[비즈한국] The Myanmar military seized power through a coup in 2021. It has faced international criticism for suppressing political opposition, including the detention of former State Counsellor Aung San Suu Kyi. Even now, it continues to suppress the public through violence. Companies associated with this Myanmar military have business ties with the South Korean POSCO Group. Conscious of the critical public opinion, the POSCO Group announced in 2021 that it was considering severing ties with military-related companies. However, to this day, those ties have not been completely severed.
POSCO International047050's Gas Field Business
POSCO International operates a gas field business in Myanmar. The Myanmar gas field project is divided into upstream, offshore midstream, and onshore midstream segments. The upstream segment is responsible for low-pressure gas compression platforms, subsea production facilities, and pipelines. The offshore midstream handles offshore pipelines, while the onshore midstream manages onshore pipeline operations.
POSCO International holds a 51% stake in the upstream and offshore midstream projects and a 25% stake in the onshore midstream project. However, the Myanma Oil and Gas Enterprise (MOGE) holds a 15% stake in the upstream and offshore midstream projects and a 7.4% stake in the onshore midstream project.
MOGE is suspected of being a key financial lifeline for the Myanmar military. In October 2023, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) issued guidance prohibiting U.S. persons from providing financial services to MOGE. The U.S. Treasury stated at the time, "Sanctions on MOGE are intended to disable the Myanmar military from purchasing weapons to commit atrocities against the people of Myanmar," adding that "MOGE is the single largest source of foreign revenue for the Myanmar military, earning tens of billions of dollars annually."
As controversy erupted, POSCO International announced in May 2021 that it was considering suspending dividends to MOGE. However, Bizhankook's investigation revealed that MOGE is still receiving dividends from POSCO International's gas field business.
A POSCO International official explained, "The contract for (the upstream and offshore midstream projects) was signed in a way that profits are distributed according to equity stakes. For (the onshore midstream project), the China National Petroleum Corporation (CNPC) is the largest shareholder with a 50.9% stake. We proposed the withholding of dividends to MOGE to CNPC, but we have not yet received a reply."
POSCO Steelion058430's Steel Sheet Production
POSCO Steelion (formerly POSCO Coated & Color Steel) is also conducting business in Myanmar. In 2013, POSCO Steelion established a local subsidiary, Myanmar POSCO C&C, in Myanmar. Myanmar POSCO C&C produces 50,000 tons (t) of color steel sheets and 20,000 tons of plated steel sheets annually. Myanmar POSCO C&C recorded 24.3 billion won in revenue and 1.2 billion won in net profit for the first three quarters of last year.
POSCO Steelion holds a 70% stake in Myanmar POSCO C&C. The remaining 30% is held by Myanma Economic Holdings Limited (MEHL). MEHL is known to be a company run by the Myanmar military and serves as the military's financial pipeline. In March 2021, the non-governmental organization 'Justice for Myanmar' pointed out, "MEHL was established by the military and is operated by the military," adding, "By maintaining a business relationship with MEHL, POSCO Steelion is sending a negative message that it condones the military's human rights abuses."
As the controversy grew, POSCO Steelion announced in April 2021 that it would end its joint venture with MEHL. POSCO Steelion stated at the time, "As issues related to MEHL have been raised, we intend to terminate our joint venture with MEHL," and added, "We will continue to disclose ongoing matters."
However, even now, 3 years and 10 months later, MEHL still holds a 30% stake in Myanmar POSCO C&C. While POSCO Steelion is pushing to acquire the stake, it is not going smoothly. A POSCO Steelion official explained, "I understand that work (related to acquiring the stake owned by MEHL) is in progress," and added, "We have not paid any dividends to MEHL since the controversy arose." When asked if MEHL was uncooperative regarding the stake sale, the official replied, "That is somewhat the case."
As such, the POSCO Group maintains that it is realistically difficult to completely sever ties with MOGE or MEHL. Considering the profits the POSCO Group earns from its Myanmar business, a full withdrawal is also difficult. In the third quarter of last year, POSCO International generated 164.4 billion won in revenue and 108 billion won in operating profit through its Myanmar gas field business. This means approximately 30% of POSCO International's total operating profit of 357.2 billion won in the third quarter of last year came from the Myanmar gas field project. Kim Eung-kwan, a senior researcher at Korea Investors Service, analyzed while evaluating POSCO International: "The Myanmar gas field serves as a stable profit-generating foundation based on a long-term supply contract structure and smooth production volumes."