YANGON, Myanmar (Reuters) - Myanmar's generals were looking for a chance to improve ties with the United States. A disturbed American gave them one in May 2009, when he swam across Yangon's Inya Lake on "a mission from God" to rescue Aung San Suu Kyi.
John Yettaw, a 53-year-old Vietnam veteran from Missouri, had hoped to smuggle the democracy champion out of the country in a burkha. He was convicted along with Suu Kyi for violating the terms of her house arrest. Instead of sending him to Yangon's notorious Insein Prison, however, the junta let Yettaw fly out of the country with a U.S. senator.
It was a major step in Myanmar's warming toward the West - but not the first one.
Interviews with dozens of officials in Yangon, Washington and Southeast Asia, and an examination of diplomatic cables obtained by Wikileaks, show that the United States and Myanmar had started waltzing warily toward each other in the first year of Barack Obama's presidency.
Yettaw's bizarre night-time swim gave impetus to the dance. But it began with Myanmar's fears of rising Chinese influence in their country and was given crucial help by Indonesia's top diplomat. Washington's subsequent willingness to engage the junta, and the generals' surprise steps toward reform, culminated in Hillary Clinton's visit to Myanmar earlier this month, the first by a U.S Secretary of State in five decades.
Whether Myanmar remains on the reform path is an open question. The military junta yielded to a nominally civilian government last year. But U.S. officials expressed worry in interviews that Myanmar's leadership may not be moving in lockstep. It remains impossible to determine exactly what is going on inside the secretive government.
Among the questions is how far Yangon is willing to embrace Suu Kyi and her fellow democrats. Washington and its allies must encourage a reformist faction led by President Thein Sein against what they fear could be an eventual effort by hardliners to throttle back the process.
U.S. officials hope the prospect of improved economic ties with the West will help consolidate the reformers' gains. But China remains a powerful and cash-rich suitor, and Beijing has sought to parry Clinton's overtures by sending its own top diplomat, State Councilor Dai Bingguo, to Myanmar to offer more cooperation. Chinese officials have also reached out to Suu Kyi herself - their highest contact with the Myanmar opposition in two decades.
The new administration of President Barack Obama signaled at the start of 2009 a pivot towards Asia. An emerging China had made strong economic and diplomatic inroads the previous decade while America was absorbed with militant Islam and the wars in Iraq and Afghanistan.
Western trade and investment sanctions, meanwhile, had taken a toll on Myanmar, and it had increasingly been pulled into the economic orbit of China, its giant neighbor to the north.
The Association of South East Asian Nations (ASEAN), of which Myanmar is a member, saw an opportunity to change Myanmar's tilt toward China.
The goal, Indonesian Foreign Minister Marty Natalegawa said in an interview, was to encourage political and economic reforms that might convince Washington to ease sanctions. ASEAN dangled before the generals a prestigious prize, he says: the 2014 chairmanship of the regional bloc.
Washington's decision to engage Myanmar came after realizing the sanctions weren't working and were irritating U.S. relations with ASEAN. The Yangon gambit was seen by both Washington and ASEAN as key to balancing China's rapid emergence in Asia.
"More than anything it was a recognition that what we were trying, which was simply sanctions and the like, was unsuccessful," a senior Obama administration official said. "It was simply not working. I think also there was a recognition that we were out of step with everyone else."
Myanmar's thick wall of distrust toward the West began softening after a natural disaster in 2008.
Hardliners in the junta at the time feared the U.S. military could one day find a pretext to intervene in Myanmar, diplomats in Myanmar said. The country's warrior class will never forget how easily the British sailed up the Irrawaddy River in 1885 and with a thousand soldiers took the royal town of Mandalay, bundling King Thibaw and his family into exile in Bombay.
That suspicion helps explain why the junta hesitated to let U.S. military planes fly in desperately needed relief aid after a cyclone swept over the Irrawaddy Delta and into Yangon, killing nearly 140,000 people in May 2008. It also moved the capital to the remote town of Naypyitaw from Yangon, a mere 20 kilometers (12 miles) from the Andaman Sea.
U.S. military planes were eventually allowed to fly in more than $40 million of supplies. The disaster forced senior Myanmar officials to interact with foreign relief workers.
"I think that began to change the mindset, essentially," said Thant Myint-U, a former U.N. official, author, and influential commentator on Myanmar affairs. "The main insight in Naypyitaw was that they could open up, allow in aid and interact with foreigners, and the sky wouldn't fall in."
Shortly after taking office in January 2009, Obama and Clinton announced they were reviewing policy on Myanmar. That gave the generals an opening when Yettaw made his swim in the summer of 2009.
U.S. Senator James Webb flew to Myanmar days after their convictions that August. The Virginia Democrat said he did not ask for a meeting with the reclusive leader of the junta, Than Shwe.
"I never make a demand as to who I want to see, in any country," he said in a recent interview. Yet the Burmese offered a meeting with Than Shwe nonetheless. "And I took it," Webb said with a laugh.
No U.S. official had ever met the enigmatic junta leader, now 78. A lifelong military man, Than Shwe had specialized in psychological warfare and, according to diplomats, relied heavily on advice from soothsayers. He had led the junta since 1992.
A businessman with ties to senior generals said Than Shwe had been looking for an opportunity to improve ties with Washington for some time. The junta was even getting encouragement to do so from China.
That seems counterintuitive, given China's current ambivalence over the U.S.-Myanmar détente. But at the time, Chinese officials thought outreach to the West would promote economic growth and stability in its shaky neighbor to the south. Internal strife could have led to regime change, which might threaten major infrastructure deals and other economic interests China had with the generals.
"The Yettaw case was an opportunity to do something about relations with the U.S.," the businessman said.
The U.S. embassy in Myanmar had come to a similar conclusion, according to a cable released by Wikileaks. Than Shwe wanted to use Webb's visit "to deliver an unequivocal message: (Myanmar) wants better relations with the United States," the cable said.
Embassy officials attended the August 14, 2009 meeting between Than Shwe and Webb at a guest house in Myanmar's newly built capital of Naypyitaw. They noted that he and the other generals at the meeting seemed comfortable speaking in English.
"Than Shwe and others appeared to understand Senator Webb's use of humorous quotes (e.g., President Truman's comment that, "in politics, if you are looking for a loyal friend, get a dog,")" said one diplomatic cable released by Wikileaks.
SPECIAL ENVOY NAMED
Webb stressed the strategic importance of a U.S. relationship to Than Shwe. "I think in the last two years now, it has become more obvious to these second-tier countries that the United States ... is the most important balancer, strategic balancer, in the region," he said in the interview.
Than Shwe replied, according to the cable, that Myanmar wanted to resume direct communications with Washington. The U.S. had all but cut off ties after a 1988 putsch and the subsequent brutal suppression of the pro-democracy movement led by Suu Kyi.
At the meeting, Than Shwe offered a surprise: He named Science and Technology Minister U Thaung, a former U.S. ambassador, as his new special envoy to America.
"It is certain Than Shwe believes he has unclenched his fist," the U.S. embassy cable said after the Webb meeting. That echoed a line in Obama's inaugural address that he would "extend a hand" to adversaries if they were willing to "unclench their fist."
"The generals will look for response," the cable said.
It came quickly. U Thaung met Assistant Secretary of State for East Asia and the Pacific Kurt Campbell in New York on September 19. A few days later, Myanmar Foreign Minister Nyan Win was allowed to visit his embassy in Washington - albeit for one day. U.S. sanctions had limited the movement of junta members, and it was the first time in nine years Nyan Win had been allowed outside New York.
But U Thaung didn't play a big role in the thaw after that, the senior administration official said. "It's like you chose the guy who's the least interested in engagement, who is the most anxious about the United States and the most resistant, and you put him in charge."
The budding rapprochement stalled. "It was difficult because the government didn't budge for some time," senior Obama adviser Ben Rhodes said in an interview. "But we wanted to make sure we were prepared to take advantage of any opening."
Than Shwe was focused at the time on holding a seminal election in November 2010. It would bring a nominally civilian government to power, though dominated by the military's proxies.
Thant Myint U, the grandson of former U.N. Secretary-General U Thant, said the junta leader was busy in late 2009 and 2010 forcing other generals in the junta to step down before the polls. "None of the people who are in government now are of that group. So he had one by one retired all these lieutenant generals."
STUDY IN AMERICA
Though U.S. officials had come to the conclusion that sanctions were not having the desired effect, they were indeed an irritant.
Broad U.S. sanctions were imposed after the army's crackdown on student-led protests in 1988 and tightened in 1997 when new U.S. investments were banned. Washington banned Myanmar imports in 2003. In 2007, following a crackdown on protests led by monks, Washington targeted the financial assets of key regime officials and their business associates. They and their families were also blacklisted from visiting the United States.
It was these last sanctions that seemed to really bite with the junta.
Khin Maung Win, head of a construction company with close ties to the regime, told U.S. embassy officials after the Webb visit the government didn't expect changes in the U.S. sanctions regime anytime soon, according to another classified diplomatic cable from September 2009. But he said "senior levels" were hoping for positive signals, including getting permission for the children of senior officials to study in America. That concession has yet to come.
Asked why Myanmar was anxious to have a better relationship with the United States, "Khin Maung Win said with assurance: China," the cable said. "The senior (Myanmar) leadership really dislikes being too heavily dependent on one dominating neighbor and hopes the U.S. can be a buffer."
Khin Maung Win, in an interview in Yangon, declined to confirm any details in the cable. The junta leaders, he said, had "a general desire � to have a better relationship with the U.S. It's always there, I believe."
Over the past decade or so, China has penetrated almost every economic sector in Myanmar, as trade and investment with the West shut down. So many Chinese immigrants have streamed into Mandalay, the main city of Upper Burma, that the locals have a saying for it: "When China spits, Mandalay swims."
Chinese money is financing new ports, highways and dams across the resource-rich country of 55 million people. China pledged $14 billion in investment for the fiscal year ending in March, making it by far the biggest investor in Myanmar.
But resentment of the Chinese presence has grown as well, a touchy subject in a country that has seen periodic anti-Chinese rioting, including clashes in 1967 in Yangon in which scores were killed and the Chinese embassy ransacked.
CHINA 'FED UP'
Embassy cables made public by Wikileaks suggest China shared Washington's dissatisfaction with Myanmar's pace of reforms.
"The Chinese clearly are fed up with the foot-dragging by the Than Shwe regime," the U.S. embassy chief in Myanmar, Shari Villarosa, said in a confidential cable in January 2008, after hosting Chinese ambassador Guan Mu for lunch.
The prospect of turmoil "will inevitably affect Chinese business interests here, making them more amenable to our approaches...," Villarosa said. The Chinese ambassador, she said, suggested that if the senior leaders could be offered assurances that they would not "lose their lives and could keep their economic interests, they might be more amenable to ceding power gradually."
Villarosa, no longer running the embassy, declined to comment.
Than Shwe's junta stepped down after last year's flawed elections, and the new government of President Thein Sein took over this March. A sample of the kind of turmoil Beijing feared soon followed.
China has been building hydroelectric projects in Myanmar. But it has insisted on using its own workers, and will be sending much of the power from those plants in energy-starved Myanmar back to China. That has stirred local anger. In June, more than 200 Chinese workers fled home after separatist rebels attacked a hydroelectric plant in the northern border province of Kachin.
Three months later, in late September, President Thein Sein halted construction of a $3.6 billion dam being built by China in northern Myanmar. Public anger had erupted over the dam's impact downstream on the mighty Irrawaddy, which bisects the country and is seen as a holy river. Ninety per cent of the power generated from the Myitsone project was to be sent to China after its proposed completion in 2019.
Senior Obama advisor Ben Rhodes and other U.S. officials cited this response to a grassroots campaign as a decisive turning point that helped convince Washington that Myanmar was indeed changing its stripes.
"Here they were putting aside a development project in response to the concerns raised," Rhodes said in an interview. "That signaled a seriousness by the government about being responsive to the people."
Obama was coming to Bali, Indonesia, in November for ASEAN's annual meetings with Asia-Pacific powers. On the ASEAN agenda was Myanmar's request to take its turn as chairman of the grouping in 2014.
Marty Natalegawa, the Indonesian foreign minister, was ASEAN's point man on Myanmar. He saw a chance to use the junta's desire for international respect as a wedge for reforms.
"To me that was something falling in my lap, and I said, okay, this is it," he said in an interview. "This is something we can ride on."
Myanmar's new president, Thein Sein, would be meeting Obama at the Bali summit. The White House was still cautious about engaging Myanmar and had shown no sign of easing sanctions. Myanmar had to give clearer signals about its reform path.
Myanmar's reforms were important for ASEAN as well. The 10-nation group of 600 million people, with a combined GDP of $1.5 trillion, aims to become a European Union-style economic community by 2015. Without major changes, Myanmar's economy would have difficulty integrating into that common market.
Natalegawa decided to see Thein Sein in Myanmar's remote new capital of Naypyitaw in late October.
ABODE OF KINGS
The presidential palace and the parliament building are surrounded by moats that can only be crossed by bridge. Naypyitaw, or "abode of kings," was built on scrubland five years ago. It is a quiet, mostly empty place of manicured lawns and forbidding stone walls. It bears little resemblance to the rest of Myanmar, one of Asia's poorest countries, or even to nearby villages, where many live in thatched wooden huts.
Myanmar has been one of the most isolated countries in the world, despite sitting on the crossroads of Asia. It shares borders with China, India and Thailand - has fought wars with all three over the centuries - and its southern ports provide access to the Strait of Malacca, which links the Indian and Pacific Oceans, one of the world's busiest sea lanes.
Thein Sein was seated alone on a long sofa in a cavernous reception room of the Presidential Palace. The distance between chairs required participants to practically shout at each other, Natalegawa says. But he liked what the new president had to say.
Thein Sein had taken over in March as head of Myanmar's first civilian government since 1961, after Than Shwe, to the surprise of some, stepped down as promised. Thein Sein had recently embarked on a series of reforms he hoped would convince ASEAN the changes were for real.
In return, Thein Sein was seeking a reward that, the Myanmarese argued, would keep up the momentum: the ASEAN chairmanship in 2014. As chairman, Myanmar would be responsible for running literally hundreds of meetings ASEAN holds each year. It would host the annual East Asia summit at its heretofore secretive capital, an event that brings together 17 nations including China, Japan and the United States, not to mention an army of inquisitive journalists.
Myanmar had formally requested to take its turn as ASEAN chairman in January, just after its widely derided election. But the generals had also released Suu Kyi a week after the polls, and ASEAN was pushing for more.
"During that window, from January all the way to October, it was all about, for want of a better word, extracting maximum possible mileage out of that prospect of Myanmar chairing ASEAN," Natalegawa said.
So, Thein Sein, in the echoing halls of the presidential palace in that late October visit, was making a final pitch to ASEAN's point man, the Indonesian foreign minister.
Since taking office March 30, Thein Sein had met with Suu Kyi and allowed her to travel outside Yangon; the government had called for peace talks with armed separatists along its border with Thailand and China; it had eased controls on the media, and legalized unions. Two weeks before the meeting with Natalegawa, the government had freed 200 political prisoners, including several prominent dissidents.
Thein Sein had shed his uniform for the traditional Burmese longyi, or sarong. The conversation featured an unprecedented candor, Natalegawa said: "You are able to speak to the president of the country, the speakers of the two houses, who then without asking, raise issues like meeting with Aung San Suu Kyi, a name that in the past if you had mentioned they would have just stood up and left the room probably."
One of the parliamentarians surprised the Indonesians by acknowledging that Suu Kyi's party had, indeed, won the 1990 election. The junta had never denied stealing the vote, but had never admitted it, either. "I think that is big and profound," Natalegawa said.
Thant Myint-U, the Myanmar expert, says the country has been basically following the "roadmap to democracy" it first unveiled in 2003 - a new constitution, followed by elections, a civilian government and transition to democracy.
The "roadmap" was widely dismissed as farce by analysts and Western governments. But Ko Ko Hlaing, the chief political adviser to Thein Sein, insists the changes began then. "It has been ... slow but gradual," he said in an interview.
The idea of sending Clinton to Myanmar was first discussed around the time Natalegawa was meeting Thein Sein in late October. Rhodes, the senior Obama adviser, said the president had "pretty much decided" she should go before he left for the Bali summit in November.
But he first wanted to make sure Suu Kyi was on board with that idea. He would be the first U.S. president to call the democracy leader, Rhodes said. "That would send a signal that we were doing this ... in response to her interests as well," Rhodes said. "Suu Kyi had been one of Obama's heroes because of her nonviolent pursuit of political change."
Obama called her from Air Force One on the flight to Bali. He went through each of the steps the Myanmar government had taken and asked for her feedback. He floated the idea of sending Clinton to Myanmar. She supported it, Rhodes said.
Suu Kyi and her spokesman declined to comment.
The cumulative effect of the reforms since Thein Sein's government took power, and the shelving of the dam project, said Rhodes, "made us think that these were real moves by the government."
NO DEMOCRACY EXPERIENCE
Natalegawa, too, says he believes Myanmar's steps are for real.
Myanmar's new government wanted to learn from Indonesia's experience, which adopted a free-wheeling democracy after the fall of the autocratic former general Suharto in 1998, he said. Myanmar had sent a group of presidential advisors to Jakarta in September to talk with Indonesian parliamentarians about that experience.
But the road ahead remains uncertain. Ko Ko Hlaing, the 55-year-old chief political adviser and former army officer, said the new government is still experimenting with democracy.
"We have to change our strategy and tactics," he said in an interview at Bali. "We have to change our skills and technology. We have to change mindsets and attitude of all of society. It is very difficult to change mindsets."
(Editing by Bill Tarrant and Michael Williams. Neil Chatterjee reported from Jakarta. Additional reporting by Aung Hla Tun in Yangon, Caren Bohan and Susan Cornwall in Washington, Jason Szep in Bangkok, Raju Gopalakrishnan in Singapore and Olivia Rondonuwu in Jakarta)
(Created by Bill Tarrant)
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