* US greenlights investment by energy, mining, banking firms
* State Department's Derek Mitchell nominated as ambassador
* Washington urges high standard of corporate responsibility
* Rights groups say US move overlooks brutal wars on minorities
By Andrew Quinn and Paul Eckert
WASHINGTON, May 17 The United States on Thursday suspended sanctions barring U.S. investment in Myanmar in response to political reforms in the poor southeast Asian state, drawing praise from some U.S. lawmakers but criticism from human rights advocates.
"Today we say to American business: invest in Burma and do it responsibly," Secretary of State Hillary Clinton said.
She appeared with Myanmar's Foreign Minister Wunna Maung Lwin, on his long-isolated nation's first official visit to Washington in decades as ties between the two countries warm rapidly.
Clinton said Washington would issue a general license to permit U.S. investments across Myanmar's economy, and U.S. energy, mining and financial service companies were all now free to look for opportunities in the nation formerly known as Burma.
But Clinton stressed that the laws underpinning U.S. sanctions on Myanmar would remain as Washington seeks to maintain its leverage while pushing the reclusive country's government further on democratic reforms.
"We are suspending sanctions. We believe that is the appropriate step for us to take today," Clinton said.
"We will be keeping the relevant laws on the books as an insurance policy, but our goal and our commitment is to move as rapidly as we can to expand business and investment opportunities."
Elaborating on the policy shift, President Barack Obama said Washington would work to "ensure that those who abuse human rights, engage in corruption, interfere with the peace process, or obstruct the reform process do not benefit from increased engagement with the United States."
Clinton said the United States would maintain its arms embargo on Myanmar and urged the country's new civilian-led government to take further steps to exert its control over the military, which ruled the country since a 1962 coup.
Thursday's announcement marked the latest step in a rapid rapprochement between the United States and Myanmar, which has seen a dramatic series of political reforms in the past year.
Myanmar's reformist, quasi-civilian government took office a year ago, ending five decades of military rule, and has started overhauling its economy, easing media censorship, legalizing trade unions and protests, freeing political prisoners and agreeing to ceasefires with a dozen ethnic rebel armies.
Nobel Peace Prize laureate and pro-democracy icon Aung San Suu Kyi has been elected to and taken a seat in parliament.
Suu Kyi's National League for Democracy, Myanmar's biggest opposition force, won a 1990 election by a landslide but the country's military refused to cede power and for two decades suppressed the party's activities, jailing many of its members.
In response to the reforms, United States has promised to begin unwinding the complex web of U.S. sanctions that have contributed to the country's isolation and driven it closer to its powerful neighbor, China.
Clinton said Derek Mitchell, the State Department's coordinator for Burma policy, would be nominated to return to the country as U.S. ambassador and Maung Lwin said his government had appointed its current permanent representative to the United Nations to fill its ambassadorial slot in Washington.
Pro-democracy advocates have urged the United States to move cautiously, saying sanctions are an important tool to maintain pressure on Myanmar's government to follow through on pledges of greater democratic openness for its 60 million people.
ACTIVISTS CRITICIZE MOVE
U.S. Campaign for Burma, a human rights advocacy group that opposes wholesale lifting of sanctions until the government makes deeper reforms, said Myanmar's army continued to wage a brutal campaign against the Kachin ethnic minority in northern Myanmar and the new U.S. policy would do little to stop it.
The "symbolic exclusion of investment with the military will not prevent the military from continuing to attack and assault ethnic villagers in the name of providing security for foreign investment projects," the USCB said in a statement.
The military offensive in Kachin State had created about 100,000 refugees and this month, Myanmar Army soldiers had committed gang rape against Kachin women and girls -- "one egregious case among many that are ongoing," the group said.
The Kachin fighting, which erupted anew a year ago after a 16-year truce, drew a call from U.N. chief Ban Ki-moon for an end to attacks by all parties in Myanmar.
Bill Davis, Burma Project director of the group Physicians for Human Rights, said Kachin and other ethnic minority groups whose homelands hold Myanmar's natural resources told him in interviews they are "still afraid of the government."
"If the people of Burma do not trust their government, the U.S. administration should not either," he said.
A senior U.S. official said U.S. investments in Myanmar would be subject to the highest standards of corporate responsibility and that Myanmar's "bad actors" would remain subject to sanctions on a list that would be regularly updated.
"We will hold folks accountable and look at various mechanisms going forward for ensuring that there is oversight, that there is transparency and ... accountability for the activities of our companies," said the official.
U.S. Senate Republican Leader Mitch McConnell and Senator John McCain, said in a statement Obama struck an "appropriate balance between encouraging the process of reform now unfolding in Burma, while maintaining sufficient leverage to continue pressing the Burmese government for additional progress."
Another influential lawmaker on Myanmar policy, Democratic Senator Jim Webb, however, said Obama should have done more.
"The president has wider powers with respect to economic sanctions, and he should use them to lift all economic sanctions," he said in a statement, noting that the European Union had already lifted its sanctions.
(Reporting By Paul Eckert; Editing by Cynthia Osterman)