By Stuart Grudgings and Thu Rein Hlaing
NAYPYITAW, Myanmar (Reuters) - Myanmar's reformist rulers are looking forward to an eagerly awaited easing of European Union sanctions on Monday but celebrations will be muted over a political stalemate delaying Aung San Suu Kyi's historic parliamentary debut.
A protest by Suu Kyi's party over a swearing-in vow for its would-be parliamentarians will dent an image of transformation the government wanted to show off on Monday, when the European Union is all but certain to become the first among Western powers to suspend in earnest sanctions that isolated Myanmar for two decades.
The expected EU decision on sanctions would be a boon for Myanmar's tattered and long-stagnant economy and could prompt the United States and Canada to follow suit and pave the way for development loans and a flood of foreign investment in its trove of natural resources like oil, gas, timber and gemstones.
But on the political front, Suu Kyi's National League for Democracy's (NLD) deferral of Monday's lower house debut over a word in the oath members of parliament take is seen as an ill-timed gamble with the potential to upset fragile political harmony.
Suu Kyi sought to play down the stalemate and told reporters on Sunday: "We are not boycotting parliament".
At the heart of the issue is the NLD's refusal to take the oath to "safeguard" a constitution it wants to amend to reduce the military's enshrined political role after five decades of brutal and inept army rule. The quibble, analysts say, should have been settled long before now.
"The NLD doesn't want a confrontation and although it will always take an opposing stance, the timing is all wrong," said Aung Zaw, a Myanmar expert and editor of the Thailand-based Irrawaddy magazine.
"It's quite a divisive issue and a lot of people are very disappointed because there are so many pressing issues that the NLD needs to be handling right now, in parliament."
The NLD has petitioned President Thein Sein and the house speakers, the moderates in the administration who brought the NLD into the political fold by allowing it to run in April 1 by-elections, which it won in a landslide.
Suu Kyi won a by-election and was due to take her seat in a new session of parliament on Monday. But the NLD wants the oath changed to a promise to "respect" the constitution.
Thein Sein is seen as a driver of reforms over the past year that the West wants to reward Myanmar for - hundreds of political prisoners freed, more media freedom, currency reform and peace talks with ethnic minority rebels - but the issue of changing the oath is out of the ex-junta general's hands.
It may come down to a vote of the bicameral parliament dominated by appointed soldiers and the army-backed Union Solidarity and Development Party (USDP) led by hardliners and allies of the old military junta, who might not be sympathetic to the NLD after it was dealt a crushing by-election defeat.
"The president has not got the power to change the wording in the oath so it needs to be decided in parliament," senator Aye Maung, leader of the Rakhine Nationalities Development Party, told Reuters.
"Since most of the lawmakers are USDP members they will play the major role when this proposal is decided," he said.
The NLD seems convinced the issue will be settled this week and has told many of its elected MPs to stay in the main city of Yangon, where the party has its headquarters, to discuss strategy, one MP told Reuters, requesting anonymity. Parliament is in the new capital, Naypyitaw.
The standoff is unlikely to affect the easing of sanctions, with the West bent on working out how best to roll back on restrictions to allow deeper engagement and investment by hundreds of firms eager to take advantage of one of Asia's last frontier markets.
Australia said it would lift financial and travel restrictions on 260 people and normalize trade ties. Japan said on Saturday it would resume loans to Myanmar and write off 303.5 billion yen ($3.72 billion) of its debt.
The United States is tipped to name its Myanmar envoy, Derek Mitchell, as its new ambassador after an upgrade of ties and the Treasury Department last week decided to permit financial transactions to support certain humanitarian and development projects in Myanmar.
The European Union is expected to unfreeze assets on Monday and end travel bans on certain individuals and suspend, but not lift, bans on investments and sales related to timber and the mining of gemstones and precious metals.
"We want to check that the regime is progressing on the path of democracy," French Foreign Minister Alain Juppe said on Friday. "There is progress, but we haven't reached the final objective yet."
(Additional reporting by Aung Hla Tun in Yangon; Writing by Martin Petty; Editing by Robert Birsel)