Following up on its initial immediate condemnation of the February 1, 2021 military coup in Myanmar,^[1] the Biden Administration this week unveiled four actions comprising the first significant restrictions imposed on the country since the lifting of sanctions by President Obama in 2016: (i) an executive order authorizing blocking sanctions and other restrictions (including possible U.S. visa bans) against individuals identified as responsible for the coup and other members of the military; (ii) restrictions on the export of sensitive goods and technology to the Myanmar military and other entities in Myanmar; (iii) restrictions on more than $1 billion in Myanmar government funds held in the United States; and (iv) a freeze U.S. foreign assistance to the country’s government.  Further U.S. government action can be expected if the military rulers do not take steps to restore power to the elected government. 

Blocking Sanctions

On February 10, President Biden approved an Executive Order using his authority under the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (“IEEPA”) to declare a new national emergency and impose sanctions against multiple categories of persons involved in the coup in Myanmar.  The executive order authorized the U.S. Department of the Treasury to designate members of the military, officials in the newly-installed military government, and others involved in the coup and their close family members, and entities linked to the military and political subdivisions in Myanmar, as blocked persons with whom U.S. persons are generally prohibited from dealing.  Concurrent with the release of the executive order, the Department of the Treasury designated ten individuals, including six members of the National Defense and Security Council and four members of the State Administration Council, as well as three entities connected to the Myanmar military.  

The new executive order also authorizes blocking sanctions against any person determined by the Secretary of Treasury in consultation with the Secretary of State to: (i) to operate in the defense sector, (ii) to be responsible for or complicit in (A) actions or policies that undermine democratic processes or institutions in Myanmar, (B), actions or policies that threaten the peace, security, or stability of Myanmar, (C) actions or policies that limit the exercise of freedom of expression or assembly by people in Myanmar, or (D), the arbitrary detention or torture of any person in Myanmar or other serious human rights abuses in Myanmar, (iii) to have been a leader or official of “the military or security forces of Burma,” (iv) to be a political subdivision, agency, or instrumentality of the government of Myanmar, as well as (v) persons who act for or on behalf of persons designated pursuant to the executive order.  Even close family members of military leaders could be sanctioned.  Finally, the order provides for so-called “secondary sanctions,” authorizing the Treasury Department to designate anyone, including non-U.S. persons, found to have “materially assisted, sponsored, or provided financial,  material, or technological support for, or goods or services to or in support of” any person or entity sanctioned under the order.  This broad authority gives the administration substantial flexibility to ratchet up pressure on the military leaders by targeting supporters, financers, and others determined to facilitate their continued hold on power.

The mere existence of this so-called “secondary sanctions” authority often has – and is intended by the U.S. government to have - the effect of causing non-U.S. financial and other institutions with business relationships with those blocked parties outside U.S. jurisdiction to nevertheless “de-risk”, and cease business activities with those persons and in the wider region as a result.  Further designations of individuals and entities are possible in the coming weeks and months as the situation on the ground in Myanmar develops.

Export Controls

In parallel, the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) announced export restrictions against Myanmar on February 11.  The immediate restrictions fall into three categories: (i) a presumption of denial of applications for licenses for exports to Myanmar’s Ministry of Defense, the Ministry of Home Affairs, armed forces, and security services; (ii) the revocation of licenses already issued for export to these departments and agencies; and (iii) the suspension of certain license exceptions previously available for transfers of items to Myanmar, including Shipments to Country Group B countries (GBS) and Technology and Software under restriction (TSR).

These export control measures may just be a first step in the Biden Administration’s response as the political situation on the ground develops.  According to its announcement, BIS is considering other potential actions, including “possible Entity List additions, adding Burma to the list of countries subject to the [Export Control Administration’s (“EAR”)] military end use and end user (MEU) and military intelligence end use and end user (MIEU) restrictions, and downgrading Burma’s Country Group status in the EAR.”  These additional contemplated actions could have a significant impact on exports to Myanmar.

Restrictions on $1 Billion in Myanmar Government Funds

According to its fact sheet, the Biden Administration is “taking steps” to restrict the use of $1 billion in Myanmar government funds held in the United States.  No further details have been released at this time.

U.S. Assistance Program Freeze

Immediately after the parliamentary takeover occurred, the Biden Administration formally determined that the Myanmar military’s actions met the legal definition of a “coup.”  This designation resulted, by operation of law, in an immediate suspension of U.S. direct foreign assistance to the country’s government.  Accordingly, USAID will redirect $42.4 million of assistance away from programs that benefit the government of Myanmar, but will keep in place bilateral programs that “provide direct benefits to sustain and improve the health of the people of Burma.”

Further Considerations

This is a rapidly developing situation, with new sanctions designations, further export restrictions, and additional details about the $1 billion asset freeze likely coming within days or weeks.  Continued monitoring is critical to ensure compliance with U.S. sanctions and export control laws.  We intend to provide periodic updates to our clients and over the PHIRE blog as developments warrant.