By David Brunnstrom
BRUSSELS (Reuters) - The European Union on Friday welcomed Myanmar allowing the party of democracy leader Aung San Suu Kyi to take part in upcoming by-elections, and was looking at whether such reforms could justify the bloc further easing its sanctions.
The EU said positive moves by Mynamar's civilian government since elections last year had exceeded expectations, but it urged the reclusive Asian country to release more dissidents.
"The EU has always stated that it will respond to positive events in the country. The restrictive measures have already been partly modified this year," EU foreign policy chief Catherine Ashton said in a statement. "A more substantial review of EU policy is already under way."
The opposition National League for Democracy (NLD), led by Suu Kyi, said on Friday it would contest the forthcoming by-elections, after the government amended its law on registration of political parties.
The party boycotted last year's national election, and Friday's move was seen as further sign of political rapprochement.
"The continuing positive developments in Myanmar are a source of great hope and encouragement," Ashton said. "I look forward to them continuing, including a further substantial release of political prisoners."
Ashton said "the European Union will want to accompany Myanmar on the path it is taking, both with political and economic engagement." However, she stressed that "fair and transparent elections leading to a wider representation of the people" would be a key factor in making national reconciliation a reality.
The EU comments came after U.S. President Barack Obama said on Friday he saw "flickers of progress" and would be sending Secretary of State Hillary Clinton for a historic visit that could help Myanmar emerge from a half century of isolation.
Clinton's December 1 visit would be the first by a U.S. secretary of state since a 1962 military coup ushered in decades of military rule that ended in March, when a nominally civilian parliament was established. Some Western governments believe the military remains in charge.
Ashton said she looked forward to talking directly to interlocutors in Myanmar and a spokesman said the EU was working on plans to send a top EU official to Myanmar, but no dates had been set.
Ashton sent her top foreign policy adviser to Myanmar earlier this year, and the EU, in a move to encourage reform, slightly eased sanctions in April by ending travel bans and asset freezes on 24 civilian government officials.
"A year ago, most were skeptical about transition," an EU official said. "Six months ago, most began to realize reforms were kicking in. Today, there is a different climate in the country."
The new government has called for peace with minority groups, displayed some tolerance of criticism, suspended an unpopular Chinese-funded dam project, freed about 230 political prisoners and improved relations with Suu Kyi, a Nobel Peace laureate who was released from house arrest in 2010.
However, large numbers of political prisoners remain and EU officials have said they would wait to see how many were actually freed when judging the government's sincerity.
"We are cautiously optimistic. Without a doubt, positive steps have been taken, but there is also much that remains," Swedish Foreign Minister Carl Bildt said. "It is good to have a diplomatic engagement policy of trying to influence (matters)."
(Reporting by David Brunnstrom; Additional reporting by Justyna Pawlak; Editing by Rex Merrifield and Alessandra Rizzo)