China and the US appear headed for a damaging confrontation over the extent of China’s territorial claims in the South and East China seas.
Now that China has become the world’s largest importer of oil, its need to develop indigenous supplies is urgent.
Expecting China to put the South and East China seas off-limits to exploration and production until sovereignty disputes can be resolved through some undefined legal or diplomatic process is unrealistic.
Part of the problem is that Western analysts and policymakers still fail to appreciate the strategic importance of these areas. It is common to hear maritime disputes between China and its neighbors characterized in terms of uninhabited islands, submerged reefs, historic fishing grounds and unfinished business from World War II.
In reality, the disputes center on control over areas that are thought to contain substantial quantities of oil and gas, which would be vital to the economic development of all claimants.
US diplomats were reportedly dismayed when China started to claim the South China Sea was among the country’s “core national interests,” along with Taiwan and Tibet.
However, given the potential for developing oil and gas fields in both seas, it should have been obvious that they could not be treated as unimportant claims that could be deferred indefinitely.
US diplomats sometimes appear to want to freeze the disputes, a position that is both unhelpful and dangerous.
According to US Secretary of Defense Chuck Hagel, the US takes “no position on competing territorial claims” in both seas, but wants disputes peacefully resolved “in accordance with international law.”
At a regional security conference in Singapore in May, Hagel singled out what he termed China’s “destabilizing, unilateral actions asserting its claims in the South China Sea,” without apportioning blame to other countries, a one-sided approach that drew a furious protest from China.
Subsequently, US Chairman of the Joint Chiefs of Staff General Martin Dempsey has become the first top US military officer to visit Vietnam since 1971, fueling China’s suspicions about encirclement and US backing of its neighbors in maritime disputes.
The US has also refused to recognize China’s self-declared air defense indentification zone in the East China Sea and insisted that the Senkaku Islands, known as the Diaoyutai Islands (釣魚台) in Taiwan, which also claims them, are covered by its mutual defense pact with Japan, even as US officials insist they do not take a view on the underlying issue of sovereignty.
This strategy of expressing no view on sovereignty while trying to freeze the “status quo” is dangerous and threatens to worsen the standoff because the “status quo” is not remotely stable.
Western analysts and policymakers tend to downplay the potential energy resources of the disputed areas, but this probably understates the amount of energy that could be recovered if the areas were thoroughly developed.
Both seas contain sedimentary basins with thick layers of mud, silt and organic material deposited on the floor of ancient seas and lakes. Both have already seen significant oil and gas discoveries.
The South China Sea is ringed with known oil and gas fields off China’s Pearl River Delta and Hainan Island, and the coasts of Vietnam, Thailand, Malaysia, Indonesia, Brunei and Philippines.
In 2010, the US Geological Survey (USGS) estimated that the South China Sea had about 11 billion barrels of oil and 145 trillion cubic feet of natural gas that had yet to be discovered (Assessment of undiscovered oil and gas resources of Southeast Asia, March 2010).
In global terms, these are modest amounts, but for China, they are significant.
The assessment focused exclusively on coastal areas and did not include potential resources in the deeper waters in the center of the sea, near the islands and reefs at the heart of the disputes.
The South China Sea remains comparatively unexplored and there is the potential for substantial additional discoveries.
China’s oil companies believe the area has strong hydrocarbon potential and they have published resource estimates that are an order of magnitude higher than those of Western analysts.
The hydrocarbon potential of the East China Sea is even less understood. However, there are good reasons to believe that it could hold significant quantities of recoverable oil and gas. Several oil and gas fields have already been found in sea areas claimed by Taiwan, China and Japan.
The sea borders on the Songliao and Bohaiwan basins have been in production for decades and account for most of China’s current oil and gas output. There is therefore a high probability that more oil and gas could be found further offshore in the East China Sea itself.
With advances in ultra-deepwater drilling, the potential for far offshore exploration and production has never been greater, and the dispute over sovereignty in the East and South China Seas is unlikely to remain frozen.
US diplomats have suggested that the disputes could be resolved through international law, norms and diplomacy, without outlining how that might be achieved.
In its maritime boundary dispute, the Philippines has filed a claim against China under the UN Convention on the Law of the Sea (UNCLOS) with the Permanent Court of Arbitration in The Hague in the Netherlands.
UNCLOS is cited by many outside observers as a suitable legal framework for resolving disputes between China and its neighbors.
However, UNCLOS is not really relevant to the dispute, because the core of the disagreement concerns ownership and sovereignty over the islands and other outcrops.
Once sovereignty has been established, UNCLOS can help assign rights and responsibilities to all the parties, including control of shipping, fishing and oil and gas drilling.
However, UNCLOS cannot resolve the underlying disputes about sovereignty in the first place.
China has already rejected the arbitrators’ jurisdiction, which suggests the process is headed for failure.
The parties to the various disputes are all now raiding their archives for ancient books, letters and artifacts to bolster their claims of historic control over disputed islets.
Such historical research is unlikely ever to persuasively resolve the claims — just look at Britain’s and Argentina’s unresolved dispute over the Falkland Islands, also known as the Malvinas.
The only real solution is diplomatic. The coastal states around the South and East China seas must agree to divide, share or pool their sovereignty in the interests of security and to permit the peaceful exploitation of the resources.
There are plenty of examples of such shared resource development, ranging from the Spitsbergen Archipelago in the Arctic to the Neutral Zone between Saudi Arabia and Kuwait.
Before the recent flare-up, China and Japan had agreed to jointly develop the Chunxiao gas field (春曉油田), which straddles the maritime boundary.
The challenge for diplomats, especially from the US, is to help the parties find creative solutions that benefit all the coastal states.
Instead, US diplomats have encouraged the parties to harden their positions and suggested that the dispute can be frozen until some vague legal process runs its course.
This strategy will not work and is escalating, rather than defusing, regional tensions, encouraging states to pursue maximal claims, rather than to compromise and negotiate common solutions.
It is time that Western policymakers recognize that hydrocarbon exploration is both necessary and desirable in both the South and East China seas.
Oil and gas exploration must be a stabilizing force for cooperation, rather than a source of conflict and competition.
John Kemp is a columnist for Reuters. The opinions expressed here are those of the author.
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