BANGKOK, March 16, 2008 (AFP) - Thai jewellers are buying highly coveted rubies and jade at an official auction this week in Myanmar, which supplies stones for the kingdom's booming, multi-billion-dollar jewelry industry.

But once they cut and set the gems, they could face problems selling them as companies and western governments move to ban trade in precious stones from the military-ruled state.

Myanmar has about 153 million dollars worth of gems on the auction block this week, at the second official sale of the year in a country that produces some of the world's most spectacular stones.

Up to 90 percent of the world's rubies are from Myanmar, including 'pigeon blood' rubies that are considered the finest in the world, sometimes costing more per-carat than a diamond.

Imperial jade -- emerald green in colour -- is another Myanmar treasure that is highly sought after.

However, leading jewellers including Tiffany, Cartier and Bulgari, are refusing to sell the stones in protest at the military's deadly crackdown on pro-democracy protests led by Buddhist monks in September.

Their boycott is backed up by tightened sanctions in the European Union, which ban trade in Myanmar's gems.

The United States is also moving to close a loophole in its sanctions regime, which had allowed the sale of Myanmar stones as long as they were cut in Thailand.

That has cast a shadow over Thailand's jewelry exports, which soared 33 percent last year to 185.15 billion baht (5.8 billion dollars).

The kingdom's top buyer is the United States, followed by Hong Kong and Australia, according to government data.

'Sanctions over trade in gems from Myanmar by the US or the European Union will certainly hurt some gem and jewelry exporters in Thailand,' said Vichai Assarasakorn, president of the Thai Gem and Jewellery Traders' Association.

He estimated that up to two million dollars worth of gems, mainly rubies, are imported into Thailand from Myanmar each year. But he said there are no official import records, so it's impossible to know the exact amount.

The actual figure could be much higher. Myanmar sells more than 300 million dollars worth of precious stones every year, and Thailand and China are the two biggest buyers.

Jewellers associations from around the world plan to meet in Switzerland next month to draft a letter calling on the United States not to ban all sales of Myanmar gems, he said.

'The US government and politicians need to thoroughly consider all the information, because their sanctions may not be the right answer to solve the problem,' he said.

Thai traders agree with the goal of promoting democracy in Myanmar, but they say the ban would hurt the 400,000 people in Myanmar who depend on gem mining and trading to earn a living.

Human rights groups argue that workers in Myanmar's officially run mines toil in deplorable conditions and are sometimes subjected to forced labour, but Vichai said ordinary people do benefit from the trade.

'The junta might have an amount of gems for its auction sales. But, a greater amount of rubies remain in the hands of ordinary people in Myanmar who need to trade gems for their living,' Vichai said.

Those stones slip into Myanmar's vast black market, which economists estimate is larger than the formal economy. With scant border controls between Myanmar and Thailand, small-scale miners can slip across the border to sell their stones, bypassing regulations.

Less than 15 percent of Thailand's imported gemstones come from Myanmar, said Dej Pathanasethpong, chairman of the Thai Chamber of Commerce's Fashion and Jewelry Industry Club.

He warned that enforcing a ban will prove difficult.

'It is not easy to prove the origin of rubies,' Dej said.

Despite growing attention to the Southeast Asian country's gem trade after the junta's crackdown on anti-government demonstrators, demand for Myanmar's rubies has not subsided, said Choosak Tangkoonsombat, manager of Petcharat Import and Export company.

His company exported 15 million baht (475,000 dollars) worth of jewelry last year to Europe, mostly to France, with much of the shipments including rubies and sapphires, he said.

'Red rubies are in great demand and the fine quality ones cannot be found anywhere other than Myanmar,' he said.

Tougher US and EU sanctions have not deterred him from changing his business practises, he said.

'Our business has carried on as usual. Our customers are happy with the products. They did not express any concerns over sanctions on gems from Myanmar,' Choosak said.