WASHINGTON — Obama administration officials on Tuesday said they would lift a broad array of sanctions on Myanmar, removing restrictions on state-owned banks and businesses as they seek to reward a historic move toward democracy in a country dominated for decades by brutal military rule.
The moves, to take effect on Wednesday, will allow American individuals, banks and companies to do business with all Burmese financial institutions, easing the flow of exports in and out of Myanmar, formerly known as Burma. It will also enable United States citizens living and working there to pay rent and buy goods without running afoul of the law.
The easing of restrictions is the latest effort by President Obama to use diplomacy coupled with sanctions relief to prod toward greater openness a country that the United States once isolated. That principle was at the heart of Mr. Obama’s agreement last year with Iran, which relaxed sanctions in exchange for restraints on Iran’s nuclear program. It has also been the driving force behind the opening with Cuba.
The Treasury Department’s Office of Foreign Assets Control, which oversees and enforces sanctions, announced the changes related to Myanmar on Tuesday. The democratic process reached a milestone in November with elections in Myanmar and has continued to unfold in recent months with the formation of a new government.
Still, Mr. Obama made it clear on Tuesday that he did not regard Myanmar’s transformation as complete or irreversible. In a notice to Congress required annually, he renewed an official government declaration related to Myanmar, calling it an “extraordinary threat.”
Senior administration officials said they were still concerned about potential “spoilers” of the shift toward democracy there, particularly the military, which profited financially and politically from the old system and might seek a return to it. They said sanctions would remain on individuals and entities that are obstructing political reform in Myanmar, committing human rights abuses or propagating military trade with North Korea.
“The United States wants to continue to further incentivize democratic reforms and continue to pressure targeted individuals and entities, including the military, so that the work of reforming that government continues,” said Josh Earnest, the White House press secretary.
In a speech on Tuesday, Benjamin J. Rhodes, the president’s deputy national security adviser for strategic communication, called efforts to encourage ties with Myanmar one of the most important foreign policy overtures of Mr. Obama’s tenure, and said rewarding Myanmar for its steps toward democratization was crucial.
“We have to demonstrate that there are dividends for people who go down this road,” Mr. Rhodes said. “And if we’re not there for those people when they make the right choices, that won’t just be a problem for Myanmar.”
Mr. Rhodes said that improving relations with Myanmar should not wait until that country liberalizes entirely. He said existing sanctions on Myanmar are in many ways more draconian than those that apply to neighboring countries with worse human rights records. He did not name those countries, but Myanmar borders China, Laos and Thailand.
Several state-owned businesses and banks in Myanmar are to be removed from the list of sanctioned enterprises, the administration said, including timber and mining companies and gem concerns that are now owned by civilians rather than the military. But the Treasury Department will tighten sanctions on Steven Law, a Burmese business tycoon penalized by the department in 2008 for supporting the military junta.
Mr. Law and his late father, Lo Hsing Han — who was once described by the United States as the “Godfather of Heroin” — prospered under the military government, which awarded them contracts to build large infrastructure projects. Their businesses have continued to thrive even with the transition to democratic rule in Myanmar.
On Wednesday, the Treasury will blacklist six companies owned 50 percent or more by Mr. Law or Asia World: the Asia Mega Link Company, the Asia Mega Link Services Company, the Pioneer Aerodome Services Company, the Green Asia Services Company, the Global World Insurance Company, and the Shwe Nar Wah Company.
Correction: May 19, 2016
An article on Wednesday about the Obama administration’s lifting of sanctions on Myanmar rendered incorrectly part of the name of one company in which the Burmese business tycoon Steven Law owns a majority stake and which the Treasury Department will blacklist. It is the Shwe Nar Wah Company, not the Shew Nar Wah Company.