* Sanctions have limited impact on public, NLD says
* Western investors to remain on sidelines
* Sanctions debate keeps focus on Suu Kyi's role
(Adds details, analyst comment)
By Aung Hla Tun
YANGON, Feb 7 (Reuters) - The party of Myanmar pro-democracy leader Aung San Suu Kyi said on Monday that Western sanctions on the country should remain in place, arguing the embargo affected the military regime and not the broader population.
The announcement by the National League for Democracy (NLD), Myanmar's biggest opposition force, will be a blow to both the ruling junta and Western investors keen to tap the isolated country's vast natural resources.
"We came to find that the sanctions affect only the leaders of the ruling regime and their close business associates, not the majority of the people," Tin Oo, NLD vice-chairman, told Reuters.
Tin Oo declined to elaborate but said a report by the NLD, whose 1990 election victory was ignored by the junta, would be released later on Monday based on its own research and consultation with economists.
Suu Kyi, who was released from house arrest on Nov. 13, has long backed sanctions as part of her fight against decades of authoritarian military rule in the former British colony also known as Burma. The sanctions were intended to force the regime to improve its poor human rights record and initiate democratic reforms.
But many experts say the policy damaged the economy and hurt the Burmese people, pushing the generals closer to neighbours China and Thailand, which are tapping the country's vast energy reserves.
Soon after her release, Suu Kyi indicated she might recommend the lifting of the embargoes, which prompted a flurry of diplomatic activity and attracted wide attention in the West.
INVESTMENT CREDENTIALS
Around the same time, Myanmar launched a drive to attract Asian investors, touting its tourism potential and abundant supplies of gemstones, timber, oil and gas, much of which remained intact because of "unfavourable Western sanctions".
Such sanctions have not affected the wealth and lavish lifestyles of the junta top brass, but they have hampered efforts to acquire new weapons technology for the military and have increased dependence on China.
Many experts see the sanctions as Suu Kyi's best, and perhaps only, bargaining chip -- one she might continue to hold to remain relevant in Myanmar's changing political landscape.
While hugely popular and a symbol of hope for the Burmese people, Suu Kyi and the NLD have no official political role in Myanmar having boycotted the Nov. 7 election because of strict election laws. It has since been officially disbanded for refusing to take part, despite repeated court appeals.
A civilian parliament dominated by retired and serving soldiers convened last week for the first time in five decades and chose a new president to lead the country but the old regime is expected to pull the strings, with little scope for reconciliation or reforms.
Experts suggest Suu Kyi could act as a mediator between the West and the reclusive generals towards easing the sanctions in return for concrete reforms in the country of 50 million people, about a third of whom live beneath the poverty line.
"The NLD is popular, but it's facing real problems. They've been outmanoeuvred by the generals, who have formed a parliament and government without them," said Milton Osbourne, a Southeast Asia expert at Australia's Lowy Institute think tank.
"The focus on sanction reflects the NLD and Suu Kyi's desire to be relevant again after being sidelined for so long." (Writing and additional reporting by Martin Petty; Editing by Andrew Marshall)