Mahrosu Jantarawadee, 31, was Rusnee’s childhood sweetheart, the father of their two children, and part of a secretive Islamic insurgency fighting a brutal nine-year war with the Thai government that has killed more than 5,300 people.

Mahrosu died with 15 other militants while attacking a nearby military base in Bacho district on February 13. Acting on a tip-off, Thai marines repelled the attack with rifle fire and anti-personnel mines. “He died a martyr,” said Rusnee, 25, dabbing her eyes with a black headscarf.

Just over two weeks later, the Thai government agreed on peace talks in neighboring Malaysia with the insurgent group Barisan Revolusi Nasional (National Revolutionary Front, or BRN). Although the first round is set for Thursday, there has been no halt in the fighting and people in the region see no early end to one of Southeast Asia’s bloodiest conflicts.

In a rare interview, an operative for BRN-Coordinate, a faction blamed for most of the southern violence, told Reuters the talks were “meaningless” and “tens of thousands” of Malay-Muslims would fight on.

An older generation of insurgent leaders has struggled to control young jihadis like Mahrosu, said the operative, nicknamed Abdulloh. This raises doubts over the BRN’s ability to meet the Thai government’s key initial demand at the talks: stop the escalating bloodshed.

Thailand is dominated by Thai-speaking Buddhists, but its three southernmost provinces are home to mostly Malay-speaking Muslims. They have chafed under the rule of faraway Bangkok since Thailand annexed the Islamic sultanate of Patani a century ago. The latest and most serious violence erupted in the early 2000s.

“This round of talks will not result in any formal deals,” said Paradorn Pattanathabutr, secretary-general of the National Security Council (NSC), Thailand’s lead agency in the process. “We will ask them to reduce violence towards certain groups and soft targets.”

More insurgents were killed during the Bacho raid than in any other single clash since April 2004. But even this rare defeat revealed their growing military sophistication, the depth of local support they enjoy, and their links to Malaysia – long an insurgent safe haven and source of bomb-making materials and other supplies, say security analysts.

POORLY UNDERSTOOD

Thailand’s southern provinces are only a few hundred miles from Phuket and other tourist destinations, but the insurgency is poorly understood, partly because it doesn’t fit the pattern. Long-running sub-national conflicts are usually found in weak or failing states, not along the border of two prospering allies in a fast-developing region.

Thailand’s homegrown jihad also rarely blips on the global security radar. That’s because the militants have no proven operational link to Al Qaeda or regional terror groups such as the Indonesia-based Jemaah Islamiya, although they do boast a secretive, cell-like structure and are partly driven by post-9/11 jihadi zeal.

The militants, who number in the low thousands, are ranged against 66,000 soldiers, police and paramilitary forces spread across a conflict area half the size of Israel. Like their U.S. counterparts in Afghanistan, Thai soldiers face a ruthless enemy sheltering amid a largely hostile Muslim population.

Their pitiless response has further fueled the insurgency. The dispersal by soldiers and armed police of a protest at Tak Bai town in 2004 led to deaths of 85 Muslim men and boys, mostly by suffocation, after they were stacked four or five deep in army trucks.

Mahrosu Jantarawadee symbolizes the divide between Muslims and Buddhists in southern Thailand – a martyr to some, a murderer to others. He was born, killed and buried in Bacho, an area of rice fields and rubber plantations the Thai military calls a “red zone” of insurgent activity.

Hundreds of mourners cried “God is great!” at his funeral in Duku village. Mahrosu’s family and neighbors believe he died while fighting a holy war against a Thai government whose harsh assimilation policies have suppressed their religion, language and culture.

Mahrosu is no hero to the authorities or to the relatives of his alleged victims. The Thai military links him to an eight-year streak of gun and bomb attacks that killed at least 25 people. Sometimes, said the military, he shot his victims and then set their bodies alight. His mug shot appears on posters at heavily fortified police stations across the region.

One of his alleged victims was teacher Cholatee Jarenchol, 51, shot twice in the head in front of hundreds of children at a Bacho school on January 23. The children included Cholatee’s seven-year-old daughter. “She’s scared she’ll be killed next,” her mother Fauziah, 47, said.

Cholatee was one of at least 157 teachers killed by suspected insurgents since 2004, ostensibly for being government employees.

STUBBORN

Mahrosu was advised not to attack the Bacho military base, said Abdulloh, the BRN-C operative. A wiry man in his sixties dressed in a tracksuit and sneakers, Abdulloh met Reuters in a teashop in Yala, the capital of Yala province, in a shabby neighborhood known locally as “the West Bank”.

Like many militants, Abdulloh hides in plain sight in the towns of the region, although he kept the meeting brief and clutched a bag that he said concealed a pistol.

“He wouldn’t listen to the elders,” Abdulloh said, referring to Mahrosu. “They told him it was too risky to have so many fighters in one place. But he was stubborn and went ahead.”

It was Abdulloh’s task to monitor the movement of soldiers and police, and to liaise between militant cells and what he called “the elders”. He said nine of the 16 dead, including Mahrosu, were “commandos” – well-equipped veterans who join forces with villagers to form platoon-strength units for big attacks.

The Bacho operation illustrated an insurgent attempt to “shift military operations to a higher level”, said Anthony Davis, a Thai-based analyst at security consulting firm IHS-Janes. There are relatively fewer attacks than in previous years, but they are often better planned and more lethal, reflecting a “growing professionalization within insurgent ranks”, Davis said.

The insurgents are also making more – and bigger – bombs. On March 15, just two weeks after the Malaysia talks were announced, a 100-kg device exploded beneath a pick-up truck carrying three policemen through Narathiwat province, flipping the vehicle and scattering body parts across the road. All three died on the spot.

In towns and villages, insurgents move about with surprising ease, considering the massive deployment of security forces, and pay discreet but regular visits to their families.

“He usually stayed for less than an hour,” Rusnee said of Mahrosu. He was already on the run when they married in 2006. Many insurgents manage to raise families. Mahrosu and Rusnee have a six-year-old daughter and a 17-month-old son.

The ability to blend with the population also makes the militants a formidable enemy. Bacho-style insurgent attacks are logistically complex, said Thamanoon Wanna, commander of a Thai marine task force responsible for Bacho.

Weapons, ammunition and uniforms must be retrieved from multiple hiding places, then delivered to commandos arriving from all three war-torn provinces. “They have supporters in the village but right now we don’t know who they are,” Thamanoon said.

These militant cells have become “self-managed violence franchises”, said Duncan McCargo, a British scholar of Thailand and the author of Tearing Apart the Land, a book on the southern conflict. How to rein them in will top the Thai government’s agenda at this week’s talks in Kuala Lumpur.

LINKS ACROSS BORDER

Malaysia established its role as a regional peacemaker after helping broker a deal between the Philippine government and Muslim rebels in October. Doing the same in southern Thailand is complicated by the fact that insurgents often seek refuge across a porous border in Malaysia. Those suspected links, which the Malaysian government denies, have periodically strained ties with Thailand.

Yet, bringing peace to southern Thailand without Malaysian help would be like ending Northern Ireland’s “troubles” without the Republic of Ireland. “The Thais have got to stop demonizing Malaysia and be ready to work with them,” McCargo said.

The BRN-C operative Abdulloh was pessimistic about the talks. The main insurgent delegate, Hassan Taib, who has identified himself as “chief of the BRN liaison office in Malaysia”, has no control over the fighters, he said.

McCargo also questioned Hassan’s credentials, saying: “The question is whether he can bring other people to the table.” Historically, Thai governments have used dialogue to identify the movement’s leaders and “then buy them off or get rid of them,” said McCargo. “So you can understand why the militants are so suspicious.”

Thailand’s powerful military also has reservations. It has been lukewarm about the talks that confer legitimacy on an armed movement Thai generals have dismissed as more criminal than political.

The talks could encourage ethnic Malay Muslims in southern Thailand to express political aspirations Bangkok has long viewed as disloyal. Thailand’s militants are often described as “separatists”. But many southerners acknowledge that creating a tiny new Islamic republic sandwiched between Thailand and Malaysia is, as McCargo put it, “a fantasy”.

Abdulloh, who is bullet-scarred from a decades-old gunfight with Thai troops, seemed to be one of them. He wanted the Thai government to apologize for past human rights abuses and recognize a “Malay homeland”, but stopped short of demanding a separate state.

Even so, any solution will likely have to include greater autonomy for Pattani, Yala and Narathiwat. Thailand is highly centralized, with the governors of its 76 provinces appointed by Bangkok. The three southern border provinces were traditionally a dumping ground for venal or inept officials.

It’s unclear whether Thailand will offer greater self-rule, or anything else that will make the process any more successful than a string of semi-secret dialogues since 2005.

Winning over locals in the hardest-hit areas could be the greatest challenge.

“Of course we welcome a peace agreement, if the Thais are sincere,” said Zakaria bin Adbulrasid, whose 28-year-old son Barkih Nikming was also killed during the Bacho raid and given a martyr’s burial in the nearby village of Cuwo. “But their promises of peace and justice are all lies.”

(Editing by Bill Tarrant and Raju Gopalakrishnan)

So does something more desirable – iron ore – and supposedly in such huge quantities two Chinese companies have an $11-billion plan to extract it.

Their proposal – a steel plant and seaport linked by a 404-km (251-mile) railroad – has alarmed environmentalists, mystified mining and transport experts, and bolstered Cambodia’s reputation as an agent for Chinese expansionism in a region where the United States is increasingly competing for influence.

It is the latest in a series of mega-projects underscoring China’s growing economic clout in mainland Southeast Asia, while improving China’s access to supplies of raw material and ports in the Indian Ocean and South China Sea.

Work will soon begin on a $7-billion railway through Laos to link China’s Yunnan province with northeast Thailand. And in Myanmar work is almost finished on a $3-billion twin pipeline project to carry oil and gas to Yunnan from Myanmar’s Bay of Bengal coast.

The railway, port and steel project will be Cambodia’s largest, with a price tag not far off the value of the country’s $12.9 billion economy. The steel plant in Rovieng, in northern Cambodia, will be its first. The seaport on a Cambodian island in the Gulf of Thailand will be connected to the mainland by a 3-km (1.9-mile) bridge. The railroad will almost span Cambodia, although its exact route hasn’t been revealed.

“This is 65-percent iron,” says Sun Qi Cai, 58, caressing a heavy, gleaming lump of Rovieng rock. “Not many places have such high-quality ore.” That includes China, the world’s largest steel maker, where most ore has an iron content of less than 40 percent.

Sun is a Chinese site manager for Cambodia Iron and Steel Mining Industry Group, which on December 31 signed a deal to build the three-part project with China Major Bridge Engineering Co, a subsidiary of state-owned behemoth China Railways Group.

The iron ore is destined for the steel plant – by law, ore cannot be exported from Cambodia. Mining experts could not hazard a guess as to how much ore is recoverable in Rovieng and there was no indication of how much steel it would produce and where the products would go.

Those are just some of the unanswered questions about the project.

CHINA’S CLOUT

Speaking at the signing ceremony, Cambodia Iron and Steel general manager Zhang Chuan You said work would begin in July and be finished within four years. But Cambodia’s transport minister Tram Iv Tek, who also attended the ceremony, professed to know almost nothing about it. The conspicuous absence of authoritarian Prime Minister Hun Sen also left many wondering whether China’s mystery train was going anywhere.

“There are a lot of real things happening here with Chinese money,” says Daniel Mitchell, a long-time American resident who runs a Phnom Penh investment firm called SRP International. “I don’t think this railroad is one of them.”

Mining experts question whether northern Cambodia has enough mineral wealth to justify the project’s costs. Transport experts wonder why the Chinese railroad will not connect with Cambodia’s existing train system, which is already being refurbished at a cost of at least $141.6 million, or either of its ports.

The ambitious project could be as much strategic as economic. Chinese investment pledged in Cambodia has totaled $9.1 billion since 1994, including almost $1.2 billion in 2011 – eight times more than the United States, according to the Cambodia Investment Board. China is also Cambodia’s largest aid donor.

That money carries political clout. Last year, Cambodia used its powers as chair of the Association of Southeast Asian Nations (ASEAN) to stymie discussion on the South China Sea, where China’s territorial claims overlap those of five other countries. Cambodia emerged as a staunch China ally willing to put the interests of its giant neighbor over those of its ASEAN members.

The lesson for Washington was clear.

“For U.S. strategists, if you neglect certain ASEAN countries you hurt U.S. interests,” says American scholar Carlyle Thayer, an Asia Pacific security expert at the Australian Defence Force Academy in Canberra. “There’s a price to pay … because China’s economic dominance carries political influence, the U.S. has to compete across the board.”

AMATEURISH FACADE

Cambodia Iron and Steel doesn’t look like a billion-dollar company or, as Chinese media reports describe it, a Cambodian one.

It is registered to three Chinese nationals who, says Rovieng site manager Sun, are brothers. The only Cambodian found working at its Phnom Penh headquarters, a five-story building flanked by a paint shop and a Korean restaurant, was the cleaner.

Despite its amateurish facade, other evidence suggests that Cambodia Iron and Steel is moving ahead with its project, and Cambodian officials know more than they publicly state.

On July 15 last year, telecoms and electricity officials were summoned to the Ministry of Public Works and Transport to explain to a Chinese representative from Cambodia Iron and Steel where the country’s fiber optic and electrical cables were buried.

“He wanted to know so that the train track didn’t cut through them,” said a Cambodian who attended the meeting.

An official at the company’s Shanghai-based partner, China Major Bridge Engineering, said it would begin construction this year but gave no specific date.

CATALYSTS FOR PROTEST

In Myanmar, where a quasi-civilian government replaced a military dictatorship in March 2011, Chinese mega-projects have been catalysts for protest. China armed and supported Myanmar’s hated military during decades of Western sanctions, and is still resented by many people.

China’s ambassador to Myanmar, Li Junhua, has promised greater transparency from Chinese companies doing business in the country. In Cambodia, however, Chinese companies remain tight-lipped and closely allied with an authoritarian government that last year jailed record numbers of land-rights activists.

In one token of their close collaboration with the government, Chinese projects in Cambodia are often guarded by soldiers or military police. Chinese workers often dress in military fatigues.

No sign marks the entrance to Cambodia Iron and Steel’s vast site near Rovieng village, only a ramshackle house occupied by armed Cambodian soldiers who stopped Reuters from entering.

“I’m scared the Chinese will get angry,” one soldier said.

Som Soeun, 64, a community leader, was among hundreds of villagers who attended a 2011 ceremony in Rovieng to announce the building of a steel plant. Also present was Suy Sem, Cambodia’s Minister of Mines and Energy, who told villagers not to protest against a plant “needed for the country’s development,” Som Soeun recalled.

With the help of local people, Reuters reporters entered the same area and found no sign of construction. Trucks and other heavy machinery lay idle. Lumps of iron ore littered the deserted access roads.

The Cambodia Iron and Steel’s depot in Rovieng village already occupies what used to be community ground: the local soccer field. The depot also lay dormant. A villager who had befriended its few Chinese workers said they complained of being broke, bored and homesick.

The prospect of a railroad cutting a swathe through homes and land is unsettling, says Som Soeun. So is the continued silence from government and company officials.

“I am worrying every day now,” he says.

Tun Aung, a practicing medical doctor and Islamic leader, was arrested in June 2012 after clashes between Buddhists and Muslims in Rakhine State killed at least 80 people. He was accused of inciting unrest in the town of Maungdaw, although Amnesty International said credible eyewitness reports suggested that Tun Aung “actively tried to defuse the violence.”

He was not allowed to choose his own lawyer, nor to meet privately with his state-appointed one, “giving him no chance of a fair trial,” says Amnesty. Even so, Tun Aung was sentenced to a total of 15 years in jail.

Seven of them were for offenses under the Emergency Provisions Act (1950), one of a number of laws “commonly used to arbitrarily detain activists or criminalize dissent” under Myanmar’s old junta, according to the Assistance Association for Political Prisoners (AAPP). These laws, which still remain on Myanmar’s books, help create “an environment conducive to politically motivated arrests,” says AAPP. At least 200 dissidents remain behind bars, says the group.

Amnesty has designated Tun Aung a prisoner of conscience and called for his immediate and unconditional release. He could be granted a presidential amnesty “before too long,” reported The Irrawaddy in November. Maybe. Or President Thein Sein could decide that keeping 200 or so people behind bars is no big deal. After all, Myanmar’s more developed Southeast Asian neighbors still routinely incarcerate citizens for their political views.

Indonesia has about 76 prisoners of conscience, most of them jailed for peaceful political expression in the restive provinces of Papua and Maluku, says Amnesty. At least 31 activists and dissidents were jailed in Vietnam in the first nine months of 2012 alone, estimated Human Rights Watch. And dozens—perhaps scores—are serving lengthy sentences in Thai prisons under draconian laws that forbid even mild criticism of the country’s monarchy.

The canister contained tear gas, the police later said, but the explosion flayed so much skin from his arms and legs that he remains in hospital weeks later.

“The police gave no warning before they fired,” said Pyinyananda, 19, nursing his bandaged arms.

He was one of at least 67 monks and six other people injured on November 29, when riot police raided camps set up by villagers protesting against a $1 billion expansion of the Myanmar Wanbao copper mine in northern Myanmar.

The raids sparked nationwide outrage that dented the reformist credentials of President Thein Sein, a former general whose quasi-civilian government replaced a decades-old dictatorship in 2011. They also underscored how, after a year of often breathtaking change, the bad old Myanmar still looms over the new.

“Our leaders haven’t kicked their dictatorial habits,” said former monk Nyi Nyi Lwin, better known as Gambira, who was jailed for his role in 2007 pro-democracy protests. “We’re no longer an absolute dictatorship, but we’re not yet a genuine democracy.”

Few ordinary Burmese have felt the impact of reform, but most have high expectations and feel emboldened to speak out. The mine dispute suggests that while 2012 was Myanmar’s year of hope and change, 2013 has the potential to be a year of protests and crackdowns.

INTERSECTION OF GRIEVANCES

The copper mine sits at a crowded intersection of grievances and interests – local, national and international; political, economic and religious.

Myanmar Wanbao is a unit of China North Industries Corp, a Chinese weapons manufacturer. It operates the mine – the country’s largest – with the Union of Myanmar Economic Holdings Ltd (UMEHL), a vast holding company belonging to the powerful Myanmar military.

Villagers say the expansion at Letpadaung, a set of low hills on the west bank of the Chindwin River, involves the unlawful confiscation of thousands of acres of their land. Monks say it has destroyed or damaged the holy sites of a famous Buddhist teacher who died in 1923.

Their months-long protest ended in a pre-dawn, military-style operation reminiscent of the suppression of monk-led protests in 2007. Back then, Thein Sein, a former general, was the loyal prime minister of retired dictator Than Shwe.

The November crackdown triggered a public-relations nightmare. A government headed by an ex-general and filled with former soldiers had used force to protect the business interests of the Myanmar military and of the giant neighbor that had armed and supported it during decades of Western sanctions: China.

Amid nationwide street protests by monks, Thein Sein cancelled a state visit to Australia and New Zealand to focus on damage control. Police and ministers apologized to the monks, and a commission was established to investigate local grievances about the mine. It is headed by Nobel Peace Prize-winning opposition leader Aug San Sul Kyi.

The crackdown came just 10 days after Myanmar basked in a visit from U.S. President Barack Obama. His November 19 appearance in the former pariah state lasted just six hours, but for many Burmese it heralded their re-entry into the world after decades of isolation.

Obama’s trip followed news that the U.S. military would invite Myanmar counterparts to observe war games in neighboring Thailand in January 2013. The invitation was a powerful symbolic gesture toward a Myanmar military that has yet to acknowledge its well-documented human rights abuses.

The mine crackdown now has some wondering if the U.S. rapprochement is too hasty. In a paper published December 12, the Heritage Foundation, a conservative Washington think tank, said the Obama Administration’s policy “lacks sufficient protections against Burmese backsliding on reforms.” It urged Congress to re-impose major U.S. sanctions if Myanmar’s progress was insufficient.

DENTED OPTIMISM

Myanmar’s reforms have not stalled. But they have entered a complex and less headline-grabbing phase that could test the nerve of Thein Sein’s reformers and the patience of his long-suffering people.

This year the government has held a free and fair by-election, all but scrapped media censorship, reformed Myanmar’s antiquated currency, and set in motion a crowded legislative agenda to tackle rural poverty and encourage foreign investment.

But there have been setbacks. A year that began with the release of hundreds of political prisoners ended with activists alleging that the government is arresting dissidents almost as fast as it is freeing them. In the days after their crackdown at the mine, police detained at least eight activists in Yangon.

The government still has the trust of the people, said Aung Min, minister of the president’s office and one of Thein Sein’s top reformers. “It was not a crackdown. It was crowd control,” he said, adding that the government has already apologized for the injuries.

The year also started with a slew of ceasefires with ethnic insurgent armies. Several are now looking shaky, and a 20-month conflict in Kachin State between government troops and Kachin rebels is escalating.

And a relationship once considered essential to the reform process is showing signs of strain. Suu Kyi speaks privately with increasing bitterness of Thein Sein, say diplomats and other visitors to her semi-fortified lakeside home in Yangon. Her spokesman, Ohn Kyaing, denied there is any rift.

The mine protest also capped a year in which Myanmar’s monks returned as a major political force – for good and for bad. Monks have been famed for years for their pro-democracy stance. This year, some of them were shown to have an anti-Muslim stance as well.

Monks have held street rallies to oppose the mostly stateless Rohingya Muslims of Rakhine State in western Myanmar. There, two eruptions of sectarian violence this year with Rakhine Buddhists left hundreds dead and tens of thousands homeless.

In an October outbreak, monks openly incited Rakhine mobs to attack Muslims. The ethnic cleansing that followed has left Muslims elsewhere in Myanmar fearing for their own safety.

The setbacks should serve as a reality check for foreign investors eyeing business opportunities in one of Asia’s last frontier economies, some Myanmar watchers say. The reform process will be lengthy and “very hostage to events,” said Sean Turnell, an expert on the Myanmar economy at Macquarie University in Australia. “The mine illustrates the sort of event that could send things off the rails.”

“THEY ARE NOT OUR ENEMIES”

You could fit Yankee Stadium into the Myanmar Wanbao copper mine. Twice.

Giant trucks look like toys as they ascend on switchback curves from its depths. The hole is surrounded by towering heaps of copper ore which, with every new truckload, inch their way towards surrounding villages.

The company’s compound in Letpadaung is a neat grid of bungalows surrounded by a fence topped with barbed wire and security cameras. Outside the gate is a singed and threadbare lawn where the main protest camp once stood. Inside, riot police march back and forth, shouting and banging riot shields with their truncheons.

“Regular training,” said Police Lieutenant Colonel Thura Thwin Ko Ko, 49, one of commanders on duty the night of the crackdown. He is a former army major decorated for bravery during bloody jungle campaigns against rebels in Karen State. (“Thura” is a military honorific meaning “brave.”)

Thwin Ko Ko said police had been patient with the demonstrators, who had no legal permission to protest. “They are not our enemies,” he said. “They are our brothers and sisters. They are not educated and don’t understand the law.”

But he said this patience wore thin as people from other areas joined the protest, along with “outside groups” whom Thwin Ko Ko didn’t identify. “Our country cannot stand it forever,” he said. “So we had to take action.”

On the evening before the crackdown, “we asked them to go back to their homes and monasteries at least 15 times,” he said. “Nobody wanted to make violent action.” More warnings were made at 3 a.m. on November 29, before police used water cannon and threw tear-gas canisters.

The order to clear the protest sites, he said, came from “our superiors” in the Ministry of Home Affairs, which oversees the police, and from the office of the prime minister of Sagaing state, of which Monywa is the capital.

Police were told not to fire rubber bullets or even to use truncheons, said Thwin Ko Ko. “We only used water cannon and tear gas.” This action was “in accordance with the law.” The president’s office issued a statement on the day of the crackdown which used similar language.

BURN INJURIES

The burn injuries of dozens of monks still recuperating at Mandalay General Hospital tell a different story.

According to Western diplomats in Yangon, two types of munitions were found at the protest site. One was a canister bearing the letters “CS” – an abbreviation for the active chemical in tear-gas. The other was a smaller, bullet-like munition with no markings.

The munitions were standard-issue police weapons for dispersing crowds, said Twin Ko Ko. If the police had known what kind of impact the munitions would have, they would never have deployed them, he said. “We were really surprised what kind of smoke bomb it is.”

Why did tear-gas canisters explode like incendiary grenades? That’s one mystery opposition leader Aung San Suu Kyi’s commission investigating the incident hopes to solve by the end of December. “When we can find enough evidence, then we will announce who is guilty and why,” she said at a December 6 news conference.

At her request, four children with mental disabilities aged from one to 16 years were sent to Yangon Children’s Hospital, after locals claimed they had been poisoned by emissions from a sulphuric acid factory in the area that’s owned by UMEHL.

Doctors found “no symptoms of exposing to acid,” said a government news release printed on the front page of the state-run New Light of Myanmar on December 14.

BURMESE BIN LADEN

The state-run media also has been running photos of Thein Sein making offerings at Buddhist temples. With the monk-led Saffron Revolution of 2007 so recent a memory, the president seems at pains to persuade his people that the mine crackdown was an aberration.

The monkhood has about 400,000 members and remains a powerful force in Myanmar. CDs with sermons by celebrated monks take pride of place on street stalls that also sell pirated Hollywood movies.

A key monk in the mine protest was Wirathu (his holy name), a short, shaven-headed abbot at New Massoyein in Mandalay, a vast monastic complex housing almost 3,000 monks.

Wirathu, 44, lives in a monastery whose walls are decorated with larger-than-life photos of himself. In an interview, he said he dispatched 170 monks to Monywa – not to demonstrate, he stressed, but to safeguard the protesters. The police crackdown enraged him, he said.

“Honestly, I felt I wanted to fight weapons with weapons,” he said.

Wirathu is also one of the most prominent articulators of Burmese resentment against the country’s Muslims, whom he refers to by the pejorative “kalar.”

He blames Muslim Rohingyas for recent sectarian violence in Rakhine State, despite evidence, first documented by Reuters, of ethnic cleansing by Buddhist Rakhines in October. He alleged that Muslims deliberately razed their own houses to win a place at refugee camps run by aid agencies. Wirathu said his militancy is vital to counter aggressive expansion by Muslims, who he says marry and forcibly convert Buddhist women.

“I am a Burmese bin Laden,” he grinned.

Valerie Amos, the United Nations humanitarian chief, visited the refugee camps in December and described conditions as among the worst she had ever seen. Thousands of Rohingya men, women and children are cramming onto ramshackle fishing boats and setting sail for other Southeast Asian countries.

Former political prisoner and monk Gambira said monks are less anti-Muslim than Wirathu’s views suggest. In a nation where a third of all people live below the poverty line, the monkhood will inevitably reflect the beliefs of an ill-educated populace, he said. Gambira also noted that Buddhist monks in Yangon recently held an interfaith meeting with Muslim, Christian and Hindu religious figures.

ANTI-CHINESE SENTIMENT

The copper mine is not the first Chinese project to become the target of popular anger. Thein Sein stunned Beijing after suspending the $3.6 billion Chinese-built Myitsone dam in Sep. 2011 after fierce public opposition to its construction.

In the aftermath of the mine crackdown, the fear now is that simmering resentment could spark protests over Myanmar’s largest project, also Chinese-built: a twin oil and gas pipeline being built across the country into China’s energy-hungry Yunnan province.

In most of Myanmar, Chinese populations are long-established and well-integrated. Not so in Mandalay and the north, where the copper mine lies. Here, hundreds of thousands of Chinese migrants have settled in the past 20 years, often with citizenship papers obtained illegally.

Their access to credit and business networks in China gives them an advantage over existing native-run businesses, which has raised tensions with locals, reported the Brussels-based think tank Crisis Group in November. “There is clearly a risk of intercommunal violence, something that the Chinese government has long been concerned about,” it said.

Suu Kyi’s investigation of the mine crackdown will likely be highly critical of the Myanmar police. But it’s unclear how far she will risk antagonizing either of the mine partners, Myanmar Wanbao (meaning China) or the military-run UMEHL. Both Beijing and the military are powerful supporters of Thein Sein.

“There will never be an answer with which everyone will be satisfied,” she said at a December 6 press conference in Yangon. “But our commission’s only mission is to reveal the truth.”

POLITICAL PRISONERS

Still, Suu Kyi feels that Thein Sein reneged on promises to release all political prisoners, said activists who have spoken with her recently. Fifty-one dissidents were released on November 19, just as Obama arrived on the first visit to Myanmar by a serving U.S. president. But at least 200 remain behind bars, according to the Assistance Association for Political Prisoners, a Burmese human-rights group.

Obama spoke at Yangon University of “a future where a single prisoner of conscience is one too many.” Listening from the front row was the former monk Gambira, a lantern-jawed 33-year-old with thick-rimmed glasses.

He had been sentenced to 68 years in prison for his leading role in the 2007 Saffron Revolution protests by monks. He was freed in January 2012 with many other prominent political prisoners. He says he suffers from poor mental health due to torture and abuse while in custody.

On December 1, less than two weeks after Obama’s speech, Gambira was arrested for an act of civil disobedience. Soon after his January release, Gambira broke the padlocks on monasteries shut down by the former junta, so that monks could occupy them again.

He was charged with trespassing and vandalism, then released on bail after spending 10 days in the notorious Insein Jail.

Gambira believes he was arrested to prevent him from organizing anti-mine protests. He admits to meeting with “angry” Mandalay monks just after the crackdown. “The monks won’t budge until the whole (mining) project is cancelled,” he said.

The opponents of the copper mine seem unfazed by the government’s tactics. As of two weeks ago, half a dozen monks and about 60 lay people, mostly from surrounding villages, had set up a new protest encampment east of the mine’s Letpadaung expansion.

“Every crackdown creates a new generation of activists,” Gambira said.

(Reporting by Andrew Marshall; Editing by Michael Williams and Bill Tarrant)

Now 59, he has a new mission as deputy minister of defense: explaining why the military intends to retain a dominant role in a fragile new era of democratic reform.

In a two-hour interview with Reuters, the first by a leader of the armed forces with the international media since Myanmar’s historic reforms began last year, Aung Thaw depicted the military as both architect and guardian of his country’s embryonic democracy.

That’s why the military has no plans to give up its presence in parliament, he said, where its unelected delegates occupy a quarter of the seats. Nor will the military apologize for its violent suppressions of pro-democracy protests in 1988 and 2007 that led to crippling Western sanctions.

“The government is leading the democratization,” said Aung Thaw. “The Defense Services are pro-actively participating in the process.”

The military will also retain a leading role in Myanmar’s economy through its holding companies, according to the firms, which are among the country’s biggest commercial enterprises.

Aung Thaw’s comments came ahead of Barack Obama’s visit to Myanmar on November 19 – the first by a serving U.S. president to the country also known as Burma.

The generals’ reluctance to loosen their grip on power and acknowledge past abuses raises fundamental questions for this strategic country at Asia’s crossroads: Can Myanmar be reborn after decades of dictatorship without the military itself also undergoing profound change? And is the United States too quickly embracing the generals?

“When there is genocide in Darfur,” said President Obama in his Nobel Peace Prize acceptance speech in 2009, “systematic rape in Congo, repression in Burma – there must be consequences.” Three years later, the United States is rewarding Myanmar’s once-reviled military by granting it observer status at next year’s Cobra Gold war games in Thailand. The exercises form part of Washington’s strategic “pivot” to Asia to counter the growing influence of China, traditional patron of Myanmar’s former junta.

While in Myanmar, Obama is expected to meet both President Thein Sein, a former general, and opposition leader Aung San Suu Kyi, the Nobel Peace Prize laureate. Obama adviser Samantha Power wrote a post on the White House website last week signaling that Obama would use the trip to pressure Myanmar to do more about continuing ethnic violence and human-rights abuses against civilians.

“The government and the ethnic nationalities need to work together urgently to find a path to lasting peace that addresses minority rights, deals with differences through dialogue not violence, heals the wounds of the past, and carries reforms forward,” she wrote.

THE REAL POWER

Aung Din, executive director of the U.S. Campaign for Burma, an advocacy group, also urged Obama to meet with “his real counterpart” – meaning Vice Senior General Min Aung Hlaing, Myanmar’s commander-in-chief.

Myanmar’s emergence from authoritarianism has been compared to the Arab Spring, but the trigger wasn’t street protests. The opening was stage-managed by retired generals such as Thein Sein, whose dramatic reforms cleared the way for an engagement with the West and a suspension in sanctions. A government now dominated by former generals has begun repairing a dysfunctional economy with foreign expertise and investment.

Since taking power in March 2011, Thein Sein’s quasi-civilian government has relaxed censorship, allowed street protests and held a by-election that put Suu Kyi into parliament. In return, the West has suspended most sanctions, while Japan has promised up to $21 billion in aid and investment. Foreign investors are pouring into one of the world’s last frontier markets.

The military, however, has remained practically a law unto itself, its power and privileges enshrined in a 2008 constitution drafted by the former junta. Fears persist that hardliners may emerge to stall or roll back the reforms.

The generals have long insisted the reforms were the culmination of their “roadmap to democracy” announced nearly a decade ago. Diplomats here cite other pressures, including fears of economic collapse and further popular unrest, growing unease over China’s dominance, and a desire to shrug off Myanmar’s pariah status in an increasingly connected Southeast Asia.

The military is showing some signs of change. Deadly sectarian violence in Rakhine State in October was a major test for government troops, who showed restraint in policing the unrest between ethnic Rakhine Buddhists and Rohingya Muslims.

Ethnic insurgencies rage elsewhere along Myanmar’s borderlands, where battle-hardened soldiers have committed their worst abuses and, in northern Kachin State, commit them still, say human rights groups.

“EVERYBODY SUFFERED”

Myanmar’s army is called the Tatmadaw, or “Royal Force,” a phrase evoking the age of Burmese warrior kings. Its modern version was founded by General Aung San, the independence hero and father of Aung San Suu Kyi, who led his troops against both British and Japanese occupiers.

Respect for the Tatmadaw began to fade in 1962, when the late dictator General Ne Win seized power and ushered in the catastrophic “Burmese Way to Socialism.” A nationwide pro-democracy uprising that began in 1988 was so brutally repressed it scarred the nation’s psyche. Thousands were killed or injured when troops opened fire on unarmed protesters. Hundreds more were jailed, including Suu Kyi, who spent 15 of the next 21 years under house arrest.

The savagery provoked global outrage and led the United States and Europe to impose sanctions. Some military officers remain on visa blacklists in Western countries.

In the interview, deputy defense minister Aung Thaw described 1988 as a “very, very sad memory for us”. Military intervention was necessary to halt nationwide anarchy that threatened to “forever” change Myanmar’s borders, he said. “In 1988, the reality is the whole country was in a chaotic situation. Everybody suffered, including our armed forces.”

The military was “the only strong institution left in that chaotic situation to maintain law and order,” he said. “At the time, we had no other option. We tried to restore law and order to protect the civilian population.”

And the population was grateful, he insists. “If you were in this country at that defining moment, you would hear (this) sound”, he said, emitting an audible sigh of relief. “Because everybody felt insecure, even in their own homes.”

Kyaw Min Yu recalls it differently. Better known as Ko (“Brother”) Jimmy, he was protesting with other students in March 1988 by Inya Lake in the main city of Yangon when security forces attacked. Scores of students were shot dead or drowned. Later, he said, he saw a soldier stab a schoolgirl with a bayonet.

“I’ll never understand why they were so cruel to us students, who were about the same age as their sons and daughters,” said Ko Jimmy, who spent 20 years as a political prisoner and is today a leading political activist.

Shaken by the 1988 protests in the cities, and embroiled in conflict with ethnic insurgent groups in border regions, the military expanded. By 1995, its ranks had almost doubled to about 350,000, according to Myanmar military scholar Andrew Selth of the Griffith Asia Institute in Brisbane, Australia. When Buddhist monks led pro-democracy protests in 2007, the military was able to snuff them out easily.

The military’s refusal to acknowledge the suffering it caused is part of a deep-rooted arrogance that undermines hopes for reconciliation, said Ko Jimmy. This is especially true in ethnic areas, where attacks by government soldiers have left generations of bad blood.

The military is overwhelmingly Burman, as Myanmar’s ethnic majority is called, which compounds the sense among minorities that it is an invader, not a liberator.

The Thailand Burma Border Consortium, the main aid agency caring for refugees along the Thai-Myanmar frontier, estimates that since 1996 more than 3,700 villages have been destroyed or abandoned in the eastern Myanmar regions of the Karen ethnic group. More than 1 million people have been displaced and tens of thousands killed. The military has been accused by defectors and international rights groups of ordering soldiers to rape women and leave them pregnant to breed out resistance.

“It would take a miracle for the military to reform,” said Myra Dahgaypaw, a 36-year-old ethnic Karen. Soldiers killed her parents when she was a young child, she said, and later killed her elder brother, his wife and their daughter. Soldiers also shot dead her uncle after forcing him to watch them rape his wife, she said.

Now working for an advocacy group in Washington, D.C., Dahgaypaw urged the United States to slow its rapprochement with Myanmar and its military. “I feel like they are in a rush and forget about what’s really important.”

Ten ethnic insurgent groups have this year signed preliminary cease-fires. But about 75,000 people have been displaced in 16 months of fighting in Kachin State in northern Myanmar, many of them fleeing forced labor, killings, rape and torture by the Myanmar military, the New York-based Human Rights Watch reported in June.

Aung Thaw said government troops were exercising “maximum restraint” in Kachin State, despite attacks from the rebel Kachin Independence Army. “It is our duty to protect the civilian population in that area,” he said.

CONSTITUTIONAL SHIELD

The military faces no institutions powerful enough to compel it to account for its past history. The 2008 constitution, drafted by the former junta, gives soldiers immunity from civilian prosecution and indemnifies former junta members. It also gives the military autonomy over its own affairs and sweeping powers in civilian life.

The constitution reserves a quarter of the seats in Myanmar’s upper and lower houses for officers, as well as three important cabinet posts – the ministries of defense, home affairs and border affairs – and one of Myanmar’s two vice-president positions.

Serving or former officers also dominate key civilian institutions, including a national security council that can assume power in an ill-defined state of emergency. Myanmar’s commander-in-chief is not a popularly elected president or prime minister. The current one, Min Aung Hlaing, was handpicked by former dictator Than Shwe and outranks the Defense Minister.

“For anyone in the military, even today, you don’t challenge someone of a higher rank,” said an officer who spoke on condition of anonymity. “So how can the Defense Minister ever say no to the Commander-in-Chief? He wouldn’t dare.”

This helps explain why the Defense Ministry, which in theory subjects the military to civilian control, is half-deserted. The commander-in-chief sits in the War Office, a vast complex of offices, mansions and bunkers in the newly built capital of Naypyitaw where, said Aung Thaw, journalists are forbidden to go for national security reasons.

Aung Thaw nonetheless contended the military is “under civilian control.” He noted that the commander-in-chief must be proposed and approved by a civilian body: the National Defense and Security Council, a presidential advisory group resembling the White House’s National Security Council. But the NDSC is only nominally civilian. Five of its 11 members are serving military officers; another five are ex-officers, including its chairman, President Thein Sein.

While parliament can reduce or increase the defense budget, it cannot audit it, and has no control over the military’s vast off-budget financial holdings.

Amending the constitution to remove the military’s reserve of seats – a major goal for the Suu Kyi-led opposition – requires more than three-quarters support of parliament, which would have to include at least some military delegates.

It seems an almost impossible task. The delegates, mostly mid-ranking officers, tend to vote as a bloc on issues affecting the armed forces, suggesting they are following orders from superiors, the opposition says.

Not so, said Aung Thaw. “This is democracy. They are there. They decide.” When they do vote as a bloc, he said, it is only because “our thinking is very similar.” The military delegates “are there to safeguard the constitution,” Aung Thaw said. “As long as required and necessary, Defense Services will be in the parliament.”

“STATE SECRET”

The military’s influence on the economy is equally profound. It is a major player in many industries through two vast holding companies: Myanma Economic Holdings Ltd (MEHL) and the Myanma Economic Corporation (MEC).

Both are blacklisted by the U.S. Treasury, which means American companies are banned from doing business with them. But they remain deeply involved in gem trading, banking, tourism, breweries, property, transportation and construction. They have ties to a coterie of businessmen who were cronies of the old junta, and their finances remain a state secret.

MEHL, founded in 1990, has been a reliable source of off-budget funds for the military. It enjoys unrivaled access to import permits and monopolies through a web of 38 wholly-owned subsidiaries and nine joint ventures, staffed by 14,000 workers. For years, ex-dictator Than Shwe controlled the profits. Some went to special projects, or bought the loyalty of retired officers, said Sean Turnell, an expert on the Myanmar economy at Macquarie University, Australia. Much of it went to pensions or otherwise vanished.

Today, with foreign investors descending on Myanmar, MEHL is changing, the company says. In its first public statements to Western media since reforms began, MEHL told Reuters it has no plan to expand, echoing government assurances it will retreat from the economy as private investors assert themselves.

“MEHL has not sold or bought any enterprises this year,” it said in a written reply to questions. “It does not have any detailed talks with or coordination with anybody.”

Last year, MEHL gave up lucrative auto-import licenses and ended a monopoly in the edible-oils industry. It said it has begun to pay taxes. “Maybe in future they have to behave just like an ordinary company,” said Soe Thein, a minister in the president’s office and former naval commander-in-chief.

Richard Horsey, a researcher for the International Crisis Group and a former U.N. official who maintains senior-level contacts, said he expects MEHL and other military holdings to steadily lose influence. As foreign investors arrive, the economy opens up and competition grows, the holding companies could even start to lose money.

“It is clear it (MEHL) is no longer the untouchable entity it once was,” he said.

IN RETREAT?

For a retreating enterprise, however, MEHL is very active. It plans to build an oil refinery near the Dawei deep-sea port, one of Myanmar’s most ambitious projects, and one Japan is expected to underwrite.

In northwest Sagaing region, MEHL is the biggest partner in the country’s largest mining project, a copper deposit in Monywa that has stirred the most substantial protests since Myanmar emerged last year from isolation.

As many as 10,000 villagers have confronted authorities near the mine, claiming unlawful seizure of thousands of acres of land to make way for a $1 billion expansion. China North Industries Corp, a leading Chinese weapons manufacturer, signed a pact with the government of Myanmar in June 2010 to develop the mine after Canada’s Ivanhoe Mines Ltd pulled out in 2007. MEHL emerged with the largest share.

“They all know we gave money for their land. They know they have to give up their land,” said Myint Aung, chief representative for MEHL at the mine. “This is a national project. It is in the interest of the country and of the region.”

Farmers acknowledged they received compensation but believed it was for the destruction of crops during the project’s construction, not to buy their land.

MEHL also occupies the 73-year-old former central bank headquarters, a neoclassical building at the centre of the economy since British colonial rule. Japanese forces printed currency from here in World War Two. In 1952, Myanmar’s first kyat currency notes were issued here.

Today, its rows of tellers look hardly changed from 1993, when MEHL’s Myawaddy Bank moved in.

“It has plans to expand businesses when it gets the permission from the central bank,” MEHL said of Myawaddy Bank in its statement. MEHL disclosed the bank’s assets for the first time — authorized capital of 50 billion kyat ($56 million) and paid-up capital of 44 billion kyat ($50 million). It runs 20 branches nationwide.

The military’s other industrial arm, the Myanmar Economic Corp (MEC), is also recalibrating. MEC, which operates 37 factories with about 10,000 workers, says it is talking to Asian and Western companies about partnerships.

For the military itself, there is no shortage of money. A law passed in 2011 allows the commander-in-chief to access a “special fund” for unspecified defense and security expenses. It requires a request to the president but escapes parliamentary oversight.

The military already gets about 14 percent of the 13.04 trillion kyat ($15.3 billion) national budget.

“NOBODY LIKES THE SHOES”

The town of Pyin Oo Lwin on the Shan Plateau, about 40 miles northeast of the city of Mandalay, offers a glimpse into the military’s struggle to adapt to a more democratic era.

The junta groomed officers here at its Defense Services Academy. (Motto: “The Triumphant Elites of the Future”). Its buildings date back to the early 1900s when Pyin Oo Lwin was a British colonial hill station.

On streets teeming with saffron-robed monks and women in sarongs, the DSA’s cadets stand out. They wear maroon berets, dark-green uniforms and thick black belts. Most students must buy their own stripes, uniforms and Chinese-made boots that wear out quickly. “The shoes are horrible,” said an officer who teaches at the academy. “Nobody likes the shoes.”

The academy is changing, but slowly. Its annual intake of cadets has halved to about 1,000, the DSA said. In the past, cadets had little access to the outside world, said the officer, who spoke on condition of anonymity. Mobile phones, the Internet and personal computers were banned. Today, cadets can surf the web and bring their own laptops (some have iPads). Mobile phones remain forbidden.

The academy also ended some practices that would qualify as abusive, the officer said. Previously, vacation requests were granted on condition the cadets recruit new soldiers while on leave. That included the homeless and minors. Since April, cadets are no longer required to forcibly recruit, he said.

Deputy Defense Minister Aung Thaw said the military faces “very serious allegations” about its use of child soldiers and forced labor. The Defence Ministry pledged in June to halt the recruitment of minors and release those in service. On September 3, the military discharged 42 underage recruits at a Yangon ceremony attended by U.N. and international aid agencies. Activists say many child recruits remain in military service.

Since 2009, 20 lieutenant colonels and over 1,700 adjutant officers have taken a four-day course designed by UNICEF to prevent underage recruitment, the U.N. child-protection agency said. It includes sessions on human rights and international humanitarian law.

The International Labor Organization is training the military about the legal implications of forced labor. This includes the well-documented practice of dragooning villagers to carry ammunition or, in some cases, lead a path through mine-fields. “Now we are cooperating fully with ILO and UNICEF,” Deputy Defense Minister Aung Thaw said.

Even so, human-rights training is not on the curriculum at the academy, the teaching officer said.

Inside the academy’s musty walls, where typewriters can be heard clacking away, requests to interview cadets and soldiers were turned down. In another remnant of Myanmar’s recent past, plainclothes agents trailed reporters until they had left town.

(Additional reporting by Aung Hla Tun; Editing by Bill Tarrant and Michael Williams)

Thein Sein has been both a dictator’s henchman and a man
widely seen as a Nobel Peace Prize contender. He rose to power
in a rabidly anti-American military junta, yet spearheaded its
efforts to build better relations with the United States.

His past remains opaque, even as he leads Myanmar into a new
era of transparency after nearly five decades of dictatorship.

When his quasi-civilian government took power four months
after a rigged election in November 2010, Thein Sein was easy to
dismiss as a puppet for a still-powerful military lurking behind
a new democratic facade. Few predicted what happened next.

Thein Sein launched an ambitious programme of political and
economic reform that could transform the impoverished nation of
60 million people also known as Burma.

He released political prisoners, scrapped censorship,
legalised trades unions and protests, sought peace with ethnic
minority insurgents and pushed through legislation on everything
from land reform to foreign investment.

Thein Sein’s reputation as a corruption-free moderate among
hawkish hardliners has earned him widespread praise from world
leaders, top economists and Nobel Peace Prize winner and
opposition leader Aung San Suu Kyi.

For years the junta’s greatest foe, Suu Kyi was released
from house arrest a week after the November 2010 election. She
met Thein Sein nine months later and, in a critical endorsement,
declared him “sincere” about reforming Myanmar.

With his reformist zeal and growing domestic popularity,
Thein Sein was widely tipped to win the Nobel Peace Prize in
October.

A Western diplomat who has met the bespectacled, soft-spoken
president many times described him as “modest, courageous and
committed”.

“Those who knew him before he became president felt that he
was aware of the poverty of his people, had seen the progress
made by others in the region and recognised the need for
change,” he said.

“HIS OWN VISION”

Those comments were echoed by U.N. Secretary-General Ban
Ki-moon, who got to know Thein Sein when he was the military
regime’s prime minister from 2007-2011. He felt Thein Sein had
been inspired by the world around him.

“He must have seen and heard the real situation … the
international perception and Myanmar’s image,” Ban told a group
of journalists during his last trip to Myanmar in May.

“As soon as he became president, he has his own visions to
make his country better and more prosperous, where human dignity
would be respected.”

But Thein Sein’s reputation still suffers from his role as a
loyal servant to former dictator Than Shwe, who during 19 years
in power jailed political opponents, gunned down pro-democracy
protesters and commanded a military accused of killing, raping
and torturing members of ethnic minority groups.

Thein Sein was described last year as “Than Shwe’s most
malleable puppet” by Irrawaddy, a prominent Myanmar news service
long based in neighbouring Thailand.

A man of humble rural beginnings and son of a landless
farmer and monk, Thein Sein joined the military in his early
20s. But he was always more of a bureaucrat than a soldier,
serving as Than Shwe’s personal assistant in the 1990s.

He kept his reputation as “Mr Clean” despite four years as a
commander in the lucrative drug-producing Golden Triangle
region, where several successors were tarred with allegations of
smuggling and abuse of power.

In a 2001 speech to officials in the Golden Triangle, Thein
Sein referred to two suspected drug-lords as “real friends”,
according to Bertil Lintner, the author of seven books on
Myanmar.

The two suspects were leaders of the United Wa State Army,
described by the U.S. Drug Enforcement Administration as
“Southeast Asia’s leading heroin and methamphetamine trafficking
organisation”.

“CONSUMMATE INSIDER”

Under the dictatorship, regional commands often served as
springboards to higher office. In 2003, Thein Sein was given a
senior position in the State Peace and Development Council, as
the military junta was then known, becoming part of Than Shwe’s
secretive and paranoid inner circle.

A 2007 U.S. Embassy cable described him as a “consummate
insider”.

He was prime minister when the regime sparked international
outrage by crushing pro-democracy protests led by Buddhist
monks. He also presided over a national convention to draft the
2008 constitution, which enshrines the military’s powers and
privileges, and was dismissed by the White House at the time as
a sham.

The convention, which was boycotted by Suu Kyi’s National
League for Democracy party as undemocratic, lasted 15 years.
“Actually, we could have wrapped all of it up in a day, but
there’s a need to make it look good, isn’t there?” Thein Sein
said in 2007, according to the Shan Herald Agency for News, a
website run by exiles in Thailand.

The following year he led the widely criticised response to
Cyclone Nargis, which killed at least 130,000 people and
flattened villages across the Irrawaddy River delta.

The junta initially denied entry to international aid
agencies and was so tardy in providing its own humanitarian
relief that the international community considered delivering
aid by force.

But Thein Sein is also said to have “appealed directly” to
the much-feared Than Shwe to belatedly allow foreign aid workers
into the disaster zone, according to a 2008 U.S. diplomatic
cable.

The devastated areas included Konkyu village, Thein Sein’s
birthplace.

As Than Shwe’s prime minister, Thein Sein led the junta’s
attempts to improve ties with the United States during an August
2009 visit to Myanmar by Senator Jim Webb. “The generals left no
doubt they are reaching out,” said a 2009 U.S. diplomatic cable.

As president, Thein Sein seems to have distanced himself
from his junta days. In a speech to the U.N. General Assembly in
New York in September he referred to the past government as
“authoritarian” and in an address to parliament in March spoke
of the need to “root out the evil legacies deeply entrenched in
our society”.

She wanted rice for their three children. He said they couldn’t afford it. Apartheid-like restrictions had prevented Muslims like Tun Naing from working for Buddhists here in Rakhine State along Myanmar’s western border, costing the 38-year-old metalworker his job.

The couple screamed at each other. Tun Naing threw another punch. Neighbors joined in the row.

The commotion stirred up ethnic Rakhine Buddhists in the next village, who began shouting anti-Muslim slurs. Relations between the two communities were already so tense that six soldiers were stationed nearby. Tun Naing’s village was soon besieged by hundreds of Rakhines. And Myanmar was plunged into a week of sectarian violence that by official count claimed 89 lives, its worst in decades.

The unrest exposes the dark side of Myanmar’s historic opening: an unleashing of ethnic hatred that was suppressed during 49 years of military rule.

It is a crucial test for an 18-month-old reformist government in one of Asia’s most ethnically diverse countries. Jailed dissidents have been released, a free election held and censorship lifted in a democratic transition so seamless that U.S. President Barack Obama is scheduled to make a congratulatory visit on November 19.

State media have largely absolved authorities of any role in the October unrest, depicting it mostly as spontaneous eruptions of violence that often ended with Muslims burning their own homes.

But a Reuters investigation paints a more troubling picture: The wave of attacks was organized, central-government military sources told Reuters. They were led by Rakhine nationalists tied to a powerful political party in the state, incited by Buddhist monks, and, some witnesses said, abetted at times by local security forces.

A leader in the regional party, the Rakhine Nationalities Development Party, denied it had a role in organizing the assaults but conceded the possible involvement of grass-roots supporters. “When the mob rises with very hot ethnic nationalism, it is very difficult to stop them,” Oo Hla Saw told Reuters in an interview.

Two townships – Pauktaw and Kyaukphyu – saw the near-total expulsion of long-established Muslim populations, in what could amount to ethnic cleansing. One village saw a massacre of dozens of Muslims, among them 21 women.

Interviews with government officials, military and police, political leaders and dozens of Buddhists and Muslims across a vast conflict zone suggest Myanmar is entering a more violent phase of persecution of its 800,000 mostly stateless Rohingya, a Muslim minority in an overwhelmingly Buddhist country.

CALLED “BENGALIS”

Rohingya have lived for generations in Rakhine State, where postcard-perfect valleys sweep down to a mangrove-fringed coastline. But Rakhines and other Burmese view them as illegal immigrants from neighboring Bangladesh who deserve neither rights nor sympathy. Rakhines reject the term “Rohingya” as a modern invention, referring to them instead as “Bengali” or “kalar” – a pejorative Burmese word for Muslims or people of South Asian descent.

October’s attacks marked an acceleration of violence against the Rohingya. An earlier wave of unrest in June killed at least 80 people. Afterwards, the Rakhine State government imposed a policy of segregating Muslim communities from Buddhists across an area roughly the size of Switzerland.

More than 97 percent of the 36,394 people who have fled the latest violence are Muslims, according to official statistics. Many now live in camps, joining 75,000 mostly Rohingya displaced in June. Others have set sail for Bangladesh, Thailand and Malaysia on rickety boats, two of which have reportedly capsized, with as many as 150 people believed drowned.

There is no evidence to suggest the Buddhist-dominated national government endorsed the violence. But it appears to have anticipated trouble, stationing troops between Muslim and Buddhist villages a month ago, following rumors of attacks.

“This is racism,” said Shwe Hle Maung, 43, chief of Paik Thay, where impoverished Muslim families cram into thatched homes without electricity. “The government can resolve this if it wants to in five minutes. But they are doing nothing.”

The Rakhine violence is also a test for Nobel Peace Prize-winner Aung San Suu Kyi, now opposition leader in parliament, whose studied neutrality has failed to defuse tensions and risks undermining her image as a unifying moral force. Suu Kyi, a devout Buddhist, says she refuses to take sides.

At stake is the stability of one of Myanmar’s most commercially strategic regions and the gold-rush of foreign investment that has come with an easing of Western economic sanctions. The United States and the European Union have suspended, not lifted, sanctions, and have made resolving ethnic conflicts a precondition for further rewards.

In Rakhine State, however, the conflict has spread, most recently to areas where Muslims have long lived peacefully with Buddhists, according to a reconstruction of the violence from October 21 through October 25.

In Paik Thay, the Buddhist Rakhine mobs hurled Molotov cocktails at wooden huts, while Tun Naing and his neighbors fled. Muhammad Amin, 62, said he was beaten with a metal pipe until his skull cracked. The initial violence ended after soldiers fired their guns into the air and police arrested a Rakhine.

The bloodshed was only beginning.

“WE HAD NO PROBLEMS BEFORE”

The next morning, Monday, October 22, hundreds of Rakhine men gathered on the southern outskirts of Mrauk-U, an ancient capital studded with Buddhist temples about 15 miles north of Paik Thay. Then they marched to Tha Yet Oak, a Muslim fishing village of about 1,100 people, and set alight its flimsy bamboo homes.

The Muslim villagers fled by boat to nearby Pa Rein village. The Rakhine mob followed, swelling to nearly 1,000, according to Kyin Sein Aung, 66, a Rakhine farmer from a neighboring Buddhist village.

He didn’t recognize the mob; he described them as “outsiders” and said he suspected they came from Mrauk-U. Hundreds now poured across a stream separating the villages. Others came by boat. By noon, there were about 4,000 Rakhines, according to both Buddhist and Muslim villagers.

Four soldiers shot in the air to disperse the crowd but were easily overwhelmed, witnesses said. The Muslims fought back with spears and machetes, torching a rice mill and several Rakhine homes. Rakhines fired homemade guns.

Six Muslims were killed, including two women, said M.V. Kareem, 63, a Muslim elder in Pa Rein – a toll confirmed by the military. He and other villagers said they saw familiar faces and uniformed police in the angry crowd.

“I don’t know why it started,” said Kareem, who has friends in the Buddhist village. Buddhist farmer Kyin Sein Aung was baffled, too. For years, he worked in rice fields shoulder-to-shoulder with his Muslim neighbors. “We had no problems before.”

Communities like Pa Rein had avoided the June violence. But new strains emerged with the subsequent segregation of Muslim and Buddhist villages, a draconian order imposed by the Rakhine State government. Intended to prevent more violence, it backfired.

Impoverished Muslim villagers could no longer buy rice and other supplies in Buddhist towns. Transgressors were sometimes beaten with sticks or fists to warn others, according to people interviewed in six Muslim villages. Fishing nets were confiscated.

Desperation grew, with rice stocks dwindling as the monsoon peaked in October. Some Muslim villagers stole rice from Buddhist farmers, further stoking anger, said farmer Kyin Sein Aung.

By 4:30 p.m. that same Monday, several thousand Rakhines were massed outside Sam Ba Le, a village in neighboring Minbya township. By now, a pattern was emerging.

Rakhines flanked the village, hurling Molotov cocktails and firing homemade guns, said a village elder. Muslims fought back, sometimes with spears or machetes, but were overpowered. Government troops shot rounds into the air. By the time the crowd left Sam Ba Le at 6 p.m., one Muslim man had been killed and two-thirds of its 331 homes razed.

As night fell, the townships of Mrauk-U and Minbya imposed 7 p.m. to 5 a.m. curfews. But worse was to come.

“RAKHINES WILL DRINK KALAR BLOOD”

Tuesday began with a massacre. Reuters reporters visited dozens of villages in Rakhine State. But there was only one where their entry was barred by soldiers and police: the remote, riverside community of Yin Thei, in the shadow of the Chin mountains.

What happened there suggested a bolder and better organized mob, aided by incompetent or complicit police.

By 7 a.m. on Tuesday, hundreds of Rakhine arrived on boats to surround Yin Thei, said a resident contacted by telephone. By late afternoon, the Muslim villagers were fending off waves of attacks. The resident said children, including two of his young cousins, were killed by sword-wielding Rakhines. Most houses were burned down.

Musi Dula, a Muslim farmer from a nearby village, said he heard gunfire at about 5 p.m. A Yin Thei villager telephoned Musi Dula’s neighbours and said police were shooting at them. Another farmer nervously told Reuters how he watched from afar as police opened fire from the village’s western edge, also at about 5 p.m.

The official death toll is five Rakhines and 51 Muslims killed at Yin Thei, including 21 Muslim women, said a senior police officer in Naypyitaw, the new capital of Myanmar. He denied security forces opened fire or abetted the mobs. The Yin Thei resident put the toll higher, saying 62 people were buried in small graves of about 10 bodies each.

As Yin Thei burned, the last of nearly 4,000 Rohingya Muslims were fleeing the large port town of Pauktaw, in a dramatic exodus by sea that had begun five days earlier.

Tensions had simmered since October 12, when four Rohingya fishermen were killed off Pauktaw, said a military source. Afterwards, local authorities had ordered Rohingya to stay in their own villages for their safety. Men couldn’t work in town, and few dared to go fishing.

“The government gave us food but it wasn’t enough,” said Num Marot, 48. “We didn’t dare stay.”

Pauktaw’s Rohingya began cramming into boats for the two-hour voyage to the state capital, Sittwe. Num Marot’s new home would be a tarpaulin tent in a squalid camp already packed with tens of thousands of people displaced by the June violence.

About 30 minutes after the last boat pushed out to sea, the two Rohingya neighborhoods in Pauktaw were set ablaze, witnesses said. All 335 homes were destroyed. The charred and roofless frame of a once-busy mosque is marked with graffiti: “Rakhines will drink kalar blood,” it reads, using the slur for Muslims.

Kay Aye, deputy chairman of Pauktaw township, insists Rohingya set alight their own homes and blames the communal problems on the Muslim population’s doubling in 10 years. “Muslims want all people to become Muslims. That’s the Muslim problem,” he said. “Most of the Muslims here are uneducated, so they tend to be ruder than Rakhines.”

Tuesday night fell. Soon a new inferno began in Kyaukphyu, a sleepy port town 65 miles southeast of Sittwe with strategic significance: gas and oil pipelines lead from this township across Myanmar to China’s energy-hungry northwest.

So far, the violence had targeted Rohingya Muslims. About a fifth of Kyaukphyu town’s 24,000 people are Muslims, and many of them are Kaman. The Kaman are recognized as one of Myanmar’s 135 official ethnic groups; they usually hold citizenship and can be hard to tell apart from Rakhine Buddhists.

Most Kyaukphyu Muslims lived in East Pikesake, a neighborhood wedged between Rakhine communities and the jade-green waters of the Bay of Bengal.

Relations between the two communities had began to unravel after the June violence. The destruction of Buddhist temples by mobs in Muslim Bangladesh in early October further stoked the animosity.

The first fire began in East Pikesake on Tuesday evening, and soon dozens of houses, Rakhine and Muslim, were ablaze. The streets around the Old Village Jamae Mosque, one of East Pikesake’s two mosques, became the front line in pitched battles between the two communities.

Rakhines fought with swords, iron rods and traditional Rakhine spears. The Muslims had jinglees – long darts made from sharpened bicycle spokes or fish hooks, which are fitted with plastic streamers and shot from catapults.

With the sea behind them, Pikesake’s Muslims were cut off from escape by Rakhine crowds so large that the security forces, which numbered about 80 police and 100 soldiers, were overwhelmed, said Police Lieutenant Myint Khin, Kyaukphyu’s station commander. “We couldn’t control them,” he said.

Police fired tear gas and rubber bullets to disperse Muslim and Rakhine mobs, said Police Lieutenant Myint Khin. The military fired live rounds, said a source in the security forces, but evidently not into the crowd. Staff at Kyaukphyu hospital told Reuters they treated injuries from blades, jinglees and fire, but none from bullets.

“TAUGHT THEM A LESSON”

The next morning, the rest of East Pikesake went up in flames. Myint Hlaing, a local official, said the heat was “more intense than a crematorium.” It singed the fronds of five-story-high palm trees.

Rakhine men had begun pouring in from surrounding villages. Unpublished video shot by an amateur cameraman shows young men in red bandanas entering the town in convoys of tractors. They helped to terrorize Muslims living elsewhere in Kyaukphyu, according to Muslim and Rakhine witnesses. Police Lieutenant Myint Khin said the security forces were too overstretched to stop them.

Men with swords pulled Susu, 39, and her husband Than Twa, 48, from a house in west Kyaukphyu. “They cut him here and here and here,” said Susu, chopping at her arms and legs. She recognised many of her attackers: They were neighbours, she said. Susu ran off to find some soldiers, who escorted her back to rescue her husband. He was dead.

Only two forces could give the mob pause. The first was the national military, which scattered crowds by shooting in the air. The second was Rakhine Buddhist officials such as Myint Hlaing.

Some officials joined the mob, said local Muslims, but others confronted it. Facing cries of “Kill the kalar protector!” Myint Hlaing, 68, pleaded with angry Rakhines outside Kaman Muslim homes in his neighbourhood. “If we hadn’t protected the Kamans, their houses would be destroyed and the people dead,” he said.

By mid-morning, the military began evacuating Muslims by bus to a guarded refugee camp outside town.

Back in Pikesake, which was still burning, the Muslims had only one exit: the sea. A flotilla of fishing boats was preparing to leave its blazing shores.

“People swam out to the boats but were chased down and stabbed before they got there,” said Abdulloh, 35, a Rohingya fisherman. Xanabibi, 46, a Kaman woman, said she watched from a boat as three Rakhine men with swords set upon a Muslim teenager. “I watched them … cut up his body into four pieces,” she said.

Rakhine Buddhists claim they witnessed atrocities, too. Myint Hlaing said he saw a Muslim on one departing boat hold aloft a severed Rakhine head.

By mid-afternoon, at least 80 boats, many overloaded with 130 or more people, had set sail for Sittwe, said witnesses. An additional 1,700 or more Muslims ended up at a squalid, military-guarded camp outside Kyaukphyu.

The official statistics tell of a lopsided battle at Kyaukphyu. Of the 11 dead, nine were Muslims. Nearly all of the 891 houses destroyed belonged to Muslims; nearly all of the 5,301 people displaced were Muslims. Four of Kyaukphyu’s five mosques were destroyed.

A prominent Rakhine businessman, who requested anonymity, showed little sympathy for his former neighbours. “The majority taught them a lesson,” he said.

“HOT ETHNIC NATIONALISM”

The last spasm of violence took place at Kyauktaw, a town north of the state capital, Sittwe. At that point, the military shot into the crowd – and, for the first time, killed the Buddhists it had long been accused of siding with.

Soldiers opened fire to prevent Rakhine villagers on two boats from storming a Rohingya Muslim community, said Aung Kyaw Min, a 28-year-old Rakhine from Taung Bwe with a bullet in his leg. “I don’t know why the military shot at us,” he said. Two people died and 10 were wounded, villagers said.

In a separate incident the same day, security forces shot at Rakhines on Kyauktaw’s outskirts, killing two and wounding four, a witness told Reuters.

The shootings seemed to send a message to the mobs. The violence stopped that day.

The senior police officer in Naypyitaw acknowledged that police were forced to fire at both Muslims and Rakhines in their attempts to subdue large crowds.

The official death toll from the October violence now stood at 89. The real toll could be higher. The extent of the killing at Yin Thei village remains unclear. Reports persist that scores of Muslims fleeing Pauktaw drowned after Rakhines rammed their boat. Nearly 4,700 homes were destroyed in 42 villages.

In a statement that Thursday, President Thein Sein warned that the “persons and organizations” behind the Rakhine State violence would be exposed and prosecuted. The mobs were well-organized and led by core instigators, some of whom moved village to village, military sources told Reuters.

In Kyaukphyu, however, police have so far arrested only seven people – six of them for looting. In Mrauk-U township, where most killings occurred, only 14 people have been arrested, said the military intelligence officer. The apparent impunity of the instigators is sending a chilling message to Muslim communities across Myanmar.

The intelligence officer, who has direct knowledge of the state’s security operations, identified the suspected ringleaders as Rakhine extremists with ties to the Rakhine Nationalities Development Party, or RNDP, which was set up to contest Myanmar’s 2010 general election. He didn’t name any suspects. Buddhist monks stoked the unrest with anti-Muslim rhetoric, he added.

RNDP Secretary-General Oo Hla Saw denied that his party organized any mobs. But he acknowledged the possible involvement of supporters, low-level officials and “moderate monks who become radical when they think about Muslims.”

Oo Hla Saw blamed local authorities for failing to heed rumors of impending violence, and Islamist radicals for inflaming tensions. For many Rakhines, he adds, the term Rohingya has jihadist overtones associated with the “Mujahid,” autonomy-seeking rebels in northern Rakhine State from 1949 to 1961, who called themselves ethnic Rohingya. (Independent historians say the rebels did popularize the term “Rohingya,” but cite a few references to it since the 18th century.)

Even today, Oo Hla Saw said, the Rohingya want “to set up an autonomous Islamic community. They are systematically scheming to do that.”

Most Rohingya struggle simply to get by. A 2010 survey by the French group Action Against Hunger found a malnutrition rate of 20 percent, far above the emergency threshold set by the World Health Organization.

Many arrived as laborers from Bangladesh under British rule in the 19th century – grounds the government now uses to deny them citizenship. Rohingya were effectively rendered stateless under the 1982 Citizenship Law, which excluded them from the list of indigenous ethnic groups. Officials refer to them as Bengalis. Most Rohingya found it hard to apply for naturalized citizenship, since they couldn’t speak Burmese or prove long-term residence.

Monks, symbols of democracy during 2007 protests against military rule, have helped fuel the outrage against Muslims. A week before the violence erupted, monks led nationwide protests against plans by the Organisation of Islamic Cooperation (OIC), the world’s biggest Islamic body, to set up a liaison office in Rakhine State.

An anti-OIC rally in Sittwe on October 15 “angered Muslims here,” conceded Nyar Nar, 32, one of the Rakhine monks who led it. He regards Muslims as foreign invaders. “As monks, we have morality and ethics,” he said. “But if outsiders come to occupy our land, then we will take up swords to protect it.”

In some parts of the state, the mood is celebratory. “This is the best time because there are no Muslims here,” said Zaw Min Oo, a Rakhine shoe seller in Pauktaw township. Nearly 95 percent of a 20,000-strong Muslim community there is now gone.

The peace might be short-lived. The state’s clumsy attempts at segregation helped create the conditions for the October violence. Further segregation – including the confining of tens of thousands of Muslims in seething camps – could spark more violence. Curfews remain in force across much of Rakhine State.

In Kyaukphyu town, starving dogs sniff through the ashes while municipal workers heave scrap metal into a truck. The only Muslim left in town is Ngwe Shin, an old woman suffering from mental illness. She can often be found near the market, shuffling past vandalized or shuttered homes.

(Additional reporting by Martin Petty and Reuters staff; Editing by Bill Tarrant and Michael Williams)

The secretary-general of the Rakhine National Development Party (RNDP) denies his party led or organized attacks against Rohingya Muslims in a wave of sectarian violence in late October that killed at least 89 people. But grass-roots members may be involved, he conceded in an interview with Reuters. A military intelligence officer told Reuters RNDP members were among the instigators.

The RNDP, set up in 2010 to run in Myanmar’s first elections in two decades, is known for tapping into a centuries-old nationalist fervor. The Rakhine are an ethnic minority within Myanmar who make up a majority in Rakhine State in the country’s West. Many RNDP members proudly recall the Rakhine Buddhist kingdom that dominated the area until a 1784 invasion by Burmans – the largest of Myanmar’s ethnic groups, who are also primarily Buddhists.

After the first Anglo-Burmese War of 1824-26, the British Raj annexed the region, known then as Arakan, and built a powerful economy with labor from neighboring Bangladesh. The RNDP says descendents of those workers invented an entirely new ethnicity, Rohingya, to stake an ancestral claim to the area and earn Myanmar citizenship. Rohingya contend their roots stretch back centuries in Rakhine State.

“They make many fabrications,” said Oo Hla Saw.

The Rakhines’ historic rivals, the Burmans, today dominate the country’s ruling Union Solidarity and Development Party (USDP), led by former generals of the military junta that oppressed Myanmar for nearly half a century. USDP Chairman Thein Sein, a Burman former general, leads Myanmar’s 18-month-old reformist government.

In Rakhine State, the RNDP remains a powerful force, a magnet for ethnic Rakhine nationalists and tough competition for the USDP in the area.

President Thein Sein has warned the RNDP it could be dissolved if found to have incited attacks on Muslims, according to the RNDP and a military source. But the party doesn’t seem worried. Early this month, Oo Hla Saw met Aung Min, a minister in the president’s office.

“He told us that the government does not intend to link the violence to any one political party,” said Oo Hla Saw. “But lower elements of our party may have been involved in this fighting, he told us.” Aung Min didn’t reply to a request for comment.

“We only want peace and stability,” Oo Hla Saw added. “But on the grass-roots level, our supporters can be involved in this fighting. Some villagers were arrested for holding hand-made guns. They may be our party members.”

(Reporting by Jason Szep and Andrew R.C. Marshall; Editing by Bill Tarrant and Michael Williams)

The United Nations said 22,587 people had now been displaced after unrest between Muslim Rohingyas and Buddhist Rakhines claimed at least 67 lives in Rakhine State and tested the reformist mettle of the quasi-civilian government that replaced Myanmar’s oppressive ruling junta last year.

“We were told to stay in our homes but then they were set on fire,” said Ashra Banu, 33, a mother of four who fled the coastal town of Kyaukpyu after its Muslim quarter was razed on October 25.

“When we ran out people were being shot at by Rakhines and police,” she said. “We couldn’t put out the fires. We just tried to run.”

New York-based Human Rights Watch earlier released before-and-after satellite images showing the near total devastation of the Kyaukpyu’s Muslim quarter.

Located about 120 km (75 miles) south of the Rakhine State capital Sittwe, Kyaukpyu is crucial to China’s most strategic investment in Myanmar: twin pipelines that will carry oil and natural gas from the Bay of Bengal to China’s energy-hungry western provinces.

No new clashes were reported on Sunday, but a Reuters journalist at Te Chaung camp near Sittwe witnessed a constant trickle of new arrivals, mainly from Kyaukpyu, where more than 811 buildings and houseboats were destroyed according to Human Rights Watch’s analysis of satellite imagery.

The government estimates at least 3,000 homes have been destroyed across in Rakhine State since October 21. Rights groups say the number of people killed is likely far higher than the official death toll.

“The Rakhines came to attack us with knives. They set fire to our homes, even though we have nothing there for them. I left in only the clothes I am wearing,” wept a 63-year-old woman who said her name was Zomillah, as she sat on a crowded space in Te Chaung camp. “I can’t go back.”

Abdul Awal, 30, police stood by as Rakhines burned their homes. “The Rakhines beat us, and the police shot at us. We ran to the sea and they followed us, beating us and shooting at us,” he said. “I have to start a new life now.”

A Buddhist Rakhine in Kyaukpyu tells a different story. Contacted by telephone by Reuters, he said Rakhines and Muslims had fought each other with knives, swords, sticks and slingshots. Overwhelmed, the Muslims then “set fire to their own houses as a last resort and ran away,” he said. The resident estimates 80 to 100 Muslim boats left Kyaukpyu that day.

“MANY PEOPLE KILLED”

Barefoot Muslim men and women alighted from engine-less fishing boats and climbed the muddy embankment to Te Chaung camp carrying children and what meager possessions they had salvaged from the inferno.

“I saw many people killed,” said Noru Hussein, 54, another ex-resident of Kyaukpyu. “We didn’t fight back. How could we? We live in a place surrounded by Rakhine villages. We just fled to the beach and escaped by boat.”

Te Chaung camp was created after a previous explosion of sectarian violence in June killed more than 80 people and displaced at least 75,000 in the same region. Already squalid and overcrowded, the camp was ill-equipped to cope with more inhabitants.

Forty-seven boats carrying 1,945 Rohingya men, women and children have landed at villages near Sittwe in the past few days, said a local official, who requested anonymity.

Myanmar’s Buddhist-majority government regards the estimated 800,000 Rohingyas in the country as illegal immigrants from Bangladesh and denies them citizenship. Bangladesh has refused to grant Rohingyas refugee status since 1992. The United Nations calls them “virtually friendless”.

People at Te Chaung said many more boats full of Rohingya had left Kyaukpyu but had yet to reach land.

The camp lies on a remote coast at the end of a pot-holed road from Sittwe. Its tents and two-story huts are linked by muddy lanes and guarded by about a dozen unarmed officials.

The only obvious aid consists of sacks of rice from the World Food Program. The empty sacks double as sleeping mats. Many people bed down beneath trees.

Reuters saw no medical workers. Some of the camp’s inhabitants suffer from malaria. The children are naked and often malnourished.

Mohammed Jikeh, 34, a former fishseller, has lived here since the June violence, which he said claimed the lives of 11 relatives.

“We have no hope,” he said. “We want this violence to stop. We want to live in peace. But like this none of us can survive.”

The United Nations said the violence hit eight townships or districts, destroying 4,600 homes, and the number of people displaced could rise.

“I am gravely concerned by the fear and mistrust that I saw in the eyes of the displaced people,” Ashok Nigam, the U.N. resident and humanitarian coordinator said in a statement on his return from a tour of Rakhine State’s trouble spots.

“The violence, fear and mistrust is contrary to the democratic transition and economic and social development that Myanmar is committed to,” he said in a statement.

(Reporting by Reuters staff,; Writing By Andrew R.C. Marshall, Editing by Jason Szep and Jonathan Thatcher)

Myanmar has been invited to observe Cobra Gold, which brings together more than 10,000 American and Thai military personnel and participants from other Asian countries for joint annual maneuvers, officials from countries participating in the exercises told Reuters.

“It’s significant. In the past, Myanmar has always been unhappy about this Cobra Gold, thinking that it was directed against them and was like a step towards invasion,” said Dr Tin Maung Maung Than, a senior fellow at the Institute of Southeast Asian Studies in Singapore and expert on Myanmar’s military.

The invitation is part of a carefully calibrated re-engagement with Myanmar’s military under the umbrella of humanitarian dialogue, the sources said, constituting one of the boldest rewards for Myanmar’s new semi-civilian government after 49 years of direct military rule.

It is also seen as a first step towards U.S.-Myanmar military-to-military ties, cut off after 1988 when soldiers opened fire on pro-democracy protesters in a crackdown that killed or wounded thousands and led to the house arrest of democracy champion Aung San Suu Kyi.

The invitation came after intense lobbying by Thailand, co-host of the exercises, the sources said.

It could prompt charges that Washington is moving too quickly in seeking to rehabilitate a military accused of continued human rights violations in ethnic regions such as Kachin State where tens of thousands of people have been displaced in 16 months of fighting.

Refugees fled forced labour, killings, rape and torture by the Myanmar military, reported Human Rights Watch in June.

The invitation follows a visit this week by a delegation led by Michael Posner, the U.S. State Department’s top human rights official, to Naypyitaw, the capital of Myanmar, also known as Burma. The U.S. team also included Deputy Assistant Secretary of Defense Vikram Singh and other U.S. military officials.

The talks on the Myanmar side were led by Deputy Minister for Defence Commodore Aung Thaw. Myanmar state media reported that the “two sides held talks on levels and operations of defence institutions of Myanmar and U.S. and exchanged views on future dialogue and bilateral cooperation.”

U.S. officials in Bangkok and Washington declined to comment.

“If there is a decision to move forward with military-to-military operations with Burma, then we are going to be prepared to support that the best we can,” the head of U.S. Pacific Command, Navy Admiral Samuel Locklear, told journalists in Bangkok on Tuesday.

HISTORIC U.S. TIES

The invitation is another illustration of the Obama administration’s pivot this year from Iraq and Afghanistan to focus national security resources on the Asia-Pacific region.

Cobra Gold take places in Chon Buri, a province east of Bangkok where the United States built up a massive military presence during the Vietnam War. It began in 1980.

Last year, about 10,000 U.S. military personnel took part, along with about 3,400 Thais. Five other countries participated — Indonesia, Japan, Malaysia, Singapore and South Korea. And nine countries sent observers, including China.

The U.S. military once had strong ties with the Tatmadaw, as Myanmar calls it military, a word that translates as “Royal Force” and recalls an age of Myanmar’s warrior kings.

Even when it was a dictatorship, Myanmar sent more officers to the United States than any other country. More than 1,200 officers trained there between Myanmar’s independence from Britain in 1948 and General Ne Win’s military coup in 1962, according to Maung Aung Myoe, author of “Building the Tatmadaw: Myanmar Armed Forces since 1948.”

Ne Win’s coup ushered in nearly half a century of isolation and misrule, but the United States maintained military ties as a bulwark against the spread of communism from neighbouring China.

Some 255 Myanmar officers graduated from the United States from 1980 to 1988 under the International Military Education and Training program, more than from any other country, said Maung Aung Myoe. The program was halted, and U.S. sanctions were imposed, after the junta crushed the 1988 uprising and refused to honor the results of a general election won by Suu Kyi’s party two years later.

AMERICAN REMAINS

Re-engagement began in earnest with U.S. Secretary of State Hillary Clinton’s historic visit to Naypyitaw in November last year. Clinton said she spoke with President Thein Sein about recovering the remains of U.S. servicemen who died in Myanmar during World War II, noting that “the search for missing Americans once helped us repair relations with Vietnam.”

During World War Two, nearly 1,000 Americans and 600 planes were lost over Myanmar due to bad weather and Japanese guns while flying from India to China. About 730 Americans remain unaccounted for, according to the U.S. Defense Department.

The Hawaii-based unit Joint POW/MIA Accounting Command (JPAC) ran three missions in Myanmar before its patron, former spy chief Khin Nyunt, was purged by ex-dictator Than Shwe in 2004. After Clinton’s visit, the United States and Myanmar governments began talks about resuming the missions.

In August, a team of military intelligence officers from Myanmar visited JPAC to learn about remains recovery techniques and to discuss operations in Myanmar, said the U.S. Defense Department. JPAC’s plans to resume missions in Myanmar remain “very tentative,” its media chief Jamie Dobson told Reuters.

British efforts to re-engage with the Myanmar military have also begun. Retired general Sir Mike Jackson, one of the British Army’s most prominent figures, met Myanmar’s deputy commander-in-chief General Soe Win in Naypyitaw on September 21. They “frankly discussed promotion of ties” between the British and Myanmar militaries, reported the state-run Myanmar News Agency.

(Editing by Jonathan Thatcher)