Snr-Gen Than Shwe’s offer of a conditional dialogue with democracy icon Aung San Suu Kyi following a visit by UN special envoy to Burma, Ibrahim Gambari, has set off a new political debate not only in the international community, but also amongst exiled Burmese opposition groups.

The junta’s hard-line leader has insisted that before he will speak with Suu Kyi, she must give up her “confrontation” with the regime and end her longstanding calls for economic sanctions.

While the international community may be wondering if the general’s demands are indeed a reasonable precondition for talks, the debate among exiles and other long-time observers of the Burmese situation revolves more around the junta’s motives for setting such conditions.

It is, of course, entirely up to Suu Kyi herself to decide how she will respond to the general’s call. But it is worth considering why the regime has raised the issue of sanctions at this time, when the world’s attention is on the military’s brutal suppression of peaceful protests against growing economic hardship. Is the regime merely trying to scuttle any potential dialogue by setting unacceptable conditions? Or is it trying to scapegoat Suu Kyi for the country’s deepening economic crisis, which is due far more to the junta’s corruption and gross mismanagement of resources than to the impact of sanctions?

The regime has always claimed that it is impervious to Western sanctions, and constantly boasts in the state-run media that the country’s economy is on the right track, achieving double-digit annual growth and drastically rising per capita income since it seized power in 1988. It cites statistics that show budget surpluses for the past three years and a US $20 million trade surplus last year as evidence of its effective handling of the economy.

Meanwhile, economic and other sanctions, especially those imposed by the United States, have grown more stringent since they were first put in place by the Clinton Administration in 1997. Under the Democracy and Freedom Act of 2003, US President George W. Bush added further punitive measures against the regime, including a ban on visas for members of the regime and its supporters, in response to the Depayin massacre of May 2003. But given the small scale of US investment in Burma, the impact of these sanctions has been limited.

The European Union, which has a bigger stake in the Burmese economy through large-scale investment by France’s Total Oil Company, has been more reluctant to impose harsh sanctions, which must be based upon a consensus among member states. To date, it has confined itself to banning sales of arms to the Burmese junta, and a visa blacklist of prominent members of the regime.

Despite the limited effect of Western sanctions, and despite the country’s putative economic gains, it is clear that the situation for the average Burmese citizen has gone from bad to worse under the country’s current masters. The fruits of the market-oriented economy introduced in 1988 are now clearly seen only in the hands of the ruling elite, as the gap between the rulers and the ruled continues to widen to new extremes.

According to a report released by the International Monetary Fund in September 2006, Burma has the lowest per capita GDP in the region. In 2005, the average Burmese citizen had an annual income of $170, compared to $350 and $400 in Cambodia and Laos, respectively¬, even though these two countries introduced market-oriented reforms later than Burma. The difference, it seems, is that Cambodia and Laos, unlike Burma, have both implemented policies that have won the support of international development agencies such as the Asia Development Bank.

Burma’s problem is that the current regime has failed to demonstrate to the ADB, the International Monetary Fund, and the World Bank, that it is capable of good governance-an essential precondition for the sort of large-scale package of development assistance needed to rebuild Burma’s economic and social infrastructure.

It is in this area that the US has exercised its greatest influence over Burma. The US, which plays a key role in these major world organizations, has blocked the flow of development assistance into Burma by insisting that all assistance must be contingent upon evidence of good governance.

The recent protests throughout Burma occurred in the wake of a dramatic increase in fuel prices in August, which had an immediate and devastating impact on the livelihoods of countless ordinary Burmese. The reaction to the regime’s attempt to pass on the costs of its unsustainable economic policies to the general public has made it absolutely clear that Burma’s economy is heading for disaster, and cannot be saved without a huge and comprehensive package of international development assistance. But the generals, who said when they seized power in 1988 that they alone could lead the country out its economic misery, cannot accept this reality.

While Cambodia and Laos have made the concessions required to receive much-needed international aid, the Burmese regime still punishes those who have the temerity to groan under the weight of its ill-considered economic decisions. Then, when the world witnesses how unfit they are to govern, the generals blame Suu Kyi for their image problems, and suggest, by bringing up the issue of sanctions, that she has somehow single-handedly undermined their otherwise flawless policies.