WASHINGTON (Reuters) - The United States said on Friday it would upgrade diplomatic ties with Myanmar after President Barack Obama called the release of hundreds of political prisoners a "substantial step forward" in the Southeast Asian country's democratic reforms.
U.S. Secretary of State Hillary Clinton said Washington was ready to begin the process of exchanging full ambassadors after an absence of two decades, and would consider additional measures if the new civilian-led government's reforms continue.
"President Thein Sein's decision to release hundreds of prisoners of conscience is a substantial step forward for democratic reform," Obama said in a statement.
"Much more remains to be done to meet the aspirations of the Burmese people, but the United States is committed to continuing our engagement," he added.
The U.S. move was one of the most significant steps yet in a quickening, but still tentative, re-engagement with the Southeast Asian country that included a visit by Clinton there last month.
Analysts have said Obama's motivations include his stated desire to reassert U.S. power in the Asia-Pacific. Myanmar had been pulled heavily into China's economic orbit, although those ties have shown signs of fraying recently.
The upgrading of diplomatic relations followed Myanmar's announcement that it was freeing political prisoners in an amnesty in the latest sign of change in a country that has spent half a century under authoritarian rule.
U.S. officials were working to confirm how many political detainees were among the 651 inmates covered by the amnesty order, but said it appeared that many key activists had won their freedom.
"We think they have either released or offered to release a substantial number of what we would call the top-level or high-profile activists," one senior U.S. official said.
"Taken in total, this is one of the largest releases of political prisoners in Asia's history."
U.N. Secretary-General Ban Ki-moon also welcomed the prisoner release, calling it the most significant to date, and called on the international community to respond "by helping build conditions for sustaining the reform process."
The United States downgraded its diplomatic representation in Myanmar to charge d'affaires following a military coup in 1988 and a violent crackdown on pro-democracy protests in the country, formerly known as Burma.
Clinton, citing progress on a number of fronts, said the next step was to identify a candidate to return to Myanmar as the U.S. ambassador.
"This is a lengthy process, and it will, of course, depend on continuing progress and reform. But an American ambassador will help strengthen our efforts to support the historic and promising steps that are now unfolding," she said.
Senate Republican leader Mitch McConnell, who was en route to Myanmar for a visit on Friday, issued a statement describing the upgrading of ties as "entirely appropriate."
Myanmar held elections last March that saw a nominally civilian government - although still heavily weighted toward the military - take over from the ruling junta and launch what has become a rapid series of political reforms.
Those have included freeing veteran pro-democracy leader Aung San Suu Kyi in November 2010, loosening media restrictions and other repressive laws, and working to end long-running conflicts with ethnic insurgent groups, including Karen rebels who signed a ceasefire on Thursday.
Clinton's trip to the isolated nation in December ended some five decades of official estrangement. At the time, she promised the United States would respond to further reforms.
"The United States will meet action with action. Based on the steps taken so far, we will now begin," she said on Friday.
Clinton spoke on Friday with McConnell, as well as Republican Senator John McCain, independent Senator Joseph Lieberman and Democrat Jim Webb - all of whom are influential on U.S. policy toward Myanmar.
Sanctions imposed by the United States and other Western nations have crippled Myanmar's economy, despite its rich resources including natural gas, timber and precious gems, and driven it deeper into the embrace of regional power China.
Clinton said she had instructed her team at the State Department to "to identify further steps that the United States can take in conjunction with our friends and allies to support the reforms underway," but did not suggest any step to remove sanctions was imminent.
"We will be beginning a dialogue with our key counterparts on Capitol Hill, who played such an important role in how sanctions and other restrictive steps are both implemented and interpreted," the official said.
"One of the most important things for the United States in this respect is not to overpromise and under-deliver."
The U.S. official said the United States would pay particular attention to the conduct of a scheduled April 1 by-election as well as further political prisoner releases.
It will also watch moves by Myanmar to allow more inspections by the International Atomic Energy Agency and fulfill pledges to end missile purchases from North Korea and other military cooperation with the reclusive communist state.
"Most of those interactions we believe are in the arena of small arms, some combat equipment, but also missiles," the official said, noting all were barred by U.N. sanctions.
"It is particularly missiles that we have concern with ... we are also obviously concerned by a provision of hard currency to the regime in North Korea."
A top State Department official will travel to Myanmar in coming weeks to further discuss these issues, the official said.
Additional reporting By Matt Spetalnick and Louis Charbonneau; Editing by Vicki Allen and Peter Cooney