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OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGO #1076/01 3041122
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O 311122Z OCT 07
FM AMEMBASSY RANGOON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6764
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHBY/AMEMBASSY CANBERRA 0649
RUEHBJ/AMEMBASSY BEIJING 1573
RUEHKA/AMEMBASSY DHAKA 4652
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RUEHUL/AMEMBASSY SEOUL 7739
RUEHKO/AMEMBASSY TOKYO 5299
RUEHCN/AMCONSUL CHENGDU 1237
RUEHCHI/AMCONSUL CHIANG MAI 1172
RUEHCI/AMCONSUL KOLKATA 0106
RUEATRS/DEPT OF TREASURY WASHDC
RUEHGV/USMISSION GENEVA 3361
RHEHNSC/NSC WASHDC
RUEKJCS/SECDEF WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUCNDT/USMISSION USUN NEW YORK 1083
RUEHBS/USEU BRUSSELS

C O N F I D E N T I A L SECTION 01 OF 02 RANGOON 001076 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EAP/MLS; 
PACOM FOR FPA 
TREASURY FOR OASIA:SCHUN 
 
E.O. 12958: DECL: 10/31/2017 
TAGS: ECON FIN PGOV PREL BM
SUBJECT: BURMA SANCTIONS HITTING THE REGIME WHERE IT HURTS 
 
REF: A. RANGOON 1048 
     ¶B. RANGOON 1050 
 
RANGOON 00001076  001.2 OF 002 
 
 
Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons 1.4 
(b and d) 
 
¶1.  (C) Summary.  The Burmese regime, concerned about the 
latest U.S. economic sanctions, called several key 
businessmen to Nai Pyi Taw, including Tay Za and Steven Law, 
to discuss how best to deal with the sanctions.  According to 
business contacts, the senior generals, unhappy with Tay Za 
for "flaunting his money," have begun to cut off several of 
his business deals.  Tay Za's airline, Air Bagan, is also 
hurting: last week the company announced that its Singapore 
banks severed financial ties because of U.S. sanctions.  The 
government, which is out of money and has halted remaining 
FY07 infrastructure projects, has also informed the 
construction companies that built Nay Pyi Taw that it will 
pay outstanding bills in kind with import licenses and duty 
waivers.  Several prominent businessmen expressed concern 
that the GOB, in an effort to raise money, will start to 
audit companies' financial statements and demand more in 
taxes.  End Summary. 
 
Regime Warning Businessmen 
-------------------------- 
 
¶2.  (C) Anwar Hussain (PROTECT), a prominent businessmen and 
member of the Tuesday Breakfast Club (a group of businessmen 
who meet regularly to discuss business in Burma) informed us 
on October 31 that the regime has noticed the latest round of 
U.S. sanctions and fears that more of its crony friends will 
be targeted.  In the past week, the senior generals have 
called up and met with several prominent businessmen, 
including Tay Za, owner of Htoo Trading and Air Bagan; Steven 
Law, owner of Asia World; Chit Khaing, owner of Eden Group; 
and Zaw Zaw, owner of Max Myanmar, to discuss how to deal 
with the sanctions.  The senior generals warned the cronies 
to "watch out" for the next round of U.S. sanctions, and 
hinted that they should move their money to secure locations. 
 They also cautioned that the businessmen should do more to 
hide their economic relationship with the government. 
Hussain, who spoke to several of the cronies after the trip, 
reported that the senior generals were concerned about the 
newest sanctions and the potential consequences for the 
personal bank accounts of government officials and cronies. 
 
Shame in Flaunting Wealth 
------------------------- 
 
¶3.  (C)  On October 25, Htet Tay Za, Tay Za's son, allegedly 
sent an email mocking U.S. sanctions.  "We're sitting on the 
whole Burmese GDP," he allegedly wrote.  Most of our Burmese 
contacts believe the email to be a hoax, although Tay Za's 
son does maintain a Facebook page with pictures of him 
sitting in his Ferraris with semi-automatic weapons. 
Nevertheless, the senior generals called Tay Za to Nay Pyi 
Taw on October 26 to read him the riot act, demanding that he 
and his family stop "flaunting their wealth." 
 
Tay Za's Companies Financially Hurting 
-------------------------------------- 
 
¶4.  (C) Tay Za and his companies were hit hardest by the 
sanctions, something that did not go unnoticed at the top 
levels, Hussain asserted.  During a meeting with Air Bagan 
last week, top company officials pleaded for Embassy 
assistance in removing the company from the sanctions list to 
no avail (Ref A).  The next day, Air Bagan released a press 
statement detailing the impact of sanctions:  the company's 
Singapore bank partners cut ties, Air Bagan can no longer 
 
RANGOON 00001076  002.2 OF 002 
 
 
purchase spare parts, and that it will halt flights to 
Singapore beginning November 4.  The General Manager of Qatar 
Airways told us that since sanctions were imposed on October 
19, Air Bagan has lost an estimated $400,000 a day, due to 
low ticket sales and high costs of plane leases and airport 
rental space.  On October 22, the Singapore Aviation 
Authority informed Air Bagan that it would no longer provide 
the airline with credit, and requested that the company pay 
its outstanding bill for parking and landing fees.  The same 
day, Air Bagan announced plans to sell two of its planes. 
 
¶5.  (C) Hussain confirmed that Tay Za's other companies - 
Htoo Trading, Htoo Wood Products, and Pavo Trading - have 
also been affected.  Htoo Trading, the only company the GOB 
permits to export rice, just lost its contract to a 
competitor for the sale of 20,000 metric tons over the next 
three months.  Htoo Wood Products, which has a contract with 
an Indian company, has an estimated $1 billion in timber 
ready for export.  The Indian company, aware that Tay Za's 
companies are facing financial hardships and greater scrutiny 
on the world market, refused to abide by its contract and 
offered to pay 90 percent less than the contract price. 
Hussain explained that Tay Za, unwilling to sell the timber 
at such a low price, was looking for another buyer. 
 
GOB Strapped for Cash 
--------------------- 
 
¶6.  (C)  Hussain confirmed reports that the GOB lacked the 
funds to pay for the remaining FY07 infrastructure projects 
(Ref B).  (Note: Burma's fiscal year is from April 1-March 
31.)  Several construction companies that built Nay Pyi Taw, 
including Asia World and Eden Group, have yet to receive 
payment for their work.  The GOB recently told the companies 
that instead of paying the outstanding bills, it would pay 
the companies in kind, with import permits and duty waivers 
for new cars.  Even Steven Law, a government favorite, has 
not received payment since April, Hussain explained.  Several 
prominent businessmen have expressed fear that the GOB, in an 
effort to raise money, will begin to scrutinize closely 
companies' financial records and demand more in taxes.  Many 
companies, including Htoo Trading and Asia World, make more 
money than they report to the GOB.  These companies have the 
most to lose, Hussain commented. 
 
Comment 
------- 
 
¶7.  (C) The Burmese Government is clearly facing a cash 
crunch, shown by its inability to pay even is favorites.  The 
latest sanctions have successfully put additional pressure on 
both the senior generals and their favored businessmen, 
making it difficult for them to do business outside of Burma. 
 The lack of cash will have ripple effects as businessmen try 
to protect their remaining assets and the senior generals 
have nothing to buy the loyalty of their subordinates. 
 
VILLAROSA