Increased tensions in the South China Sea, especially between China and Vietnam, focus attention on vitally strategic area of interest, not only for the countries involved, but for the entire Asian continent. Global dynamics and balance of power are greatly affected by them. Between late May and early June of this year, a new round of negotiations over a topic that, according to many analysts, will become one of the most important geopolitical issues in the coming years, began. The geopolitical development of what is happening in the South China Sea will have immediate and long term consequences for global security. This is due in large part to the economic significance of the area, its strategic location, the sheer number of states directly and indirectly involved with it (China, South Korea, Japan, etc), and their economic significance on the global level. Rising tensions and regional developments are being carefully followed by many stakeholders.
The South China Sea is the part of the Pacific Ocean stretching from the Straits of Malacca in the south-west to the Straits of Taiwan in the north-east. One of the distinctive features of the region is its high level of biodiversity and abundant marine resources, as it teems with fish, a product of strategic importance for all of the neighboring countries. Another feature is tied to the large number of islands and islets, sandbanks, and atolls in the region. The diversity and richness of natural resources and the divergent interests of the key actors in the region are what originally attracted so much international attention.
Two-way trade makes the China South Sea the busiest sea in the world, linking the region of Northeast Asia (the wealthiest in Asia) to the Indian Ocean and the Persian Gulf through the Strait of Malacca. Approximately 60,000 ships pass through it each year, representing almost half of marine transportation worldwide in terms of tonnage. Half of the world’s oil supplies and two-thirds (66 percent) of exported natural gas are transported through the South China Sea. In addition, about 80 percent of oil supplies to China, South Korea and Japan follow this route. The volume of oil transited through the Strait of Malacca, in terms of millions of barrels per day, is about six times that which goes through the Suez Canal (13.6 million b/d against 2 million b/d in 2009,) and about sixteen times that which goes through the Panama Canal (about 0.8 mb/d) (International Energy Agency, 2011).
The proven oil reserves in this area amount to a mere 2.3 percent of world’s total, making it, together with Europe, one of the poorest regions in terms of oil reserves. Only around 8 percent of world oil production at the end of 2010 (BP 2011) was accounted for by this region, making it heavily dependent on imports, as it consumes 25 percent of the world’s total. Most of these imports come from Africa and the Persian Gulf. Keeping this route open is vitally important for the development of international trade with the countries of Asia. Nevertheless, in light of the ever-increasing energy needs of all the regional states (particularly China), the reserves of hydrocarbons to be found in the South China Sea, which have enabled Indonesia to become one of the leading oil exporters, are exacerbating already existing tensions. Estimates of reserves vary widely. Based on the Chinese perspective, approximately 210 billion barrels of oil are located under the seabed of the sea and on islands. However, based on the more cautious U.S. Geological Survey perspective, there are not more than 28 billion barrels yet to be extracted. In the absence of exploration, any such data, at least in the short term, is likely to remain uncertain.
What seems to be even more speculative in nature is the amount of potential and documented natural gas deposits. In April 2006 Husky Energy (a Canadian company controlled by billionaire Li Ka-shing of Hong Kong), in collaboration with China National Offshore Oil Company (CNOOC), announced the discovery of significant natural gas deposits.
The importance of the sea routes, the presence of hydrocarbons and the abundant marine resources in the South China Sea are the three main causes of sovereignty disputes over the high number of islands. Guaranteeing sovereignty to any country over any part of the sea, and thus laying the basis for its legal right to exclusive exploitation of the seabed and the surrounding waters and islands, remain a controversial issue. This situation is further complicated by the strategic interests of the United States, which for its part consider the area vitally important for its strategic interests.
Territorial disputes continue to be a major source of tension in the region, causing even human casualties. For instance, in 1988 seventy Vietnamese sailors were killed off the Spratly Islands when they clashed with Chinese vessels.
Legal claims to sovereignty are primarily based on the United Nations Convention on the Law of the Sea (UNCLOS) adopted in 1982, which establishes the right of states to extend their Exclusive Economic Zone (EEZ) to 200 nautical miles from their coastal baseline. The difficulty of establishing sovereignty over the islands is related to method used in measuring each country’s EEZ. All countries simultaneously consider certain areas of the South China Sea as exclusively being within their own territorial waters.
Four main island groups are found in the South China Sea:
• The Pratas Islands (Dongsha in Chinese), usually treated as part of the Republic of Taiwan, but claimed by Mainland China;
• The Macclesfield Bank (Zhongsha Island in Chinese) claimed by China, Taiwan and the Philippines;
• The Paracel Islands (Xishi Islands in Chinese), which are under the administration of the Chinese province of Hainan but also claimed by Vietnam (before 1974 South Vietnam controlled some of these, but lost them after a brief conflict with China, which has occupied those islands since that date) and Taiwan;
• The Spratly Islands (Nansha in Chinese), the most southerly group of larger islands, in which the difficulty of distinguishing between islands, islets, rocks and cays does not allow an exact number of “islands” to be determined.
According to currently available best estimates, the number of islands in the South China Sea ranges from 90 to 650, with between 48 and 50 inhabited. Three nations claim full sovereignty over the Spratly Islands (China, Taiwan, and Vietnam), while others claim only parts of it (the Philippines, Malaysia and Brunei). All these states, apart from Brunei, have established a military presence on the widely distributed islands. Vietnam occupies the largest number of islands, twenty-seven; China occupies nine, although some reports indicate only seven; the Philippines claim occupying nine of the islands; Malaysia controls three but maintains a presence on another two; while Taiwan, which was the first state to establish a presence in the archipelago after the Second World War, occupies the largest island, Itu Aba.
China and Vietnam’s demands, which are historically based, are the least credible from a legal perspective. However, in terms of International law, little weight in cases concerning sovereignty over a territory, as the latter needs to be effectively and consistently occupied and controlled by a state in order to be considered a possession of that state. This aspect of international law explains to a great extent the thrust and motivation of regional states to occupy islands and the accompanying tensions that result. The present situation is rather complex and it will be difficult to resolve as all regional states pretend to have international law fully on their side.
What arouses the greatest concern in the area is China’s behavior. Beijing’s goals are, on the surface, no different from those of other coastal countries. What elevates the issue to another dimension is China’s growing military strength and naval capacity. Due to the stalemate of the Cold War, China was not able until 1988 to exert its claims over the Paracel Islands. However, China now has a modern navy and a higher technological capability. Such a combination perturbs its neighbors and stakeholders beyond the region.
The situation between China and Vietnam is particularly difficult. Vietnam is the third largest oil producer among ASEAN countries, accounting for 370,000 b/d in 2010 (BP). The exhaustion of its main oil field, the White Tiger, has forced Vietnam to seek new areas for oil exploitation, both on remote locations ashore and offshore. However, this strategy involved important risks of quickly fanning tensions with its bigger and stronger northern neighbor. Incidentally, China declared its sovereignty over the whole basin of the South China Sea in October 2004 when a new oil field was discovered in northern Vietnam to the west of the Hainan Island. The Chinese Foreign Minister declared at the time that China’s sovereign rights had been violated. Moreover, the Chinese authorities warned Exxon Mobil, a U.S.-owned company, of possible consequences when it signed a preliminary agreement with Petro Vietnam to do exploration in the South China Sea. The American company, part of the “Big Five” oil enterprises in the world, could see its business activities disrupted or even declared unlawful in China properly.
There have been many similar incidents in recent years, such as the blocking of fishing in areas claimed by Vietnam in the summer of 2009 and the arrest of hundreds of non-Vietnamese fishermen. Similar incidents also took place between China and Indonesia and between Vietnam and Malaysia. The intensification of these “incidents” is largely due to the increase in patrols by the Chinese navy, which is highly-strung and equipped to exercise control over important and wide trade routes.
In spite of efforts at conflict resolution the alert level has been high since 1992. Multilateral negotiations have not been effective so far. China has always managed to have the issue taken off the agenda of the ASEAN Regional Forum (ARF), as well as that of the militarization of the Spratly islands. It maintains that sovereignty over the islands is negotiable, but preferably through bilateral diplomatic efforts. In 2010, China declared the issues concerning the South China Sea as being of “vital interest,” elevating them to the level of the debates over Tibet and Xinjiang, two separatist regions within China. In these circumstances, the situation can only remain unstable and potentially inflammable.
A solution to the various territorial disputes is unlikely in the short term. China is steadily increasing its economic and military strength, as its economic growth has averaged 9.3 percent per year since 1989, while in the second quarter of 2011 it recorded a GDP growth rate of 9.5 percent over the previous year (Wall Street Journal).
According to the Stockholm International Peace Research Institute (SIPRI), China’s military expenditure rose by 12.5 percent on average in the period between 2001 and 2010, amounting to $119 billion. In recent years the extent of Chinese budget spending on security has finally caught everyone’s attention. China’s increased security and decision-making capacities are best expressed in the South China Sea.
In the summer of 2010 Colonel Geng Yansheng, a spokesman for the Defense Minister of China, used the phrase “the indisputable Chinese sovereignty over the South China Sea” in an official statement. Another Chinese spokesman, Yang Yi, uttered a similar turn of phrase on relations with Taiwan. Beijing tries to capitalize on the prosperity of its economy and new military clout to promote decisions and solutions that are in line with its own interests. It also makes it known that it is ready to aggressively defend its territorial and economic claims.
During the last summit of the ASEAN Post Ministerial Conference (PMC) +1, held on July 20-21, 2011 in Bali, China signed an agreement on guidelines which will ensure the full implementation of the 2002 Declaration of the Conduct of Parties in the South China Sea (DOC). In essence, the agreement consists of eight guidelines which should help ASEAN countries and China achieve a peaceful settlement of disputes in the South China Sea. It promotes a step-by-step approach and relies heavily on cooperation and consensus in implementing the DOC, which is based on norms of international law (UNCLOS) to resolve inter-state disputes.
Philippine state officials, however, have estimated the agreement too weak and vaguely defined. They have also declared that the Philippines will seek United Nations arbitration in resolving these outstanding disputes. This position is not welcomed by China, especially as attempts are underway to lower the tension level on a multilateral basis. In the final analysis, short-term solutions are definitely not in sight, especially if China continues to claim de facto sovereignty over the South China Sea and new energy deposits keep on being discovered by regional and outside players. There is also another variable complicating the picture: the ever-increasing U.S. presence in an already highly-contested region.