Myanmar rebel group withdraws troops from key town on Thai border

(Reuters) -An armed ethnic group in Myanmar has withdrawn its troops from a town along the Thai border following a counteroffensive by the ruling junta from whom rebel fighters wrested the key trading post this month, a spokesperson for the group said on Wednesday.

Myanmar is locked in a civil war between the military on one side and, on the other, a loose alliance of established ethnic minority armies and a resistance movement born out of the ruling junta's bloody crackdown on dissent after its 2021 coup.

The Karen National Union (KNU) made a "temporary retreat" from Myawaddy, its spokesperson, Saw Taw Nee, said after the return of junta soldiers to the vital strategic area that is a conduit for annual foreign trade of more than $1 billion.

Armed soldiers from a militia with a history of shifting allegiances, the Karen National Army (KNA), were clearing barricades and patrolling the town of 200,000 people, two residents said, speaking on condition of anonymity.

Photographs posted on some pro-junta social media groups showed a handful of its soldiers raising the Myanmar national flag at a military base the KNU had controlled just days before, and where the rebel group had raised its own banner.

"KNLA troops will ... destroy the junta troops and their back-up troops who marched to Myawaddy," added Saw Taw Nee, referring to the group's armed wing, the Karen National Liberation Army, one of Myanmar's oldest ethnic fighting forces.

He did not say what its next move would be, however.

Junta soldiers in the counteroffensive to retake Myawaddy entered the area with KNA assistance, Saw Taw Nee said.

The junta and the KNA did not immediately respond to telephone calls to seek comment.

Fighting had flared as recently as Saturday in Myawaddy, forcing 3,000 civilians to flee in a single day as rebels fought to flush out stranded Myanmar government troops holed up at a border bridge crossing.

"There is no fighting today," a 45-year-old Myawaddy resident told Reuters by telephone on Wednesday, asking not to be identified because of security concerns.

Last week, Reuters reporters saw KNA soldiers roaming Myawaddy, soon after the assault led by the KNU ejected junta troops from the border outpost. The militia had stood aside during the offensive, allowing the resistance to make inroads.

The KNA, previously aligned with the junta, asserted its independence from the weakening Myanmar military this year, but has not publicly pledged allegiance to the anti-junta resistance.

Carved out of a KNLA faction around 2010, the KNA was formerly known as the Border Guard Force under the command of Karen warlord Saw Chit Thu, on whom Britain has imposed sanctions for human trafficking.

Saw Chit Thu has significant commercial interests in Myawaddy and the surrounding area, including gambling and scam centres.

SITUATION HIGHLY UNCERTAIN

On Wednesday, Thailand's foreign ministry said the fighting around Myawaddy had eased and it hoped to re-open its border crossing as trade had been hit. It said most civilians had returned and 650 remained.

"The situation has improved significantly," spokesperson Nikorndej Balankura told a briefing. "Nevertheless, we are closely monitoring the situation, which is highly uncertain and can change."

Thailand has received reports that talks may be starting between rival groups on the Myanmar side, Nikorndej said, without elaborating.

He added that Thailand had proposed to Laos, the chair of the Association of Southeast Asian Nations, that it could host a meeting seeking to end the Myanmar crisis.

The ruling military faces its biggest challenge since first taking control of Myanmar in 1962, caught up in low-intensity conflicts and grappling to steady an economy crumbling after the 2021 coup ended a decade of tentative democracy and reform.

The junta has lost control of a string of key frontier areas to rebel groups.

(Reporting by Reuters staff; Additional reporting by Chayut Setboonsarng in Bangkok; Writing by Devjyot Ghoshal; Editing by Clarence Fernandez)