NAYPYITAW, Myanmar (Reuters) - Myanmar's ruling, army-backed party on Monday rejected demands of Nobel Peace Prize laureate Aung San Suu Kyi to change parliament's oath of office, the first clear sign of friction since the democracy leader's party swept historic by-elections.
The dispute marred Monday's opening of parliament, as Suu Kyi and other members of her party refused to take their seats, denting an image of transformation on the day the European Union agreed to suspend most sanctions against Myanmar for a year, EU diplomats said.
The expected EU decision on sanctions is a boon for Myanmar's long-stagnant economy and could prompt the United States and Canada to follow suit and pave the way for development loans and a flood of foreign investment in a trove of natural resources such as oil, gas, timber and gemstones.
Suu Kyi's National League for Democracy's (NLD) wants to replace the words "safeguard the constitution" with "respect the constitution" in the oath sworn by new members of parliament.
Suu Kyi promised supporters that, if elected, she would seek to revise the 2008 army-drafted constitution that gives the military wide powers, including the ability to appoint key cabinet members, take control of the country in a state of emergency and occupy a quarter of seats in parliament.
But the secretary general of the ruling Union Solidarity and Development Party (USDP), Htay Oo, said his party would not introduce any proposal to change the oath.
"The wording would have no impact on the development of the country," he told Reuters.
President Thein Sein, a reformist former general, told reporters in Japan that he also had no plans to change the wording of the oath, Kyodo news agency reported.
The NLD wants to reduce the military's enshrined political role after five decades of often brutal army rule in the former British colony also known as Burma, but its standoff over the oath risks alienating supporters.
"The timing is all wrong," said Aung Zaw, a Myanmar expert and editor of the Thailand-based Irrawaddy magazine. "It's quite a divisive issue and a lot of people are very disappointed because there are so many pressing issues that the NLD needs to be handling right now, in parliament."
The parliament office said there was no deadline for the NLD members to take their seats, so the dispute could drag on. If a change in the oath requires a change in the constitution, that would need the approval of more than 75 percent of members of the bicameral parliament.
Parliament is dominated by allies of the former military junta, many of whom are unlikely to be sympathetic to the NLD.
SANCTIONS GOING DESPITE STANDOFF
The NLD petitioned Thein Sein and the house speakers to make the change after winning all but one of 44 seats it contested in April 1 by-elections, a landslide that raised hopes among many people that she would accelerate reforms in a parliament stacked with former generals.
"In any country, even the United States, they have to agree to the defense, not the respect, of the constitution," said Khin Shwe, an upper-house member of the USDP, which won a 2010 election, which Suu Kyi's party boycotted, amid opposition complaints of rigging.
"If the NLD wants to change this, they need to do it from inside parliament," he said in an interview with Reuters at parliament in the capital, Naypyitaw, holding up a list of countries whose lawmakers swear an oath to protect the constitution.
Thein Sein's dramatic reforms of the past year include the freeing hundreds of political prisoners, allowing more media freedom, reforming the currency and holding peace talks with ethnic minority rebels.
The NLD seems convinced the issue will be settled this week and has told many of its elected MPs to stay in the main city of Yangon, where the party has its headquarters, to discuss strategy, one MP told Reuters, requesting anonymity.
The standoff is unlikely to affect the easing of sanctions, with the West bent on rolling back restrictions to allow deeper engagement and investment by companies eager to take advantage of one of Asia's last frontier markets.
The EU decision to suspend most sanctions, due to go into effect later this week, was taken by EU foreign ministers at a meeting in Luxembourg. It was made in recognition of the sweeping democratic reforms, diplomats said.
EU sanctions have targeted nearly 1,000 firms and institutions with asset freezes, and visa bans have affected almost 500 people. The measures have also included a prohibition on technical assistance related to the military and investment bans in the mining, timber and precious metals sectors.
Measures have also included an arms embargo, which is not being suspended.
Australia said it would lift financial and travel restrictions on 260 people and normalise trade ties. Japan said on Saturday it would resume loans to Myanmar and write off 303.5 billion yen of its debt.
The United States is tipped to name its Myanmar envoy, Derek Mitchell, as ambassador after an upgrade of ties. The Treasury Department last week decided to permit financial transactions to support certain humanitarian and development projects.
(Additional reporting by Thu Rein Hlaing in Myanmar, Justyna Pawlak and Sebastian Moffett in Luxembourg; Writing by Martin Petty; Editing by Jason Szep and Robert Birsel)
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