Burma’s befuddling rulers have launched another surprise attack on our (somewhat waning) ability to rationalise what is happening in Naypyidaw: four months after the shock suspension of the China-backed Myitsone Dam in the country’s north, the government’s environment minister yesterday announced that a massive, Thai-financed power plant in the south of the country has been scrapped.

The move has prompted two immediate questions: first, what has become of the 60-year lease awarded to Ital-Thai to develop the Dawei industrial zone (surely it has been spectacularly breached)? Second, with the cancellation of the 4,000 MW plant, whose output would have contributed towards powering construction of the vast array of factories and petrochemical plants the 200 square-kilometre site will house, how can the project possibly continue?

Like the Myitsone decision, the government has cited public opposition as the key trigger for the Dawei cancellation; also like Myitsone, its newfound fans have been quick to link the scrapping of the plant to the reformist nature of Thein Sein and his cabinet. But while it may have been China’s increasing economic influence in Burma, rather than disquiet among Burmese, that prompted the country’s nationalistic rulers to (temporarily) jump ship on Myitsone, the Dawei decision is slightly more puzzling – the government doesn’t stand to benefit, economically or ideologically, unless it has really developed a conscience and translated that into policy.

What is being left out of the initial reactions however is the fact that a coal-fired plant will in all probability still be built, only that its size will dramatically reduce. The industrial site, which upon completion is set to be Southeast Asia’s largest, and which will forever reshape Burma’s Andaman Sea coastline, can survive on a plant that produces only 400 MW – the surplus 3,600 MW was due to be sold off to Thailand, which has provided the bulk of the US$8 billion start-up costs for the project (which is expected to eventually reach US$50 billion).

Pressure had been building on the Burmese government from a range of players angry at the health impacts synonymous with a project of this size – locals around Dawei, a sleepy fishing town, have vehemently rejected the venture, which it is estimated could displace up to 30,000 people (Ital-Thai put the figure at 10,000 last year). Moreover, the Karen National Liberation Army (KNLA) has actively resisted the construction of a road that will link Dawei to Bangkok (which will in turn feed other regional economies), and demanded recently that Ital-Thai carry out an environmental impact assessment before going any further with it.

The Karen army denies that the Dawei decision is linked to attempts to broker a ceasefire deal with the government: its spokesperson, David Htaw, told me today that while it had pushed for a survey of the road, the coal plant was not mentioned in discussions with government officials.

So where does that leave us? In something of a quagmire of contradictions and bemusement, to be frank: any paean to public opinion in Burma by the government must be contrasted with its army’s ongoing, vicious attacks against civilians in the border regions, and the decision to allow only 32 political prisoners free earlier this month (despite the mother of all diplomats, Hillary Clinton, calling for giant steps in that department).

It may be that the combination of public animosity and the potential for military attacks on the Dawei project from the KNLA proved too portentous, as indeed was the case with Myitsone which lay unnervingly close to Kachin rebel territory; even that the discrepancy between the amount of power needed for construction of the industrial complex, and the final figure of 4,000 MW, was always going to be something of a numerical buffer zone for the government, within which it could manoeuvre dazzlingly but not lose out on the prized asset that is the industrial zone – perhaps the key indicator of its rising strategic status in the region.

This of course doesn’t factor in the likely fallout that’ll come as Ital-Thai, and indeed energy-hungry Thailand, formulate some sort of response to the cancellation, which will have also stretched Burma’s own Special Economic Zone (SEZ) laws to the fullest – for that we’ll just have to wait, but as the Burmese government showed after Myitsone, if it can quickly mend bridges with the aggressive powerhouse to the north, not to mention its adeptness at convincing the West that it is heading in the right direction, then its powers of appeasement are perhaps greater than it is given credit for.