Burma’s dash for offshore cash

In early July, Bangladesh took a major step towards settling its maritime boundary dispute with Burma by filing its first claim with the International Tribunal on the Law of the Sea (ITLOS), a maritime judicial body established by the United Nations in 1982. Bangladesh and Burma have agreed to use the ITLOS to help resolve their unsettled boundary, which is currently a major point of contention between the governments in Dhaka and Naypyidaw. The controversy is blocking natural gas development in a large part of the Bay of Bengal. But despite its seemingly better negotiating position, Burma has taken a number of steps that, while probably hastening a boundary solution, have forfeited much of the country's negotiating leverage..Burma's leverage results from the country's relative abundance of natural gas, especially in comparison with its energy-starved neighbour Bangladesh. Once the current disagreement is cleared up, Burma's ruling junta will likely export most of the natural gas that it finds in the disputed area, just as it has done with the country's other major offshore natural gas finds. This is despite Burma's low levels of electricity production..Bangladesh, on the other hand, will probably use gas found in the disputed area to address the country's ever-worsening electricity crisis, which is a direct result of insufficient natural gas supplies. Electricity in the country is in such short supply that the government recently issued directives to factories in Bangladesh to cut production during the World Cup, so that blackouts would not prevent Bangladeshis from watching the football matches..The dire need for energy means that officials in Dhaka should have had little leeway in the boundary dispute, especially because they are facing increasing public pressure to solve the crisis. Burma's junta, however, faces no such pressures. This disparity gives Burma significant leverage in the ongoing negotiations over maritime boundaries. Because it is already a gas exporter and faces seemingly manageable repercussions for its ongoing electricity problems, the junta should have had the flexibility to prolong negotiations and extract concessions from a more desperate Bangladesh..Yet the junta has failed to exploit this advantage, instead taking steps that have levelled the playing field and likely hastened a solution to the dispute. Since the restarting of negotiations in 2007, Naypyidaw has appeared available and eager to discuss the maritime boundary; the countries have subsequently held about a dozen meetings on the matter – certainly not a lethargic pace. These discussions have even involved top officials, including Burma's foreign minister, Nyan Win..Equidistance and equityAfter almost two years, negotiations stalled. Dhaka, under growing public pressure to address the power crisis, submitted the dispute to arbitration proceedings in accordance with the United Nations Convention on the Law of the Sea (UNCLOS). While the convention provides a compulsory settlement procedure for most maritime disputes, it makes special exemption for disagreements involving interpretations of the principle of 'equity' – a key issue in the row between Bangladesh and Burma, explained below. The convention goes on to state that the only way such a dispute can enter compulsory proceedings is with the agreement of all parties. It also allows countries to object to some or all of the avenues of settlement by issuing a written declaration, which could effectively preclude any binding procedure. Yet, instead of objecting to a binding resolution or issuing a pre-emptive written declaration to prevent this possibility, Naypyidaw has been in lockstep with Dhaka in the latter's drive to settle the dispute..Not only did Burma voluntarily agree to binding proceedings, but it also proposed that the case be settled through the ITLOS, which appears to be the most expedient of the available legal venues. The case is currently one of only two cases on the underutilised court's docket, along with a case regarding seabeds, and will therefore garner far more attention than it would have in the other judicial option, the much busier International Court of Justice in The Hague. Both countries have also agreed to dates for written filings and oral hearings that are quick by international standards, and could conclude proceedings in just three to four years according to the International Boundaries Research Unit. This unsolicited push for the ITLOS from Burma came in response to Bangladesh's suggestion of binding arbitration, which could potentially face delays due to the requirement that both sides agree on a majority of the arbitrators..Even though court proceedings have begun, the two countries continue to hold voluntary bilateral negotiations, which produced the first breakthrough in January. This was an agreement to settle the boundary using the legal principles of 'equidistance', which Burma advocates, and 'equity', which Bangladesh advocates. The principle of equidistance constructs a line that is midway between the nearest points along the coast of each country, a method that would, because of the bay's geography, maximise Burma's maritime claims. The principle of equity comes from the 1982 United Nations Convention on the Law of the Sea (UNCLOS), which tasks countries with finding an 'equitable solution', though this is vaguely defined. In this compromise, Burma sacrificed its formerly steadfast legal position ostensibly to obtain a quicker settlement..There is certainly no shortage of evidence that demonstrates that both Naypyidaw and Dhaka are eager for a quick settlement. But by pushing for expedience, the former has forfeited much of the leverage that it held earlier in the maritime boundary negotiations. Why would the junta act in a way that appears to be against the country's long-term interests? If the country's current use of gas as well as the nature of the State Peace and Development Council regime is any indication, the junta's eagerness to settle the boundary is guided far more by its short-term interest, in cashing in on gas resources from the disputed area..Presently, natural-gas exports are the largest source of foreign-currency reserves for the regime. The massive proceeds from these sales, in the neighbourhood of USD 2-3 billion per year, are spent largely at the junta's discretion. Speculation is that these proceeds have funded a number of the regime's projects, including construction of the new capital at Naypyidaw, weapons purchases and even the alleged acquisition of nuclear technologies. Gas revenues have also personally enriched powerful members of the junta, though there is uncertainty about how much longer current junta members will have access to these revenue streams. There is already competition for power (and its monetary benefits) among the junta strongmen, which includes current and retired military officers, bureaucrats and the business class, and this has only intensified with the upcoming elections and the likely retirement of some senior junta members. The regime, therefore, has incentives to fast-track projects that secure revenue, and few initiatives have the potential to secure as much money as developing gas reserves in the disputed area..Leverage foregone.For Burma, the most evident implication of the lost leverage in the maritime boundary negotiations will likely be a less favourable settlement for the junta. Gone are many of the avenues through which Naypyidaw could have stalled negotiations in hopes of exacting concessions and a more favourable agreement. Forfeiting this leverage has left Burma with fewer tools to pressure its energy-hungry neighbour. These developments have unsurprisingly been welcomed in Bangladesh, as they will help Dhaka to more quickly address the country's energy problems..For Burma, gas discoveries in the disputed area could funnel more foreign reserves to the junta and its cronies, who will probably keep almost all of the revenues from post-settlement gas development. If it fails to invest the proceeds of gas development back into the economy, it could inhibit economic development while enriching a regime guilty of economic policies that have contributed significantly to the country's current state. It could also engender greater competition within Burma for access to the profits of gas exports, as there could be significantly more to compete over. The fallout – good for Bangladesh, bad for Burma, could be especially significant if the disputed area holds a massive gas deposit the size of recent major finds off India's east coast, now supplying almost half of New Delhi's natural gas requirements. Such a gas field, if it exists, could net USD 6-7 billion annually, if sold at the same price as gas from Burma's Shwe fields..A maritime boundary settlement could also have an impact on people living in northwestern Burma, especially the Rohingya. Natural gas projects undertaken by Burma could be accompanied by restrictions that prohibit fishing within 50 km of natural gas rigs, a restriction already in place around the Shwe fields. This, along with the new maritime boundary, could significantly restrict fishing areas available to the Rohingya, many of whom have fled in large numbers to Bangladesh because they face severe discrimination in Burma. The development of onshore energy infrastructure related to the offshore gas finds could further challenge the livelihoods of people in northwestern Burma, as land confiscations, forced labour, and increased militarisation have been reported to accompany previous energy projects in the country..For Bangladesh, offshore gas discoveries would be a boon in the long term but will not be as helpful in solving short-term energy needs. Any new discoveries probably would not convert to production until around 2020. To address the short-term problems, Bangladesh will instead be forced to turn to alternate fuel sources such as domestic coal production or imported natural gas. New offshore gas finds could replace these in the longer run, benefiting both the country's environment and current accounts balance..Because of the concave curvature of the Bay of Bengal, India's involvement will also be necessary in finalising boundaries south of the point where all three countries' claims intersect, about 167 nautical miles south of Bangladesh. Yet despite the necessity of trilateral agreement, the countries have yet to discuss the boundary in a formal trilateral setting. However, if India and Burma do begin discussions over the boundary, India could also be the beneficiary of latter's desire for a quick settlement. By putting its own short-term desire for gas revenues above the country's long-term interests, Burma could well be stuck with a maritime boundary that is significantly worse than it otherwise could have achieved. And once the boundary is agreed, it will be very difficult to change..~ Jared Bissinger is an independent writer based in Chiang Mai, Thailand.