LUXEMBOURG: The European Union agreed on Monday to suspend most of its sanctions against Myanmar for a year despite a dispute over a parliamentary oath between Myanmar's ruling, army-backed party and pro-democracy leader Aung San Suu Kyi.  

In the first clear sign of friction since Suu Kyi's party swept historic by-elections, the ruling party on Monday rejected her demand to replace the words "safeguard the constitution"
with "respect the constitution" in the oath.

Suu Kyi and party colleagues refused to take their seats at the opening of parliament, denting an image of transformation.   

Despite this, EU foreign ministers decided at a meeting in Luxembourg to suspend sanctions in recognition of democratic reforms after half a century of military rule.  

The suspension, which does not apply to a separate arms embargo, is likely to go into effect this week. It will allow European companies to invest in Myanmar, which has significant
natural resources and neighbours China and India.    

The EU is rewarding a shift that has seen many political prisoners freed and a range of repressive measures lifted.   

"President Thein Sein has taken important steps towards reform in Burma, and it is right for the world to respond to them," British Prime Minister David Cameron said in a statement.  

"But those changes are not yet irreversible, which is why it is right to suspend rather than lift sanctions for good."  

The EU had frozen the assets of nearly a thousand firms and institutions, and banned almost 500 people from entering the EU.

It also prohibited military-related technical help and banned investment in the mining, timber and precious metals sectors.  

In their statement, the EU governments urged Myanmar to free remaining political prisoners and remove restrictions on those already released.  

The EU has already offered 150 million euros ($200 million) in development aid for this year and next, a sharp rise from the less than 200 million euros it has given since sanctions were
launched in 1996.   

The ministers said they aimed to include Myanmar in the EU's preferential trade scheme for less developed countries, if the International Labour Organisation approves its labour standards
- a requirement intended to address concerns about human rights abuses in labour markets.  

European companies are vying with Asian rivals for stakes in a range of industries, from oil and gas to timber, tourism, telecommunications and banking, many of them underdeveloped from
years of economic isolation.   

Cameron this month became the first British prime minister to visit since Myanmar won independence from Britain in 1948, and took several business executives with him. EU foreign policy
chief Catherine Ashton plans to travel to Myanmar on Saturday.   

The United States is also moving to ease bans on U.S. companies investing in and providing financial services to Myanmar, and will first target sectors that could support democratic reforms.   

It has already permitted non-governmental organisations to support certain humanitarian, religious and educational activities in Myanmar.  

But some would like the restrictions lifted faster.   

"The suspension somehow leaves a lingering question: Is this really the signal to 'Go'?" said Jonas Parello-Plesner at the European Council on Foreign Relations in London.   

"If you're a company, would you invest in a country where the sanctions could come back in place?" he said. "There's a very high risk."  AGENCIES