Myanmar's ongoing liberalization and its normalization of relations with the outside world have the possibility of profoundly affecting geopolitics in Asia -- and all for the better. Geographically, Myanmar dominates the Bay of Bengal. It is where the spheres of influence of China and India overlap. Myanmar is also abundant in oil, natural gas, coal, zinc, copper, precious stones, timber and hydropower, with some uranium deposits as well.

The prize of the Indo-Pacific region, Myanmar has been locked up by dictatorship for decades, even as the Chinese have been slowly stripping it of natural resources. Think of Myanmar as another Afghanistan in terms of its potential to change a region: a key, geo-strategic puzzle piece ravaged by war and ineffective government that, if only normalized, would unroll trade routes in all directions.

Ever since China's Yuan (ethnic Mongol) dynasty invaded Myanmar in the 13th century, Myanmar has been under the shadow of a Greater China, with no insurmountable geographic barriers or architectural obstacles like the Great Wall to separate the two lands -- though the Hengduan Shan range borders the two countries. At the same time, Myanmar has historically been the home of an Indian business community -- a middleman minority in sociological terms -- that facilitated the British hold on Myanmar as part of a Greater British India.

But if Myanmar continues on its path of reform by opening links to the United States and neighboring countries, rather than remaining a natural resource tract to be exploited by China, Myanmar will develop into an energy and natural resource hub in its own right, uniting the Indian subcontinent, China and Southeast Asia all into one fluid, organic continuum. And although Chinese influence in Myanmar would diminish in relative terms, China would still benefit immensely. Indeed, Kunming, in China's southern Yunnan province, would become the economic capital of Southeast Asia, where river and rail routes from Myanmar, Laos and Vietnam would converge.

Much of this infrastructure activity is already under way. At Ramree Island off Myanmar's northwestern Arakan coast, the Chinese are constructing pipelines to take oil and natural gas from Africa, the Persian Gulf and the Bay of Bengal across the heart of Myanmar to Kunming. The purpose will be to alleviate China's dependence on the Strait of Malacca, through which four-fifths of its crude oil imports pass at present. There will also be a high-speed rail line roughly along this route by 2015.

India, too, is constructing an energy terminal at Sittwe, north of Ramree, on Myanmar's coast, that will potentially carry offshore natural gas northwest through Bangladesh to the vast demographic inkblot that is the Indian state of West Bengal. The Indian pipeline would actually split into two directions, with another proposed route going to the north around Bangladesh. Commercial goods will follow along new highways to be built to India. Kolkata, Chittagong and Yangon, rather than being cities in three separate countries, will finally be part of one Indian Ocean world.

The salient fact here is that by liberating Myanmar, India's hitherto landlocked northeast, lying on the far side of Bangladesh, will also be opened up to the outside. Northeast India has suffered from bad geography and underdevelopment, and as a consequence it has experienced about a dozen insurgencies in recent decades. Hilly and jungle-covered, northeast India is cut off from India proper by backbreakingly poor Bangladesh to the west and by Myanmar, hitherto a hermetic and undeveloped state, to the east. But Myanmar's political opening and economic development changes this geopolitical fact, because both India's northeast and Bangladesh will benefit from Myanmar's political and economic renewal.

With poverty reduced somewhat in all these areas, the pressure on Kolkata and West Bengal to absorb economic refugees will be alleviated. This immeasurably strengthens India, whose land borders with semi-failed states within the subcontinent (Pakistan, Nepal and Bangladesh) has undermined its ability to project political and military power outward into Asia and the Middle East. More broadly, a liberalized Myanmar draws India deeper into Asia, so that India can more effectively balance against China.

But while the future beckons with opportunities, the present is still not assured. The political transition in Myanmar has only begun, and much can still go wrong. The problem, as it was in Yugoslavia and Iraq, is regional and ethnic divides.

Myanmar is a vast kingdom organized around the central Irrawaddy River Valley. The ethnic Burman word for this valley is Myanmar, hence the official name of the country. But a third of the population is not ethnic Burman, even as regionally based minorities in friable borderlands account for seven of Myanmar's 14 states. The hill areas around the Irrawaddy Valley are populated by Chin, Kachin, Shan, Karen and Karenni peoples, who also have their own armies and irregular forces, which have been battling the Burman-controlled national army since the early Cold War period.

Worse, these minority-populated hill regions are ethnically divided from within. For example, the Shan area is also home to Was, Lahus, Paos, Kayans and other tribal peoples. All these groups are products of historical migrations from Tibet, China, India, Bangladesh, Thailand and Cambodia, so that the Chin in western Myanmar have almost nothing in common with the Karen in eastern Myanmar. Nor is there a community of language and culture between the Shans and the ethnic Burmans, except for their Buddhist religion. As for the Arakanese, heirs to a cosmopolitan seaboard civilization influenced by Hindu Bengal, they feel particularly disconnected from the rest of Myanmar and compare their plight to disenfranchised minorities in the Middle East and Africa.

In other words, simply holding elections is not enough if all elections do is bring ethnic Burmans to power who do not compromise with the minorities. The military came to power in Myanmar in 1962 to control the minority-populated borderlands around the Irrawaddy Valley. The military has governed now for half a century. Myanmar has few functioning institutions that are not military-dominated. A system with generous power awarded to the minorities must now be constructed from scratch; peaceful integration of restive minorities requires vibrant federal institutions.

Myanmar, it is true, is becoming less repressive and more open to the outside world. But that in and of itself does not make for a viable institutionalized state. In sum, for Myanmar to succeed, even with civilians in control, the military will have to play a significant role for years to come, because it is mainly officers who know how to run things.

But given its immense natural resources and sizable population of 48 million, if Myanmar can build pan-ethnic institutions in coming decades it could come close to being a midlevel power in its own right -- something that would not necessarily harm Indian and Chinese interests, and, by the way, would unleash trade throughout Asia and the Indian Ocean world.

Courtesy www.stratfor.com