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It was one of the most exhilarating moments of 2010: On Nov. 13, Burmese opposition leader Aung San Suu Kyi emerged after seven years of house arrest in Rangoon and addressed thousands of adoring supporters. To many in the West, that sight seemed to signal that one of the world's most intransigent military dictatorships was headed for a sea change.

Two months on, that giddy feeling is fading. Indeed, rather than heralding a move toward far-reaching political change, say campaign groups, Suu Kyi's freedom appears to be complicating efforts to increase pressure on Burma's ruling generals. The U.S. currently has a raft of sanctions against Burma, including a ban on financial dealings with ruling officials as well as bans on timber, gems and military trading. E.U. sanctions, which are renewed each April, involve similar trade restrictions as well as a visa ban for top officials and their families and a freeze of their financial assets.

Yet since Suu Kyi's release, calls from Washington and Brussels to impose tighter sanctions have quieted. And one of those sanctions is a measure campaign groups say is crucial to forcing Burma's military to clean up its human-rights record: targeting the non-Burmese banks that service the country's government. That tactic is permitted, although on a discretionary basis, under U.S. sanctions, but Washington has opted not to impose it. "We've been pushing and pushing for this," says Jennifer Quigley, advocacy director of the U.S. Campaign on Burma in Washington. "Now, as a result of Aung San Suu Kyi's release, the U.S. is saying, 'We are going to hold off and see what happens.' This is a wait-and-see game." Did Burma's ruling generals make a canny calculation to free Suu Kyi in order to buy themselves time and political goodwill?

If so, they might have made a smart move. The campaign against Burma is not dead, of course. But neither does it carry any urgency these days, despite — or maybe because of — the excitement Suu Kyi's reappearance has ignited. Suu Kyi herself has been tentative in supporting sanctions, telling Western journalists she is still assessing their impact on the masses of poor Burmese. Without the opposition leader's support for the banking sanctions, says Quigley, campaign groups are reluctant to push hard for the measure. And, says Tom Malinowski, Human Rights Watch's Washington director, Suu Kyi's release has given Western governments an unrealistic sense that the Burmese generals are ready for change. "There are a number of countries who will use any excuse to avoid taking difficult steps," he tells TIME. "If they can use Aung San Suu Kyi's release as an excuse to give Burma more time, they will."

Western governments appeared to prove that point when they offered almost no response to a report published Dec. 15 by one of the most vocal Burma campaign groups, EarthRights International. The report claims that Norway's government is indirectly bolstering Burma's military rulers by investing about $4.7 billion from its giant sovereign wealth fund in energy companies operating in Burma. Those companies include Total and Chevron, which has plowed billions into building and operating a natural-gas pipeline that stretches from the Andaman Sea across Burma to Thailand. The EarthRights International report was largely ignored, and Gro Nystuen, chair of Norway's ethics council, which oversees where the funds are invested, says it failed to persuade Norwegian officials that they needed tougher action against Burma. "The threshold for excluding companies [from Norwegian investments] is relatively high," Nystuen tells TIME. "A presence in a state which [allegedly] abuses human rights is not enough. It has to be a specific act by the company itself, and there must be a risk of future abuses."

For campaign groups, the West's cautious attitude toward Burma is frustrating. Some politicians "feel things must be getting better, but we've been here before," says Mark Farmaner, director of the Burma Campaign U.K. in London. "The generals' intention was exactly that: that people would think change is on the way," he adds, calling existing E.U. sanctions "toothless." In 2008, anticipating that Suu Kyi might be released, human-rights groups, including Farmaner's, began to highlight wider abuses in Burma by pushing for the release of about 2,000 political prisoners and documenting the military attacks on ethnic villages.

Yet none of those alleged human-rights abuses has ignited Western passions as much as the plight of Suu Kyi, whose iconic fame earned her a Nobel Peace Prize in 1991 (and recently landed her on TIME's cover). Now, with Suu Kyi free, most E.U. governments believe they ought to wait at least until a new leadership is installed in Rangoon within the next few weeks. Burma's military leaders are required to form a new government by Feb. 5, three months after the election was held — an election that U.S. President Barack Obama called "neither free nor fair."

Once a new government is in office, the E.U. could dispatch a high-level mission to meet Burma's leaders and try to persuade them to begin political talks with Suu Kyi and other opposition leaders, a European diplomat in Brussels tells TIME. "There is a majority view in the E.U. that Aung San Suu Kyi's release is a step in the right direction," says the diplomat, who deals with Burma policies and spoke to TIME on the condition that he not be named. "It is something to be acknowledged with some sort of dialogue."

But while the quiet diplomacy continues, the generals appear in no hurry to cede power — perhaps because they can look forward to billions of dollars in revenue for years to come. Aside from the gas pipeline that already cuts across Burma, a new offshore natural-gas field called the Shwe Project, which has billions in investments from Korean, Chinese and Indian companies, is expected to earn about $1 billion a year for the Burmese government over the next three decades. No Western sanctions — old or new — can put a stop to that.

• Vivienne Walt
• Since opposition leader Aung San Suu Kyi was released in November, efforts to toughen sanctions against Burma's ruling military have lost momentum. Was that the generals' plan all along?