YANGON, Nov 14, 2007 (AFP) - Myanmar opened a lucrative auction of gems on Wednesday, November 14th, despite tightening Western sanctions and calls for a boycott from top international jewellers following the junta's deadly crackdown on protests.

The military government hopes to sell some 5,500 lots of jade, gems and pearls, worth nearly 200 million euros (about 300 million dollars), during the 13-day auction, an official of state-run Myanmar Gems Enterprise (MGE) told AFP.

"The quality of our stones is the best," said the official, who declined to be named, adding that more than 2,000 foreign merchants, mainly from neighbouring China and Thailand, were expected to attend the fifth sale this year.

The poverty-stricken country is the source of up to 90 percent of the world's rubies, and each auction of precious stones rakes in more than 100 million dollars, making it a key source of revenue for the military regime.

Myanmar used to hold gem auctions twice a year but has been holding them with increasing frequency in a bid to raise much-needed foreign currency amid tightening sanctions against the junta. It held four auctions in 2006.

"The mere fact that this is the fifth auction shows the junta is really desperate for money," said Aung Naing Oo, a Myanmar analyst based in Thailand.

"The gem auction is one of the vital means for the junta to earn hard currency, followed by natural gas and teak. As economic sanctions remain in place, the junta relies on gem auctions to earn money," the analyst said.

Debbie Stothard, an activist from the Alternative ASEAN Network on Myanmar, a regional rights lobby, said the regime was under severe economic pressure due to sanctions.

"Gems are one of the top earners for the regime, and the generals are very keen to sell as much as possible because they are facing financial problems," she said.

MGE is Myanmar's third biggest state enterprise with sales worth 300 million dollars in the previous fiscal year to March 2007, according to the Myanmar Times, a semi-official weekly.

The MGE official said the most expensive jade lot at the auction was worth 80 million euros.

"We expect Chinese merchants to buy this," he said as he pointed out the pricey green stone weighing 170 kilograms (370 pounds.)

Myanmar's rich jade deposits are highly prized in China, one of the junta's closest allies and a major weapons supplier to the regime.

The latest sale comes as Myanmar faces global pressure over its violent clampdown on peaceful protests which began in August, with the United States and the European Union tightening sanctions aimed at the top generals.

Amid international condemnation of the junta, China has been widely criticised for not taking tougher action after the crackdown on the mass protests, the biggest challenge to the regime in 20 years.

Myanmar, under military rule since 1962, was already under US and European economic sanctions due to human rights abuses and the house arrest of 62-year-old democracy icon Aung San Suu Kyi.

In the wake of the latest violence, the US froze assets of senior leaders including junta chief Senior General Than Shwe, and last month proposed measures aimed at stopping the import of Myanmar-mined gems into the country.

Despite the US sanctions, which ban direct imports from Myanmar, the country's gems are cut or polished in third countries, often Thailand, for jewellers, and then shipped to the United States under a legal loophole.

Jewellers Tiffany, Cartier and Bulgari are among the few dealers that refuse to sell Myanmar gems. An industry group of 11,000 stores, including Cartier and Tiffany, asked US lawmakers last month to plug the loophole under a new law.

But Aung Naing Oo said he doubted gem sanctions would add to pressure on the generals.

"Sanctions are only symbolic since the junta can sell gems to China, Singapore and Thailand. Demand for precious stones remains very strong," he said.