China Politics, Oil Needs Risk Conflict in South China Sea

Posted on August 13, 2012


This aerial view of the city of Sansha on an island in the disputed Paracel chain. Photograph: STR/AFP via GettyImages

In asserting its claims to the tiny islands, rocks and reefs in the South China Sea, China points to records of its ancient mariners. Today, those waters are far more important to China than in the age of the sail.

That’s because the area may hold oil riches that rival Saudi Arabia’s, a prospect that is stoking tensions in one of the world’s busiest shipping lanes as China undertakes its once- in-a-decade leadership transition.

China’s assertiveness over a vast stretch of sea has grown in lockstep with its economic clout as it overtook the U.S. to become the world’s largest energy user. It is encountering competition over the rights from others, notably Vietnam and the Philippines, which are also asserting their claims.

“There is no advantage for China to back down or enter negotiations,” said Andrew Nathan, a scholar of Chinese politics and foreign policy at Columbia University in New York. “China won’t calm down, and the current posture reflects a long-established strategy to reassert its claims steadily over time without ceding an inch.”

At stake are unproven oil reserves of as much as 213 billion barrels, according to Chinese studies cited in 2008 by the U.S. Energy Information Administration. That compares with 265.4 billion barrels of proven reserves held by Saudi Arabia as of 2011, according to the BP Statistical Review of World Energy.

In 2010, China became the world’s top energy consumer. Its demand for oil alone surged to 9.8 million barrels per day in 2011 from 216,000 barrels per day in 1965, BP data shows. That’s more than double its daily production of 4.1 million barrels.
Economic Case

A net oil importer since 1993, China’s own proven oil reserves would last only 10 years at the current production levels, while Vietnam’s production would last 37 years, according to BP Plc (BP/) estimates. The needs of the Philippines, because it imports nearly all of its oil, are greater than China’s, Philippine Foreign Minister Albert del Rosario said in an interview last year.

The world’s second-largest economy claims “indisputable sovereignty” over most of a body of water that lies south of mainland China, including more than 100 small islands, atolls and reefs that form the Paracel and Spratly Islands. Those claims are contested by Vietnam, the Philippines, Malaysia, Brunei and Taiwan.
‘Nine-Dash Map’

China says explorer Zheng He, whose sea adventures predate Christopher Columbus, crossed the South China Sea during the Ming Dynasty and cites historical maps that long predate the founding of the People’s Republic in 1949. The Chinese Foreign Ministry website says the earliest discovery of the Spratlys, called Nansha in China and Troung Sa in Vietnam, can be traced back 2,000 years to the Han dynasty.

These records form the basis of China’s “nine-dash” map of the sea, first published in 1947, that extends hundreds of miles south from China’s Hainan Island to the equatorial waters off the coast of Borneo. North Vietnam recognized Chinese sovereignty over the area from the 1950s to the 1970s, while the Philippine claim of some islands dates back to the 1950s.

In the closing days of the Vietnam War, China seized the Paracel Islands in a 1974 naval battle with South Vietnam. In 1988, China sank several ships and killed more than 70 Vietnamese sailors in a skirmish over the Spratlys.
Military Force

Along with the growing strength of its navy, China has used its maritime surveillance ships to harass foreign fishing boats, cut survey ships’ cables, and plant markers on unoccupied reefs. At least eight incidents between China and the Philippines, a U.S. ally, in the last 18 months have highlighted conflicting territorial and resource claims, according to the Congressional Research Service.

While all-out war is unlikely, “all of the trends are in the wrong direction,” the International Crisis Group, a policy research organization, said in a report last month.

The competing nations have moved to assert administrative control over the islands through setting up local governments, building structures, passing laws and promoting tourism, often leading to tensions. After Vietnam passed a maritime law in June, China delineated oil blocks off areas that Hanoi’s leaders had already awarded and set up a military garrison in the Paracels.

Adding to the mix is the U.S., which is shifting military assets to Asia and is advocating multilateral regional talks on the South China Sea. Secretary of State Hillary Clinton said in a July 18 editorial that China’s call for bilateral talks “is a recipe for confusion and even confrontation.”

U.S. Criticism

China’s actions in the Paracels run “counter to collaborative diplomatic efforts to resolve differences and risks further escalating tensions in the region,” State Department spokesman Patrick Ventrell said on Aug. 3. A day later, officials in Beijing said the U.S. was sending “a seriously wrong signal” to rivals for territorial rights in the South China Sea.

“The Chinese tend to react in very visceral fashion, and that does not always go down well,” said Jonathan D. Pollack, an Asian and Pacific Studies specialist at the Brookings Institution in Washington, in a telephone interview. “Any time they see a U.S. role in anything, they will lash out.”

The U.S., which says it doesn’t take sides on competing claims, has a declared national interest in a stretch of sea that carries an annual $5 trillion in ship-borne trade and frequently cites concerns of freedom of navigation. China denies ever threatening ships passing through its waters.
Long-Standing Policy

“The U.S. is unlikely to get involved directly, as that would alter a long-standing policy of maintaining neutrality in territorial disputes and complicate its broader relationship with China,” said Taylor Fravel, a professor at the Massachusetts Institute of Technology in Cambridge, Massachusetts. “However, the U.S. is likely to speak out when it believes that trends are challenging regional stability or the principle of freedom of navigation.”

The new surge in hostilities can be traced to about 2007, when claimants moved to strengthen their positions and develop oil and gas fields within their 200-nautical-mile economic zones, according to analyst Ian Storey of the Institute of Southeast Asian Studies in Singapore.

Government-owned China National Offshore Oil Corp., China’s largest off-shore oil producer and parent of Cnooc Ltd. (883), in May begin drilling using its first deep-water drilling rig north of the Paracels. The proposed acquisition of Nexen Inc. (NXY) of Canada by Cnooc, in a deal valued at $15.1 billion (NXY), would give China in-house deep-sea drilling expertise it had lacked, according to Dean Cheng, a researcher on Chinese political and security issues at the Heritage Foundation in Washington.
Race On

“It is certainly conceivable that if the Chinese are out there first, and the Chinese find oil and they can back their claims with military force that, in a sense, the region is going to be effectively ceded to the Chinese,” he said.

Vietnam has bid out areas within China’s claims, with Exxon Mobil Corp. (XOM) and Gazprom OAO (GAZP) among companies that have signed deals to explore the area. The Philippines has also opened parts of the waters to international companies, though in a July auction it received bids only from smaller, local oil companies such as Makati City-based Helios Petroleum.

The existing mechanisms for China and Southeast Asian nations to hammer out their differences are proving inadequate. China says its claims pre-date the 1982 United Nations Convention on the Law of the Sea, which sets out a framework for a solution, and won’t submit to international arbitration.

A meeting in July of the Association of Southeast Asian Nations hosted by Cambodia failed to reach a consensus on handling disputes in the South China Sea.

If after nine years Asean and China cannot agree on how to implement a set of confidence-building measures, “what hope is there for reaching an agreement on a binding code designed to limit the sovereignty-building activities of the more active claimants?” said Storey. “Little to none, I would say.”


Chinese disappointed with medals haul

The US took Olympic bragging rights at the end of a fortnight of events, ending the games at the top of the medals table and leaving China to come to terms with the relative disappointment of coming second to its superpower rival.

Victory for its men’s basketball team, complete with NBA superstars LeBron James and Kobe Bryant, gave the US its 46th and final gold medal of the London games, eight ahead of China.

China had been coming to terms all weekend with the inevitable loss of the top spot in the medals table it had achieved four years ago in Beijing.

By Sunday afternoon, many Chinese felt the games were already over.

Many internet users expressed disappointment at the result, an indication of just how tightly the games are tied in many Chinese people’s mind to a broader sense of their nation’s rise.

“We have lost what was ours to the imperialist power that is trying to contain China everywhere, but China will rise regardless!!!” said one commentator on a nationalist web forum.

American fans at the Olympics who were celebrating their place on top of the medals table noted China’s push to knock them off. “Americans strive for excellence. You see that in many parts of life … sport is no exception,” said Sherry Bitting, after the victory of the US men’s basketball team.

“China has a much greater agenda,” she said. “They have a lot to prove. Where was China [on the medals table] 20 years ago?” she added.

Dahne Scotti, from New York, said he was “so happy” the US came out on top at this Olympics and said he preferred his country’s approach to winning Olympic medals.

He said China has “different values” in their pursuit of Olympic glory.

Some Chinese observers said their country’s athletes had been treated unfairly by international media. Pointing to the debate over doping suspicions after the world record by Ye Shiwen, the female swimming gold medallist, in the 400m individual medley, one microblogger wrote: “Now the West must be satisfied that we were defeated by the US.”

If China’s disappointment was marked, at least it did not have to contend with the paltry medal return of India and Brazil.

India ended the games with six medals, including two silvers, while Brazil, host of the 2016 games, managed only three golds in an overall medal haul of 17.

Despite China’s close integration into global trade and growing foreign studies and travel, decades of nationalist propaganda have left many Chinese with the conviction that the US is their country’s enemy and is working to prevent the nation’s return to its rightful place as a global power.

That feeling has been reinforced by Washington’s “pivot” into Asia and diplomatic shouting matches between China and the US over tensions in regional waters such as the South China Sea, where China feels the US is meddling in its backyard.

But the government is trying to cool nationalist fervour over the games.

Pointing to “biased and groundless news reports” about China at the London Olympics, the People’s Daily, the Communist party’s mouthpiece, said in an editorial the nation had already been reminded during the Beijing Olympic torch relay how difficult it was to integrate into the world.

“There will be more grating noises in the process of China’s development,” it said. “The key is to stand firm against bias and absorb constructive criticism. China must go through these international tests to achieve rejuvenation.”

Even before the games started, Chinese sports officials had tried to manage expectations, saying it would be hard to repeat the strong performance seen in Beijing four years ago. They also stressed that participating was more important than winning – a statement that many athletes declare a core value but which has been questioned as lip service given China’s focus on gold medals.

When Qiu Bo, China’s hope for a seventh gold in diving, was defeated by America’s David Boudia on Saturday, he could be seen resting his head against the wall in despair. But soon after, he told Xinhua, the official news agency, that he “wasn’t that disappointed at losing”.

The People’s Daily titled on its website on Sunday: “We won silver, we did not ‘lose gold’”.

Some Chinese observers also appealed to their compatriots to give up the obsession with gold medals.

“Our government spends far too much on fostering winning athletes, and I think they should be channelling some of that money into pensions and medical insurance,” said Ji Hong, an editor at a publishing house.

Note: This article has been amended since publication to reflect the fact that India’s medal tally included two silver medals, not two gold medals.

The Financial Times

Posted in: Economy, Politics