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.

“The reversal of that progress will necessitate an immediate review of our sanction laws and authorities, followed by appropriate action,” Biden said in a statement.

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 (IEEPA).

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 (MEHL) and Myanmar Economic Corp (MEC) 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, who was deeply involved in that 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.

Biden and his secretary of state, Antony Blinken, have denounced the military for seizing power, but have not called events in Myanmar a coup.

Under U.S. law, a determination that a military coup has taken place means some U.S. financial assistance would be cut off. U.S. aid to Myanmar totaled $606.5 million in 2020 and includes funding for health programs and disaster relief.

A State Department spokeswoman said events in Myanmar “have the makings of a coup” but the department was conducting legal and factual analysis before making an assessment.