By Simon Lewis, Humeyra Pamuk and Daphne Psaledakis
WASHINGTON (Reuters) - U.S. President Joe Biden, facing his first major international crisis after Myanmar's military seized power, could impose a new program of sanctions, cut aid or target generals and the companies they run to pressure for a return to democracy.
How the new U.S. administration responds will be an early test of Biden’s dual pledges to re-center human rights in U.S. foreign policy and work more closely with allies.
Biden on Monday pledged to “stand up for democracy” and threatened to re-impose sanctions gradually rolled back by former President Barack Obama after Myanmar's generals initiated democratic reforms and released many political prisoners a decade ago.
State Department officials said on Tuesday they had determined that a military coup had taken place.
Under U.S. law, that assessment automatically puts restrictions on U.S. assistance to Myanmar, but officials said aid programs promoting democracy and humanitarian assistance to populations in need, including the stateless Rohingya minority, would continue.
“A very small circle of Burma’s military leaders have chosen their own interests over the will and wellbeing of the people," a senior State Department official said on a call with reporters.
“As president Biden has said, we will take action against those responsible, including through a careful review of our current sanctions posture as it relates to Burma’s military leaders and companies associated with them," the official added.
The Trump administration hit four military commanders, including the top general Min Aung Hlaing, with such sanctions after a brutal 2017 purge that drove more than 700,000 members of the Rohingya minority from their homes and into neighboring Bangladesh.
Biden could establish a fresh sanctions program against Myanmar with an executive order that would declare a national emergency regarding developments in the country, said Peter Kucik, a former senior sanctions adviser at the U.S. Treasury.
Doing so would enable the administration to spell out “how they view the coup and what they want to see” and exert pressure accordingly, he said, adding that Biden has broad authority to issue such an executive order under the International Emergency Economic Powers Act.
That approach would be opposed by some businesses who want to keep economic ties with the country open, according to an advocate for U.S. businesses in Myanmar, who asked not to be named for security reasons.
Investors would back more targeted sanctions against the coup-makers and those named as high-level officials by the military after its takeover, the advocate said, sending a signal that the new administration in Myanmar is illegitimate.
But former officials and experts say the United States has limited leverage over the generals that seized power, who have ties to powerful local companies but few overseas interests that could be impacted by financial sanctions.
The effectiveness of past sanctions on Myanmar's generals is also debated, with some arguing it left them largely untouched while impoverishing the wider population. Most of Myanmar's top generals are already sanctioned under the Global Magnitsky Human Rights Accountability Act.
“Simply piling more sanctions on the Burmese military won’t solve this problem,” Daniel Russel, the top U.S. diplomat for East Asia under Obama.
“Sustained and skillful diplomacy, both bilateral and with partners, is needed to defuse the crisis and to chart a path back to democratic governance and reform in Myanmar."
WEIGHING SANCTIONS
Activist groups including Human Rights Watch have joined calls for Biden to target companies run by the military.
The military’s two major conglomerates Myanmar Economic Holdings Limited and Myanmar Economic Corp are sprawling holding companies with investments spanning various sectors including banking, gems, copper, telecoms and clothing.
State Department officials had prepared Magnitsky sanctions against the companies in 2018 in response to violence against the Rohingya, but had not gone through with them, said Kelley Currie, U.S. ambassador-at-large for global women's issues under former President Donald Trump. Currie was deeply involved in the Trump administration's Myanmar policy.
"Treasury could take those up and move them forward based on the events of the past 24 hours, immediately," said Currie. "And they should.”
Among the other options at Biden’s disposal would be to impose further sanctions under the Magnitsky Act, which freezes any U.S. assets held by those targeted and prohibits Americans from doing business with them.
Biden could revive the sanctions authority in a 2008 law known as the JADE Act that targeted Myanmar’s junta and was partially waived by Obama in 2016.
The administration could also impose travel bans on Myanmar officials and their families.