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Are India’s oil investments in Myanmar an act of support to its military?

A man rides his motorised two-wheeler across the Indo-Myanmar border bridge at the border town of Moreh, in the northeastern Indian state of Manipur, January 25, 2012. A flurry of high-level official visits shows both countries are keen to get the chemistry right, but at the border area, where smuggling dominates trade, India appears ill prepared for Myanmar's historic opening. Picture taken January 25, 2012
REUTERS/Rupak De Chowdhuri
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India’s top diplomats have strongly condemned Myanmar’s military junta for a deadly crackdown on protesters since a February 2021 coup but experts say that longstanding oil-and-gas deals between the neighbouring countries may now be helping to support the brutal new regime.

As of 2019, the state-owned Indian Oil and Natural Gas Corporation (ONGC) had invested $722 million in four ventures with the state-owned Myanmar Oil and Gas Enterprise or MOGE, public records show. Since the coup, the Myanmarese military has gained (pdf) exclusive control of MOGE and the nation’s lucrative oil and gas industry.

“India’s investments in Myanmar are untenable under the current circumstances—both morally and politically,” said Angshuman Choudhury, who studies conflict in Myanmar at the Institute of Peace and Conflict Studies, a New Delhi think tank. “This regime won’t last long and civilian accountability will come soon. When that happens, India will have a lot to answer for.”

Long-standing agreements

India’s oil and gas investments in Myanmar date back to at least 2002, when ONGC’s overseas arm—ONGC Videsh (pdf)—acquired a 20% stake in a 2,129 sq km block off the Rakhine coast in north-western Myanmar. In 2006, it acquired a 20% stake in an adjacent block.

The company director’s report for 2010 mentions that the firm “is participating in the complete hydrocarbon exploration, production, and transportation chain comprising combined upstream field development” of these blocks, named A-1 and A-3, as well as having a 20% stake in the Shwe Offshore Pipeline Joint Venture Company.

The report said that MOGE had informed ONGC Videsh that it wished to exercise its “back-in rights” of 15% in Blocks A-1 and A-3. “Back-in rights“, says one industry glossary, are a part of energy contracts that allows a government the right to “acquire an equity participation once the commercial discovery has been made without carrying the risk of exploration.”

This would bring ONGC Videsh’s stake to 17%. Of the other partners in the project, POSCO Daewoo International would have a 51% stake, while the Gas Authority of India or GAIL and the Korean Gas Corporation or KOGAS would have 8.5% each.

An analysis of documents vetted by the Justice for Myanmar advocacy campaign shows that the agreements relating to these blocks stipulated (pdf) an initial investment of $2 billion by four foreign entities. It also required foreign investors to allocate a percentage of the profits to MOGE, along with other payments of royalty and land fees.

In 2018 alone, the Shwe project paid $512 million to MOGE, according to a report by the Myanmar Extractive Industries Transparency Initiative or MEITI, a non-profit working on financial transparency in the extractive industries of 55 countries. ONGC’s exact contribution to this sum is unclear because there are no disaggregated disclosures of each partner in the deal.

The United Nations Special Rapporteur on human rights in Myanmar, Thomas Andrews, last March urged other countries to stop doing business with MOGE, which he contended was the largest source of revenue for the Burmese military.

“Stop the flow of revenue into the illegal junta’s coffers,” Andrews said. “Multilateral sanctions should be imposed on both senior junta leaders and their major sources of revenue, including military owned and controlled enterprises and the Myanmar Oil and Gas Enterprise.”

At a UN Security Council meeting in Myanmar in April, the Indian representative strongly spoke against the violence in Myanmar and reiterated the importance of  “upholding humanitarian principles” and securing “the interest of the people.”

But despite being a supporter of Myanmar’s democratisation, neither ONGC nor the Indian government has made any comment about the status of their oil and natural gas explorations and production in Myanmar. ONGC Videsh did not respond to several requests and emails for comment.

Myanmar’s security forces, armed with machine guns and rocket-propelled grenades have killed more than 1,000 civilians, as of Aug. 18, 2021, in their crackdown against civilian opposition to the coup, when the country’s military general Min Aung Hlaing ousted the democratically elected government of Aung Sang Suu Kyi.

Opaque structure

ONGC’s financial payments to MOGE are difficult to establish, experts say. MOGE has an opaque structure, does not publish financial records, and has minimal public accountability.

In 2020, before the coup, ONGC accrued a profit of $45 million from its two offshore blocks in the Shwe gas field, according (pdf) to the corporation’s financial documents. In 2019, it had earned (pdf) $80 million from the same blocks. It was also exploring two other onshore oil parcels it won in a competitive bid in 2014, according (pdf) to the annual report published by the foreign arm of ONGC.

Of the total money MOGE receives from revenues, it transfers 55% to company-controlled “Other Accounts” that are not subject to public scrutiny. In 2014, MOGE transferred around $1.4 billion dollars to such accounts, according to MEITI reports. To put these figures (pdf) into perspective, this is more money than Myanmar spent on health ($750 million) or education ($1.1 billion) across the whole country in the same year.

The accounts were created to grant more autonomy to these state-owned enterprises, which are now filled with military officials. Myanmar’s democratically elected government pledged in 2019 to shut these “Other Accounts” that could have had around $4.6 billion by 2018.

Even before the military gained full control of MOGE in February, the state-owned enterprise had business links with the Burmese military. An independent United Nations fact-finding mission noted in a 2019 report that the Burmese military, also called the Tatmadaw, benefited from the relationships its conglomerates have with the enterprises in the oil and gas sector. MOGE was “one of the largest and most powerful of these enterprises.”

Apart from its payments to MOGE, ONGC paid $31,000 in taxes to the Internal Revenue Department of Myanmar in 2018 alone, according to the MEITI report. Any such future payments would fund Burmese military activities.

“New Delhi is always very aware of where the money is going and what companies fund the Tatmadaw,” Choudhury alleged. “This has never been an unwitting support.”

Ever since the coup, many human rights groups and advocacy organisations have pressured oil and gas companies to sever their business links with the Burmese military. Some of the implicated private companies are the French group Total and the American corporation Chevron.

On Jan. 21, amid growing pressure, Chevron and Total announced their withdrawal from Myanmar, in what is largely viewed as a victory for activists. Even ONGC’s majority partner, POSCO, has begun reviewing its joint ventures within Myanmar, according to a Reuters report.

ONGC is not the only state-owned player under scrutiny. Malaysian and Thai state-owned oil companies operate major gas projects in Myanmar. Malaysian-controlled Petronas operates the Yetagun oil project, while Thai-controlled PTTEP operates the Zawtika oil field.

The Shwe Natural Gas Project, where India’s primary oil interests lie, is the second-biggest gas project in Myanmar. The oil supplies from Shwe are transported by pipeline to the Chinese city of Kunming.

“There has never been a more opportune moment for international players to stand by the people of Myanmar and support democracy,” Choudhury wrote in The Diplomat. “No one, not even an India committed to realpolitik, benefits from a totalitarian junta ruling by decree next door.”

This story was originally published on Scroll.in. We welcome your comments at ideas.india@qz.com.

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