WASHINGTON (AFP) - US lawmakers have dropped plans to impose sanctions that would have pressured US energy giant Chevron to pull out from a gas project in military-ruled Myanmar, congressional aides said on Tuesday.

Sanctions that would end tax write-offs enjoyed by Chevron were part of a package of new US measures passed by the House of Representatives last year aimed at punishing the military junta for its deadly crackdown on pro-democracy protests.

But in a compromise this week, legislators from the House of Representatives and Senate removed the provision after Chevron argued that other firms from nations such as China and India could easily take over its stake if divested, congressional aides said.

"One of the things it does is it removes the part about tax incentives that affect US companies who might do business in Burma (Myanmar)," a congressional aide told AFP in describing the compromise resolution that was unanimously passed by the House of Representatives on Tuesday.

The new legislation, which is also expected to be cleared by the Senate, merely urged "investors" in the gas project "to consider voluntary divestment over time" if the junta did not embrace reforms.

The legislation's main focus was to block the import of Myanmar gems into the United States and to extend financial sanctions, moves that could take hundreds of millions of dollars out of the pockets of the regime each year.

Despite a longstanding ban on imports from Myanmar, gems from the country have entered the United States via third nations such as Thailand, China, Taiwan, Malaysia and Singapore, rights groups have said.

"The amendments to this bipartisan bill provided for in this resolution, which have been carefully negotiated with the Senate, promote a coordinated, multilateral approach to sanctions against Burma," said Howard Berman, the Democratic chairman of the House committee on foreign affairs.

The European Union has similarly banned the import of Myanmar gems, as have the Canadians, he said.

Under the previous plan, "no deduction or credit against tax shall be allowed" for Chevron on revenues from the Yadana gas project.

Chevron could also have been barred from making any payments to the junta from its joint venture with French oil giant Total, Thailand's PTT Exploration and Production, and Myanmar's Myanma Oil and Gas Enterprise operating the lucrative Yadana gas fields.

Chevron is one of biggest Western companies in Myanmar, holding a 28 percent minority share in the Yadana natural gas project following its acquisition of another US energy giant, Unocal, in 2005.

The United States has already imposed substantial trade, investment and diplomatic sanctions on Myanmar, but Chevron's operations predate an enhanced 2003 US trade embargo.

Under Myanmar law, if Chevron sold its stake, it might have to pay the military junta much of the company's capital gains on the project -- estimated to be around 500 million dollars.

Chevron's vice-chairman Peter Robertson defended Chevron's investment in Myanmar at a congressional hearing in May, saying the company had helped victims of a recent deadly cyclone that ravaged Myanmar.

"Our plan is to stay in Burma ... If we sell our interest, we would pay a large capital gains tax to them (military junta)," he said.

"Any way of extracting us would be a benefit -- a windfall benefit to the Burmese government."

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