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(1) Assess the environment in Myanmar. What is Unocal’s strategy?

(2) Discuss the advantages/disadvantages of developing the Burma Pipeline from


the perspective of the MNE…Host-country. Would you have agreed to develop
the pipeline?

(3) Is Unocal responsible for human rights problems in Myanmar? Why/why not? Has
Unocal dealt with human rights and environmental concerns in Myanmar?

(4) To what extent has the Free Burma Coalition helped and hurt Myanmar?

(5) What advice would you give to the CEO of Unocal regarding the company’s
involvement in Myanmar?
The Burma Pipeline is a case which raises a number of tough issues. It raises issues
about how managers can respond to highly charged situations; about the moral
dilemma of determining what appropriate behavior is for a corporation in a foreign
country; and about the political impact of corporate investment in repressive states.

The Burma case permits us to take a close look at how standards for international
business are created, and by whom. We see how a relatively small group of people,
energized by a common moral cause, are able to create rules for corporate behavior
and to employ sophisticated information technologies to proclaim these rules across
international borders.

UNOCAL’S STRATEGY

1) Imle is pursuing a strategy of focus, moving out of some business segments


and geographical regions and concentrating on others. The vast bulk of the
company’s new reserves are coming from foreign locations, 87% of which are
in Asia. Thus Unocal is increasingly an oil and gas development company
focused on Asia. This Asian focus, moreover, covers both production and
sales. Based on the Yadana project, we might also surmise that Unocal is
trying to work with partners and to exploit relatively accessible reserves.
Once again, there appear to be the outlines of a niche strategy. Unocal is
going after the lowest-cost, lowest-risk options it can find.

2) Commercially, at least, Unocal seems to be placing its bets wisely. Asia is a


compelling region and Unocal is not a company that can afford to have too
wide a focus. The company is managing slowly to improve its financial
performance. But the improvement has been gradual and Unocal is still not
in a position to take great risks. Since it’s small, it needs to go where the
bigger players are unable or unwilling to venture. So Southeast Asia is a
rather compelling choice.

HOW IMPORTANT IS YADANA? POSITIVE SIDE:

o Burma is relatively uncontested territory for oil companies

o Yadana is a proven, low-cost field

o The risks of the project appear further allayed by the deal’s partnership
structure

o The project appears relatively inexpensive

o The project also appears to be relatively lucrative.

o Yadana seems a nearly perfect fit with Unocal’s focus strategy


3) Total has already done much of the upfront work and MOGE and Thailand’s PTT
will clearly handle relations with their respective national governments. The
structure of the contract, moreover, guarantees a customer for all of the project’s
output.

6)It enables the company to gain access to sizable gas reserves in close proximity
to an underserved and rapidly growing market. Presumably, it also gives Unocal
future access to the Yetagun gas field, with similar geographical characteristics and
potentially even greater reserves.

NEGATIVE ASPECTS

o Burma is a high-profile country with a regime that is widely regarded as


repressive & illegitimate

o The pipeline corridor cuts through an area pockmarked with indigenous


villages & known for ethnic violence

o Insofar as the project entails partnering with MOGE, it puts Unocal into
commercial alliance with the Burmese government

o While the Yadana project promises to add considerably to Unocal’s total


reserves of natural gas, its financial impact is not particularly large.

3) It thus positions the company as a recipient for any public outrage or legal
action that might be levied against Burma.

4) Yadana will contribute only 1% of Unocal’s total revenues and 8% of its


revenues from natural gas.

IF YOU WERE JOHN IMLE, WOULD YOU HAVE AGREED TO THIS DEAL IN 1993?

To a large extent, the rough outlines of the ensuing protest were foreseeable in
1993. Aung San Suu Kyi was already under house arrest then, and already a Nobel
laureate. She had already distinguished herself as a figure of international renown,
blessed with a charisma that had won her a high degree of respect. It squashed
popular uprisings in 1988 and nullified the elections of 1990. Uniqueness of
Burma’s position. Because the military is so bluntly repressive; because elections
were so transparently ignored; because Suu Kyi addresses a global constituency;
and because, paradoxically, the country is of limited geopolitical significance, it was
destined even in 1993 to receive more than its fair share of international attention.

Imle should have known that there would be a lot of international attention. By
deciding to invest in Burma, Unocal took a consciously, presumably calculated, risk.
The company and its manager also implicitly made moral choices that some people
deem unacceptable.
WHAT ACCUSATIONS HAVE BEEN MADE ABOUT UNOCAL’S INVOLVEMENT IN THE
YADANA PIPELINE?

o Responsibility for and complicity with human rights abuses

o Use of slave labor

o Responsibility for the Burmese military’s “ethnic cleansing” & forced


relocation of local populations

o Enabling the Burmese government to engage in rape, murder, & the


laundering of drug money

o Environmental degradation

Have there been benefits? Yes, clinics and some economic activity – yet Unocal has
also contributed to what is by any measure a particularly harsh and repressive
regime. Burma’s ruling party is desperate for cash and revenue-generating projects;
Unocal has helped to create these. The government has engaged in all sorts of
heinous practices, and Unocal has helped to legitimate them. This does not mean
that Unocal is responsible for the barbarity that has occurred in Burma. But it does
mean that Unocal cannot claim to be purely a neutral party, above politics and
indifferent to it. By investing in Burma, Unocal is affecting the country’s political
situation.

WHAT SHOULD IMLE DO?

o He has already made the decision to participate in the pipeline project but
Unocal has already been accused of being complacent

o Withdraw?

o Remain aloof from accusations?

o Manage the situation?

Withdrawal – Unocal’s involvement with Yardana is simply wrong and the only
proper response is to pull out of Burma. This, after all, is what most American
companies have done. Practical questions: What will happen to Unocal’s future
plans for expansion if it retreats from Burma? Can the company afford to do so?
Can it sell its share in the project? Does Unocal really have the same options as
Pepsi or Disney – these two companies have withdrawn.
Remain aloof from accusations? What kinds of reaction will aloofness engender
among these critics? Are the criticisms likely to get muted over time?

Management of the situation – If Unocal lobbies more vigorously in Washington, will


it be able to count on any other parties to join in a coalition? Or is Unocal
effectively along and thus likely to be ineffective? Can it address its critics through
better public relations? Or has the problem already extended far beyond the point
of cosmetic damages? Can it improve its image through any possible avenues?

CONCLUSION

o This case underscores the critical and often delicate relationship between
foreign investment and a country’s political environment.

o By investing in Burma, Unocal has thrust itself deeply into Burmese politics &
into the political questions that cloud Burma’s position in the international
arena

o At a broader level, the case illustrates the growing importance of


international pressure and activist groups

o Unocal’s involvement in the country has undoubtedly helped to secure the


position of Burma’s military regime.

1) Unocal insists that they are simply engaged in a commercial venture in


Burma, without any interest in or effect upon the political context. Yet this
sentiment is either wishful thinking or simply disingenuous.

3) Unocal’s business decisions are being shaped and constrained, not be


governments, bt by private groups with their own views of what constitutes
appropriate commercial behavior This is not a wholly new phenomenon, but it has
been accentuated and acceleraed by the rise of global media groups and,
particularly, but the advent of the Internet. Over time, companies around the world
will need to pay far greater attention to the views and activities of international
pressure groups and the international media. We can call this the “spotlight effect
as discussed in Spar’s article.

4) The pipeline has brought capital, technology and the promise of future revenues
– all of which the gov’t quite desperately needs. Unocal may try to distance itself
from the brutalities committed in Burma, but this basic relationship remains
undeniable.
RECENT DEVELOPMENTS

o Military abuse of human rights around the pipeline

• Several human rights groups documented hundreds of cases of rape &


sexual assault

• Villagers forced to act as human mine sweepers

o Two legal cases in 2004

• California district court ruled that Unocal must face a jury over its
subsidiaries’ role in Burma

• Federal court (rests on the Alien Torts Claim Act – Supreme Court
opened the way for the suit to continue) – Bush tried to prevent the
law from being applied in this case

o March 2005 – Unocal settled the case – amount kept secret

o April 2005 – Chevron Texaco announced it was acquiring Unocal and will hold
on to the Yadana investments

2a) There is no suggestion that representatives of Unocal’s subsidiaries actually


carried out brutalities against the villagers, lawyers from EarthRights International
and other NGOs successfully argued that the subsidiaries of Unocal operating in
Burma were its agents and that therefore a jury should decide whether the actions
of the Burmese military were carried out on behalf of these subsidiaries during
construction of the pipeline.

2b) both cases have assisted in publicizing the plight of the local villagers in Burma
and highlighted the authoritarian repression and general lack of corporate
responsibility surrounding the gas pipeline project.

3) Judge – The Burmese military was given responsibility for security of the project
area, despite its well-documented history of repression and violence. The military
then used the project as justification for rapid militarization of the region and the
subsequent human-rights abuses that led to the case against Unocal.

4) ChevronTexaco is facing similar court action to Unocal over alleged complicity in


human-rights abuses in Nigeria.

New pipeline to be built in Burma – deal was signed between an international


consortium of Indian and South Korean corporations and the Burmese military
regime to exploit the Shwe natural gas field, in the Gulf of Bengal off the western
coast of Burma. A pipeline is to be built to export the gas through southwestern
Burma to India via Bangladesh. Ethnic minority dominated Arakan and Chin. As
with Yadana, the Burmese military have begun clearing a corridor for the pipeline
without local consultation. The increased military presence, which is already
pervasive in the region, will no doubt bring about a dramatic increase in forced
labor and other human-rights violations.
CANADIAN INVOLVEMENT

• TCPL – largest pipeline firm in Canada – is assisting in the construction of the


Thai portion of the Yadhana gas pipeline (from Burma to Thailand)

• Mitsubishi Canada – supplies material for the project

• Canadian Helicopters International provides helicopter services to Total.

• BC Gas signed a long-term contract to source gas from Unocal

• Ridel Resources is in a separate joint venture with the Burmese state oil
enterprise

• Nortel Networks – selling a cellular phone system to Burma – aids military in


tapping phone lines

• Ivanhoe Mines – copper mine – also First Dynasty Mines – East Asia Gold –
Palmer Resources

• Sears Canada sourcing clothes from garment industry (most underpaid in


Asia – 8 cents an hour – have to pay half of their wages to the military
political party)

• Canada – cut off aid but refuses to ban investment and trade.

• US has cut off aid & prohibits any new investment (1997)