting to feel the strain of international sanctions, with foreign banks freezing the accounts of Myanmar’s state-owned banks, limiting the junta’s ability to access critical foreign currency reserves. More than two and a half years on from the 2021 coup, the junta continues to rely on the political, military, and diplomatic support of authoritarian partners in Beijing and Moscow who have remained loyal to the generals despite ongoing international outcry and recent gains by Myanmar’s resistance. However, their patronage may not be sufficient for the generals to hold onto power as momentum on the battlefield shifts and overseas banks restrict the regime’s access to critical funds.
Sanctions Start to Bite
At a press conference in late August, the Myanmar military junta’s deputy finance minister Maung Maung Win blamed recent financial instability on U.S. sanctions, which he said were “hurting our government’s programs such as education, health, and infrastructure building…importers and exporters, any person or organizations using foreign banking services.”
The sanctions, announced by the U.S. in June, targeted Myanma Foreign Trade Bank (MFTB) and Myanma Investment and Commercial Bank (MICB), state-owned entities which essentially “function as foreign currency exchanges” for the military junta, allowing it to import arms and other military equipment. Analysts say that the sanctions are aimed at blocking the junta’s ability to conduct purchases in foreign currencies as well as receive incoming foreign currency transactions.
Two recent developments signal that the sanctions are beginning to have their desired effect of constraining the junta’s ability to generate and use cash. Firstly, Myanmar military-linked cronies are blatantly creating new entities to get around existing sanctions. A recently leaked letter from Myanmar’s energy ministry instructed the Central Bank of Myanmar to open new accounts to handle foreign currencies in place of Myanmar Oil and Gas Enterprise (MOGE), which is under European sanctions and whose top leaders are sanctioned by the U.S. Treasury Department. On August 10, Shwe Byain Phyu Oil and Gas Co. Ltd., a subsidiary of Shwe Byain Phyu (SBP) conglomerate and a top supplier of fuel to Myanmar’s military, dissolved, presumably to evade sanctions. Its owner Thein Win Zaw holds shares in a number of companies already impacted by targeted sanctions imposed by the European Union, the United States, and the United Kingdom.
Secondly, foreign banks have begun to cut Myanmar state-owned banks’ access, depriving the junta of much-needed foreign currency reserves. In early August, Singapore’s United Overseas Bank (UOB) notified Myanmar banks that it would limit their access to funds and would only allow transactions between UOB accounts. The following week, a state-owned bank in Bangladesh announced it was freezing MFTB and MICB accounts comprising more than US $1.1 million in assets. These moves have triggered further financial instability in Myanmar as the kyat continues to depreciate, with the Central Bank of Myanmar trading it well below the market value. Restricting the generals’ ability to use reserves in foreign bank accounts to acquire weapons will hurt their capacity to wage endless war and could give resistance forces the upper hand.
The Junta’s Strategy
The junta, or State Administration Council (SAC), has failed to restore investor confidence, and has been unable to quell resistance to its rule. It is now spread thin on the battlefield, and anecdotal evidence suggests that the junta is heavily reliant on aging Russian fighter jets to sustain its asymmetric advantage over resistance forces to mask its lack of control over territory on the ground.
Recent moves by Singapore and Bangladesh to cut the junta’s access to reserves may test its ability to outlast the nationwide grassroots uprising which seeks to oust the generals once and for all. Forced onto the defensive, the junta now relies on a limited network of supporters, most notably China, Russia, and India (as well as several authoritarian Southeast Asian states such as Cambodia, Laos, Thailand, and Vietnam), to prevent international consensus from forming which could threaten its hold on power.
This overarching strategy, born of a pragmatic acceptance of isolation, was captured in Deputy Senior General Soe Win’s response to a warning from UN Special Envoy Christine Schraner Burgener the month after the coup: “We have to learn to walk with only a few friends.”
The sit-tat, as Myanmar’s military is known, likes to signal its cool-headed preparedness and project its confidence to weather international condemnation and relative isolation. This strategy helps sustain the pretense in international diplomatic circles that the military will win in the long run and foreign governments will have to re-engage eventually. It simultaneously erodes resistance morale and undercuts the likelihood of further defections.
However, the regime’s confidence is in part based on a bluff which downplays the reality of its vulnerability. Concerted efforts by the international community to deprive the junta of access to financial assets have alarmed the military and underscore the extent to which it depends on a few authoritarian friends to avert regime collapse.
China’s Central Role in the Conflict
Beijing appears to have come around to fully backing Myanmar’s armed forces in the civil war, unable to envision a future scenario without them. China continues to provide the junta with the arms it requires to prolong the war. Despite a non-binding UN Resolution prohibiting the flow of weapons to the Myanmar military, a recent UN report found that Beijing in fact sold US $267 million worth of military equipment to Myanmar’s armed forces in 2022–2023.
China remains the country’s largest trading partner and second largest source of foreign investment after Singapore. Bilateral trade exceeded US $2 billion between April 2022 and January 2023. More than half of China’s investments in Myanmar are in the power sector, while it also has major interests in oil and gas (18 percent of China’s overall investment in Myanmar) as well as the mining sector (17 percent).
Beijing’s political support is also essential to deflect pressure at the United Nations. While China abstained from a UN resolution in December 2022 that expressed “deep concern” with the situation in Myanmar and called for an “immediate end to” violence, Chinese diplomats have stepped up public engagement with the junta since the end of last year.
Beginning with special envoy Deng Xijun’s meeting with Senior General Min Aung Hlaing in Naypyidaw in December 2022, there have been monthly high-level meetings between the two sides. Deng also hosted a delegation of ethnic armed groups in Yunnan in December. Beijing has applied pressure on several armed groups with whom it has influence not to support the National Unity Government (NUG), thus prolonging the junta’s ability to wage war on armed groups in other parts of the country. In May 2023, then Foreign Minister Qin Gang met Min Aung Hlaing in Naypyidaw, becoming the most senior Chinese official to meet the junta leader since the coup. During the visit, the two sides pledged to “further promote comprehensive strategic partnership between the two countries.”
How Russia Helps the Junta to Hedge Against China
As part of its strategy of pragmatic isolation, Min Aung Hlaing’s regime has also relied on Russia as an important partner. In particular, the junta leader looks to Moscow as a trusted friend and important source of leverage to offset overreliance on Beijing. Deepening the Russia-Myanmar partnership is part of Min Aung Hlaing’s hedging policy to avoid falling too much into China’s orbit. The Myanmar military has traditionally feared and distrusted China’s intentions dating back to many of the senior generals’ experience as young combatants fighting against ethnic armed groups with ties to the Communist Party of Burma in the country’s north who had Beijing’s support during the Cold War.
Therefore, Min Aung Hlaing has gone to great personal lengths to cultivate the relationship with Moscow, visiting nine times since becoming commander-in-chief in 2011. He has met Russian Defense Minister Sergei Shoigu roughly half a dozen times, and in September 2022, Min Aung Hlaing met with Putin for the first time at the Eastern Economic Forum in Vladivostok. During a visit by Russian Foreign Minister Sergey Lavrov to Naypyidaw in February 2023, the two sides signed an agreement on nuclear energy cooperation involving Russia’s State Atomic Energy Corporation ROSATOM.
Russia has also been a major source of defense technology for Myanmar, providing more arms than China from 2018–2022 (42 percent of total imports compared to 29 percent from China). According to the UN report mentioned above, Russia sold US $406 million worth of military equipment to the Myanmar military in 2022–2023.
Other players: Thailand and India
Unlike Russia and China, whose direct military assistance sustains the junta’s grip on power, Thailand and India play more indirect roles in propping up the SAC. Bangkok’s recent Track 1.5 diplomacy has threatened to overtake Indonesia’s “quiet diplomacy” via ASEAN. In March, Thailand hosted talks with the junta and several autocratic regional partners, including Cambodia, Laos, and Vietnam, as well as China, India, Bangladesh, and Japan. The following month, India hosted a second Track 1.5 dialogue that included Cambodia, Laos, Thailand, Vietnam, Bangladesh, and China.
Thailand and India’s rogue initiatives threaten to derail progress under Indonesia’s chairmanship of ASEAN by normalizing SAC participation in international diplomacy. Jakarta has been holding regular closed-door talks with all stakeholders (including representatives of the junta as well as the NUG) in hopes of bringing about inclusive diplomatic negotiations between the military and ousted civilian leaders.
India has also maintained high-level engagement with the Myanmar military since the coup and continues to cooperate in joint counterinsurgency operations along its shared border. Furthermore, the two sides recently heralded the opening of the Kaladan Multimodal Transit Transport Project, a decades-long shipping route to increase commerce between the two neighboring countries. Beyond shared border concerns and interest in eradicating ethnic armed insurgents, Indian policymakers also fear that Myanmar is gravitating deeper into China’s orbit. Therefore, New Delhi has refrained from condemning the military’s brutal crackdown on civilians, instead limiting itself to expressions of concern about the spiraling conflict. Given close security cooperation and senior-level military engagement, India offers the SAC another pole in its hedging strategy vis-à-vis China.
However, there are important developments in Myanmar’s regional environs. Recent elections in Thailand and Cambodia have significant implications for the junta’s foreign relations. While carefully managed elections in both authoritarian countries are unlikely to bring about significant change to either’s foreign policy, the junta will no doubt be anxious to shore up its standing with new leaders in both Bangkok and Phnom Penh lest they adopt a new approach to Myanmar’s conflict.
In Thailand, the recent brokered election of Pheu Thai candidate Srettha Thavisin as Prime Minister could introduce modest change to Thai foreign policy, though the Thai military still retains control through the 2017 constitution. The outcome represented a compromise between the military-dominated senate and a coalition of opposition parties, including Pheu Thai and the Move Forward Party, the latter of which won the majority of the vote but whose candidate for Prime Minister, Pita Limjaroenrat, was prevented from forming a government. Therefore, Srettha’s leadership is unlikely to radically alter Thailand’s generally supportive relations with the Myanmar military junta.
Nevertheless, Bangkok’s delicate balancing act as a U.S. ally and friend of the junta suggest that the SAC will want to retain channels of communication with the new government to avoid becoming a pawn in larger powers’ diplomatic games. The junta relies on lucrative cashflows from Thailand’s gas imports (US $2.4 billion in 2022, roughly 20 percent of Myanmar’s exports), giving Bangkok—and U.S. sanctions—inordinate leverage over the military regime’s economic survival.
Cambodia’s August elections, which paved the way for Hun Sen to transfer political power to his son Hun Manet, also added to the mix of uncertainty within ASEAN. The 45-year-old leader is a relatively unknown entity for the region and external powers. While he was recently invited to meet top leaders in Tokyo, there are few clues as to whether his leadership might bring about real change in Phnom Penh’s foreign policy. As he received his education in the United States at West Point and New York University and holds a PhD in economics from Bristol University in the United Kingdom, there are some hopes that the young Hun may be more progressive than his authoritarian father and even introduce a diplomatic realignment away from Beijing’s orbit.
Looking Ahead
Regardless of how these regional chess pieces move on the board, the junta has made clear it will not be deterred by international condemnation and that its foreign policy remains an afterthought to its core mission: regime survival. Therefore, internal battlefield dynamics are the most likely variables to determine the senior generals’ calculations of whether and when to seek off-ramps. The regime is prepared to weather international isolation. Yet as long as the international community remains divided, the junta’s few close friends ensure it is not totally alone.
Cutting off the junta’s economic lifelines and its ability to access reserves held in overseas banks will be vital to restricting its ability to wage endless war against the people of Myanmar. There are finally indications that the military may be beginning to feel the pinch of targeted sanctions making life more difficult, but there is still a long way to go in terms of bringing the junta down or forcing it to negotiate with the resistance. For now, the NUG and People’s Defense Forces are settling into a protracted, years-long conflict to wipe out the military once and for all. If that eventuality materializes, the junta’s external patrons—namely China, Russia, and India—might come to regret their no-strings-attached support for the ruthless dictatorship.
Hunter Marston (@hmarston4) is a PhD candidate at Australian National University, an Adjunct Research Fellow at La Trobe Asia in Melbourne, and Australia Associate at 9Dashline.
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