China, Vietnam spar on high seas over US$2.5 trillion in energy

The US has accused Beijing of escalating efforts to intimidate other claimants out of developing resources in the South China Sea

By Philip Heijmans  /  Bloomberg

Thu, Aug 29, 2019 - Page 9

When a Chinese state-owned survey vessel sailed into waters off Vietnam’s coast early last month, it unleashed a high-seas standoff with trillions of dollars at stake that risks drawing in Russia and the US.

For weeks now, the Haiyang Dizhi 8 has zigzagged across a square block of water to study the seabed in an active drilling block operated by Russia’s state-owned Rosneft Oil PJSC.

Satellite images show more than a dozen Chinese and Vietnamese Coast Guard ships maneuvering around the surveyor, which at one point included a heavily armored Chinese cutter known as “The Beast” that is larger than most US destroyers.

The location is particularly worrying for smaller nations looking to extract oil and gas from disputed parts of the South China Sea: It sits three times closer to Vietnam than the Chinese mainland.

While Beijing has long sought to disrupt exploration in parts of the sea that fall under its expansive claims, its naval buildup and moves to construct military assets on disputed reefs over the past decade have allowed it to more aggressively assert its interests further from its shores.

“It’s the growing intensity or frequency of these occurrences that truly differs from the past,” said Collin Koh, a research fellow at Singapore’s S. Rajaratnam School of International Studies.

The current standoff “could’ve sufficed to make investors think twice about staying on that offshore project, and this might even serve as a deterrence to future investors who might want to anticipate and avoid being embroiled in such troubles,” Koh said.

The Chinese move comes just as it is holding negotiations on joint exploration in a disputed area with Manila, which has sought closer ties with Beijing since Philippine President Rodrigo Duterte came to power.

Vietnam has persistently rejected China’s so-called “nine-dash line” map of the sea as a basis for cooperating on energy resources, prompting tensions to increase as Beijing’s military strength grows.

The US this week criticized China’s move to send the survey to Vietnam as “an escalation by Beijing in its efforts to intimidate other claimants out of developing resources in the South China Sea.”

A US Department of State statement said that China was blocking Southeast Asian nations from accessing an estimated US$2.5 trillion in unexploited hydrocarbon resources.

For Vietnam — a country that produced 22 million to 33 million tonnes of oil from its offshore blocks each year, and has as much as 4.4 billion tonnes in crude oil and gas reserves there — armed Chinese ships within its maritime border could have a devastating impact on an industry that made up 20 percent of Vietnam’s GDP from 1986 to 2009.

China defended the provocation, saying Vietnam should not have carried out its decision in May to unilaterally begin exploitation work in a “Chinese jurisdiction.”

“This is the cause of the current situation,” Chinese Ministry of Foreign Affairs spokesman Geng Shuang (耿爽) said on Friday last week.

Rosneft declined to comment.

While the Philippines produces very little offshore oil and gas by comparison, data shows deposits in the disputed Reed Bank (Lile Bank, 禮樂灘) to the west could amount to as much as 5.4 billion barrels and 55.1 trillion cubic feet of oil and gas respectively.

However, any attempt to extract it would likely face strong resistance from China.

“Anything that the Philippines tries to do, particularly at Reed Bank, is going to met with the same kind of response that we’re seeing right now off the coast of Vietnam,” said Gregory Poling, director of the Washington-based think tank Asia Maritime Transparency Initiative.

Weekly transgressions from China near its coast has also cast a shadow over Duterte’s final years in office amid his pursuit of warmer ties with Beijing. The Philippine Armed Forces this month said they have consistently spotted armed Chinese warships sailing through its territorial waters since early last month.

The presence of Chinese surveyors in its exclusive economic zone this month prompted a diplomatic protest, said Philippine Secretary of Foreign Affairs Teodoro Locsin Jr, who was mindful that China now has the largest naval force in the region.

“Our nightmare — we send a ship and a big Chinese ship laughs at it. What do we do,” Locsin wrote in an e-mail.

“They claim it is all theirs. We claim it is all ours,” he said.

This all follows the deployment of a maritime militia and so-called fishing fleets known to harass fisherman throughout the region. A high-profile incident in June included a Chinese vessel colliding with a trawler, leaving 22 Filipino fishermen stranded at sea.

“It is indicative of how much China has expanded its operations in and through Filipino waters on account of the government’s accommodation of China,” Jay Batongbacal, director of the University of the Philippines’ Institute for Maritime Affairs and Law of the Sea.

With Duterte and Chinese President Xi Jinping (習近平) set to discuss recent activities in the South China Sea later this month in Beijing, Xi will be hoping to make progress on a joint exploration deal that would serve as a major concession in the ongoing code of conduct negotiations with the ASEAN.

According to a leaked draft of the negotiating text of the code of conduct dated June last year and seen by Bloomberg, China has stated its intention to achieve exclusive joint explorations in the South China Sea by eliminating any foreign presence.

The draft also expresses China’s intent to win veto rights over any joint military exercises with foreign militaries and attain regular joint patrols with Southeast Asian countries.

The pursuit of such an agreement demonstrates Beijing’s resolve to win administrative control within its so-called “nine-dash line” encompassing about 80 percent of the South China Sea, while recent incidents openly challenge a 2016 ruling by the Hague-based Permanent Court of Arbitration.

Observers say the increased hostilities in the South China Sea might be an attempt by China to coerce the 10-nation bloc to yield to Beijing’s demands within a self-imposed deadline of three years — when Duterte’s term comes to an end.

“These actions are designed to shape the other parties’ calculus to take into account their interests with China in mind,” Koh said.

With Vietnam less likely to yield to such pressure, China has engaged in several high-stakes deployments in recent weeks, including conducting two military exercises near the disputed Paracel Islands (Xisha Islands, 西沙群島), lifting a controversial fishing ban, and testing new warships and weapons in the Gulf of Tonkin, prompting concerns the two nations might wind up in open conflict.

“This is the most tense we have seen the relationship between Vietnam and China in five years,” Poling said. “Even if things are relatively quiet, they don’t seem like they are going to stay that way.”

Beijing has repeatedly talked down the escalation, calling on Vietnam to respect China’s sovereign rights.

“China hopes to join hands with regional countries to maintain stability in this area, with a focus on the negotiation of the code of conduct,” Zhu Feng (朱鋒), executive dean of The Collaborative Innovation Center of South China Sea Studies at Nanjing University, said during a telephone interview.

In an attempt to defend their maritime claims, as well as wade the growing geopolitical rift between the US and China, ASEAN in June adopted its own version of an Indo-Pacific strategy, though its own signatories admit it has serious limitations.

“Southeast Asia had best focus its attention and confine its resources to the South China Sea instead of looking farther out in pursuit of a policy that reeks of containment,” Locsin said.