The military government "remains resolutely in power, sustained by its control over natural resources, in particular timber," the London-based group said in a report.

"In the absence of any new initiatives such a state of affairs is likely to remain until Burma's natural resources are completely exhausted," it said.

Myanmar's forests, known locally as "brown gold," have played a pivotal role in its history since former colonial ruler Britain first annexed parts of Burma in the early 19th century.

The Southeast Asian country is home to 60 percent of the world's natural reserves of teak and its high quality is prized by furniture makers despite calls for bans and boycotts.

"We're not saying don't import Burmese timber under any circumstances, but if logging is not sustainable and supporting conflict then it's not a good thing to do," Global Witness campaigner Jon Buckrell told Reuters.

The group studied the links between logging and long-running internal conflicts pitting the military, which has ruled since 1962, against rebel groups based in timber areas bordering China and Thailand, both key players.

Timber exports accounted for 9.3 percent of foreign exchange earnings last year and pressure to boost earnings has led to over-cutting by the state Myanmar Timber Enterprise.

"They are not chopping it all down, but they are taking more than they should in central Burma," said Buckrell.

Official data show timber exports ranged from nearly 700,000 to 800,000 cubic meters in recent years, but the report said the real numbers were probably much higher due to "informal" logging it blamed on corruption and mismanagement.

"Unrecorded exports in excess of one million cubic meters, worth $250 million, strongly suggest that the regime has lost control of its forest sector," Buckrell said.

"RESOURCE DIPLOMACY"

Isolated by the West, the generals have used "resource diplomacy," allowing neighbors like China and Thailand access to Myanmar's natural wealth in exchange for political, financial and military support, the report said.

China is a key ally and criticized U.S. and European Union sanctions imposed on Myanmar after the detention of pro-democracy leader Aung San Suu Kyi in May.

Thailand has also rejected sanctions against Myanmar.

"Burma is surrounded on all sides by resource-hungry nations and (Yangon) has used this to its advantage," the report said.

The generals have also traded timber for peace with rebels, resulting in clear-cutting in cease-fire areas, while rebels still fighting rely on logging for funds, the report said.

"Revenue derived by the regime and insurgents alike from the exploitation of natural resources, including timber, has perpetuated violent armed conflict throughout Burma," it said.

Chinese companies dominate logging in Myanmar's Kachin State, feeding factories across the border with few benefits to Kachin's impoverished people, the report said.