Energy and Geopolitics in The South China Sea

ENERGY AND GEOPOLITICS
IN THE SOUTH CHINA SEA

The Institute of Southeast Asian Studies (ISEAS) was established as an
autonomous organization in 1968. It is a regional centre dedicated to the study
of socio-political, security and economic trends and developments in Southeast
Asia and its wider geostrategic and economic environment. The Institute’s
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and APEC), Regional Strategic and Political Studies (RSPS), and Regional Social
and Cultural Studies (RSCS).
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and analyses from and about Southeast Asia to the rest of the world.
00 Energy_Geopolitics Prelims 2 9/28/09, 12:44 PM

Report No. 8
ENERGY AND GEOPOLITICS

IN THE SOUTH CHINA SEA
Implications for ASEAN and its Dialogue Partners
INSTITUTE OF SOUTHEAST ASIAN STUDIES

Singapore
First published in Singapore in 2009 by
ISEAS Publishing
Institute of Southeast Asian Studies
30 Heng Mui Keng Terrace
Pasir Panjang
Singapore 119614
E-mail: publish@iseas.edu.sg
Website: bookshop.iseas.edu.sg
All rights reserved. No part of this publication may be reproduced, stored in a

retrieval system, or transmitted in any form or by any means, electronic,
mechanical, photocopying, recording or otherwise, without the prior permission
of the Institute of Southeast Asian Studies.
© 2009 Institute of Southeast Asian Studies, Singapore
The responsibility for facts and opinions in this publication rests exclusively
with the contributors and their interpretations do not necessarily reflect the
views or the policy of the publisher or its supporters.
ISEAS Library Cataloguing-in-Publication Data
Energy and geopolitics in the South China Sea : implications for ASEAN and its
dialogue partners.
(Report / ASEAN Studies Centre ; no. 8).
1. ASEAN.
2. Territorial waters—South China Sea.
3. South China Sea.
I. Institute of Southeast Asian Studies. ASEAN Studies Centre.
II. Series.
JZ5333.5 A9A85 no. 8 2009
ISBN 978-981-230-989-1 (soft cover)

ISBN 978-981-230-992-1 (E-book PDF)
Typeset by Superskill Graphics Pte Ltd

Printed in Singapore by Seng Lee Press Pte Ltd

CONTENTS
Preface vii
Lead Article
• Energy and Geopolitics in the South China Sea:
Implications for ASEAN and Its Dialogue Partners 1
• Michael Richardson
Visiting Senior Research Fellow
Institute of Southeast Asian Studies (ISEAS),
Singapore
Commentaries
• Sam Bateman 41
Senior Fellow
S. Rajaratnam School of International Studies (RSIS),
Nanyang Technological University, Singapore
• B.A. Hamzah 53
Senior Research Fellow
Institute of Ocean and Earth Sciences (IOES),
University of Malaya, Kuala Lumpur, Malaysia
Articles
• Flashpoint: South China Sea 65
• K. Kesavapany
Director
Singapore

vi Contents
• Whither the South China Sea Disputes? 68

• Mark J. Valencia
Visiting Senior Fellow
Maritime Institute of Malaysia
• Clarifying the New Philippine Baselines Law 74

• Rodolfo C. Severino
Head, ASEAN Studies Centre (ASC)
Singapore
About the Contributors 77

PREFACE
The South China Sea is generally considered as one of the

flashpoints for conflict in East Asia. With its vast expanse, the
South China Sea’s many small land features and indeterminate
maritime regimes are the subject of conflicting claims among
China and Taiwan and four member-countries of the Association
of Southeast Asian Nations. These multiple claims vary in nature
and extent, making the situation most complex and extremely
difficult, if not impossible, to adjudicate.
Yet, this maritime body is vital not only to the claimant-
states, not only to the littoral lands, but globally as well. Through
the South China Sea pass ships carrying more than half of the
world’s trade. The presence in and passage through it of American
and other naval vessels enable the United States and other powers
to project their military weight in that part of the world. According
to the Energy Information Administration of the United States
Government, a 1993–94 estimate by the U.S. Geological Survey
placed the total of discovered oil reserves and undiscovered
oil resources in the offshore basin of the South China Sea at
28 billion barrels, while a Chinese estimate had it as high as
213 billion barrels. Another Chinese estimate calculated the natural
gas reserves in the South China Sea region at two quadrillion
cubic feet. These estimates are of considerable importance in
an era of high energy prices.
It was in the light of the importance, volatility and complexity
of the situation in the South China Sea that the ASEAN Studies

viii Preface
Centre of the Institute of Southeast Asian Studies (ISEAS) chose

that situation as the subject of its first online forum. The forum is
led off by an article by Michael Richardson, former Asia editor of
the International Herald Tribune and now Visiting Senior
Research Fellow at ISEAS. Valuably illustrated by maps, the
Richardson article focuses on the South China Sea’s potential as
a source of energy, the rise of China’s military power, and related
issues.
Sam Bateman, a Senior Fellow with the S. Rajaratnam School
of International Studies (RSIS), Nanyang Technological University,
Singapore, where he serves on the Maritime Security Programme,
contributes a commentary on the Richardson paper. A former
Australian naval officer with a special interest in the political and
strategic aspects of the international law of the sea, Bateman has
co-edited with Ralf Emmers, Associate Professor at RSIS, Security
and International Politics in the South China Sea: Towards a
Cooperative Management Regime (Routledge 2009).
B.A. Hamzah, Senior Research Fellow, Institute of Ocean and
Earth Sciences (IOES) and the Faculty of Arts and Social Sciences,
University of Malaya, Kuala Lumpur, also contributes a commentary.
Previously with the Maritime Institute of Malaysia and the Institute
of Strategic and International Studies of Malaysia, Hamzah can be
reached at bahamzah@pd.jaring.my and 601-2366-9913.
An op-ed piece by K. Kesavapany, Director of ISEAS and a
former senior diplomat of Singapore, in the Straits Times of
Singapore, entitled “Flashpoint: South China Sea”, forms part of
the online forum. So does an article by Mark Valencia, a Visiting
Senior Fellow at the Maritime Institute of Malaysia and a Senior
Associate at the Nautilus Institute. Rodolfo C. Severino, Head of
the ASEAN Studies Centre at ISEAS, contributes a clarification of
the new Philippine baselines law. Needless to say, all of them

Preface ix
express their personal views and not necessarily those of their

institutions.
The contributions to the online forum are printed in this
booklet, which is part of the Report Series of the ASEAN Studies
Centre.
Rodolfo C. Severino
Head, ASEAN Studies Centre
Institute of Southeast Asian Studies
Singapore

ENERGY AND GEOPOLITICS IN
THE SOUTH CHINA SEA:
IMPLICATIONS FOR ASEAN AND ITS
DIALOGUE PARTNERS
Michael Richardson
Visiting Senior Research Fellow
Institute of Southeast Asian Studies (ISEAS), Singapore
April 2009
The Setting
China says it wants close, cordial and cooperative relations with
its neighbours in Southeast Asia, the ten member states of ASEAN.1
Progress in this direction has gained impressive momentum since
the end of the Cold War and Chinese support for communist-led
insurgencies seeking to overthrow established governments in
the region.
However, China’s military power is growing steadily and it
claims ownership of a network of widely-scattered islands and
their surrounding waters and resources in the South China Sea,
one of the world’s largest semi-enclosed bodies of water. (See
Map 1.) These claims overlap in a substantial way with those of at
least three ASEAN countries, Vietnam, the Philippines and
Malaysia.
The three million square kilometre South China Sea is the
maritime heart of Southeast Asia. It is two-thirds the size of the
combined land territory of all the ASEAN states. Most Southeast
01 Energy_Geopolitics 1 9/28/09, 12:47 PM

2 Energy and Geopolitics in the South China Sea
MAP 1
Southeast Asia
Philippine
.SeJ
.....
-=·
--
lndi.ltl 0 c e :ut
Sc.alc- I:J2.000.000 olC S..ti
Source: U.S. Central Intelligence Agency, The World Factbook 2008 online.

Asian countries have coastlines overlooking or close to the South

China Sea. Some would be wary about having to share a common
maritime boundary with such a big and increasingly powerful
nation as China, or even having it as a very close neighbour.
Meanwhile, oil and gas reserves under the seabed of the
South China Sea are being discovered and exploited further and
further from shore, as advances in drilling and production
technology enable coastal states and the energy companies
working for them to tap hydrocarbons in ever deeper waters.
(See Map 2.)
If China does not yet have the military capability to enforce
its claims in the South China Sea, it is expected to gain this
strength in the next few years. This puts a dark shadow of
uncertainty over the future of China’s relations not just with
ASEAN members, but also with their main dialogue partners,
including the United States, Japan, India, South Korea and
Australia. All of these countries have important links with China.
They also have significant strategic and commercial interests in
the South China Sea and in ASEAN.2
Maritime Disputes
Among Southeast Asian states, Beijing’s claims to the Spratly
Islands in the South China Sea are disputed by Vietnam, the
Philippines and Malaysia. (See Map 3.) Brunei in 1984 established
an exclusive fishing zone that encompasses Louisa Reef in the
southern Spratly Islands but has not publicly claimed the reef.
About forty-five of the islands are occupied by relatively small
numbers of military personnel from China, Vietnam, the
Philippines, Malaysia and Taiwan.
The Spratlys form a widely-scattered archipelago of more
than 100 small islands, coral cays and reefs that lie to the east of

MAP 2
Competing Claims in the South China Sea
._ -....-
...
Oil and Gas Resoutces
... ............
,...........,
M itl . . ~ ..... .,....,...,OoN.r...,
___ __
I/III/IV~ flillt.'l tll._ wt~~~
llt .......... lallllll._ t ............ ..._
......,......_dllillll ....
·----
-·-·---
·~..._
e..w.. .. ......,..., ................ .....
....
South ChiiUI Sea Malltlme Claims
- Lhl . . . . ll'lowl't M arr..IIIIPI
- - --~Cilia
Other South China Sea Claims

--
__ .......,. .......
~ l:ldiiM~ . . i!it
~--.,.'""""
0
-- ·~
South
China
Sea
Source: CIA Maps and Publications for the public.

MAP 3
Competing Claims in the South China Sea
Countries Claiming
Ownership
• China
• VN!tnam
• Malaysia
• taiwan
Philippines
0 Gas/ Oil fields 500
Source: <www.southchinasea.org>.
busy international sealanes in the South China Sea. (See Maps 4

and 5.) The sealanes running through it connect the Straits of
Malacca and Singapore in Southeast Asia with China, Japan and
South Korea, the main oil-importing industrial economies in
Northeast Asia. These sealanes carry a large part of the world’s
maritime trade and are frequently used by leading navies, especially
the United States and increasingly by China. Located about two-

MAP 4
South China Sea Islands
.._
·~·
INDONEStA
..__
=:....":"..:.:-... -
Source: Wikipedia commons.

MAP 5
Spratly Islands
NOrlheMI CBy
Southwest <;ay~
South
China
Sea
Fi9ry cross •.
. Reef'
...
a d
•
~
Pigeon Reef Half
Moon
Aliso~ '
....
· spratly Reef
Shoal
JsJand
) •
.,.,
'
•• 0 50- 100 l':rn
• 0 !50 100ml
Source: CIA World Factbook 2008 online.

thirds of the way between southern Vietnam and the southern

Philippines, the Spratly archipelago covers an area of nearly
410,000 square kilometres of the central South China Sea.3
Although the total land area of the Spratlys is less than five
square kilometres, control of this remote but potentially important
real estate might be used to establish naval patrol and surveillance
bases. It could also be used to bolster claims to fisheries and
offshore oil and gas resources in a vast area of the South China
Sea. China, Taiwan and Vietnam claim all of the Spratlys,
surrounding waters and any resources they may contain. The
Philippines and Malaysia assert sovereignty over smaller portions
of the Spratlys closest to their shores. (See Map 3.)
The South China Sea claims of China, Taiwan and Vietnam
are far wider than those of other claimants. Vietnam asserts
sovereignty over the Paracel Islands (see Map 4) as well as the
Spratlys. The Paracels were seized by China from South
Vietnamese forces in 1974 in the closing stages of the Vietnam
War, when Hanoi and Beijing were supposed to be allies. Chinese
forces have since reinforced their garrison on the Paracels and
extended an airport runway there, strengthening their grip on
what is seen in Beijing as a strategic outpost southeast of China’s
Hainan Island and roughly one-third of the way between Vietnam
and the Philippines. There are 130 islands and rock outcrops in
the Paracels group.4
Vietnam asserts that both the Spratlys and the Paracels are
part of its national territory and have historically belonged to
Vietnam. In the 1930s, France annexed the Spratlys and Paracels
on behalf of its then-colony Vietnam. Hanoi treats the Spratlys as
an offshore district of the province of Khanh Hoa. Vietnam’s
claims beyond the Spratlys and Paracels cover an extensive area
of the South China Sea, although they are not clearly defined.

Both China and Vietnam protested in February 2009 after the

Philippines passed new legislation spelling out its claims to some
of the Spratly Islands and Scarborough Shoal.
China’s U-shaped Claim

However, China’s claim appears to be far wider, encompassing
much of the South China Sea. The precise limits are not clear
from the broken U-shaped line drawn on official Chinese maps.
(See Map 4 for the approximate location of this line.) Still, this
claim, if acknowledged by ASEAN countries or enforced by Beijing,
would bring China into the maritime heart of Southeast Asia. It
would make China a next-door neighbour not just of Vietnam, but
also of the Philippines, Malaysia, Brunei and Indonesia (through
its Natuna Island in the southern section of the South China Sea).
Moreover, this U-shaped line seems to coincide with the
extension into the South China Sea of the so-called “first island
chain” extending from the southern tip of Japan through Okinawa
and the ocean east of Taiwan to the Northern Philippines and
around the perimeter of the South China Sea. (See Map 6.) Chinese
military theorists say the first island chain forms a geographic
basis for China’s maritime defensive perimeter. It is the inner of
two such barriers, the second and outermost of which extends
southeast from Japan to and beyond the U.S. island territory of
Guam in the western Pacific Ocean.5
China’s Growing Military Power

Taiwan maintains a claim in the South China Sea similar to Beijing’s
U-shaped line. But neither Vietnam nor Taiwan has the military
might to enforce its claims and evict other claimants. Only China
has, or will have, that power if its military modernization
programme continues at, or close to, its pace of recent years.

MAP 6
The First and Second Island Chains
Source: U.S. Department of Defence, Annual Report to Congress: Military

Power of the People’s Republic of China, 2007.
China’s annual military spending has grown four-fold or more

over the last decade, rising from 0.9 per cent of GDP to at least
1.5 per cent, or US$58 billion. By some assessments, China’s real
military spending may be several times the published figure when
off-budget items relating to defence are included. Even without

allowing for this, China’s declared spending on military

modernization overtook India’s in 2002 and Japan’s in 2008. While
Chinese land forces are being upgraded, maritime and air forces
(and thus power projection) are modernizing faster. Meanwhile,
defence budgets in Southeast Asia, including those of the region’s
Spratly claimants, are small by comparison with those of China
and elsewhere in Asia.6
China’s navy has around 860 vessels. Some are old, small and
able to operate only in “brown water” close to the coast. But the
navy has “blue water” ambitions. It is extending its reach and
capability to protect China’s offshore interests, including those in
the South China Sea and beyond. Since 2000, China has built at
least 60 warships. According to the U.S. Defence Department,
China already has the largest force of principal combatants,
submarines and amphibious warfare ships in Asia. Its navy has
29 destroyers, 45 frigates, 26 tank landing ships, 28 medium landing
ships, 54 diesel attack submarines, five nuclear attack submarines
and 45 missile-armed coastal patrol craft. Of these 232 vessels,
168 are in China’s East and South Sea Fleets.7
In November 2008, a senior Chinese military spokesperson
indicated that the next major addition to the navy will be several
aircraft carriers built in China, although analysts doubt that the
first will be in service before 2015.8 China’s ability and readiness
to use naval power to protect trade and other interests far from its
shores were underscored by Beijing’s decision in December 2008
to send two of its most advanced warships and a supply vessel
from its naval base near Sanya, on Hainan Island, through the
South China Sea and the Straits of Malacca and Singapore into the
Indian Ocean to protect Chinese ships from pirate attack in
the Red Sea off lawless Somalia. The flotilla was ordered to guard
convoys and deter piracy for at least three months, before possible
replacement by another squadron of Chinese navy ships.

China’s Milplex
China’s military-industrial complex, the biggest in Asia, is also
improving both the quantity and quality of production. China is
one of the few countries in the world to produce a full range of
military equipment, from small arms to surface ships, submarines,
and jet fighters as well as ballistic and cruise missiles and nuclear
weapons. Since 2000, China has been producing several new types
of weapons that are highly competitive in terms of quality and
capability, among them the Song-class diesel-electric submarines
and the Type-052C destroyer equipped with an indigenous Aegis-
type radar and air-defence system.
One consequence of this growing self-sufficiency in arms
acquisition could be the rise of a more technologically-advanced
China that would be increasingly prone to challenge the United
States for regional, even global, predominance. Another
consequence of a militarily self-confident China could be a more
assertive policy in a number of areas — in the Taiwan Strait, in the
South China Sea and in the “blue waters”, of the Pacific and
Indian oceans — that would upset regional security.9
Still, the U.S. intelligence community estimates that China
will take until the end of this decade or longer to produce a
modern force capable of defeating a moderate-size adversary, and
that it will not be able to project and sustain even small military
units far beyond China before 2015.10
If this assessment is correct, there is still time to enmesh
China more fully into a regional relations system based on
international law, non-use of force and negotiated settlement of
disputes. Indeed since 1998, China has settled at least eleven
territorial disputes with six of its neighbours, among them Russia,
Vietnam and Japan. The most recent was the completion of the
land border delimitation treaty with Vietnam in December 2008.11

China’s policy since 1975 has been to “shelve” the conflicting

sovereignty claims to the land features and waters of the South
China Sea and, in the meantime, undertake cooperative activities
in the area.12 ASEAN formalized a similar approach to resolving
these maritime disputes peacefully when it issued a Declaration
on the South China Sea in 1992.13
However, many of the disputes in the South China Sea involve
more than two countries and sometimes as many as five
contestants. The plurilateral nature of the claims and the sensitive
national interests that are at stake make solutions complex and
difficult to reach. Moreover, China calls for joint development
only in the areas in which Beijing has overlapping claims with
Southeast Asian countries, and where they assert legal jurisdiction
and have established authority, such as in the Spratlys or zones on
the continental shelf southeast of Vietnam. China refuses to
countenance joint development in the Paracels, which are already
under Chinese control. Some Vietnamese scholars refer to this as
the “yours is ours, ours is mine” principle.
What do China’s Maritime Claims Portend?

China’s U-shaped claim in the South China Sea is the source of
considerable controversy, even among Chinese analysts. The “nine-
dotted line”, so called since it is composed of nine dashes, has
been on official Chinese maps dating back to 1947, when the
Kuomintang (KMT) ruled China. After the KMT was defeated in
1949 by communist forces and its remnants fled to Taiwan, the
new government of the People’s Republic of China (PRC) adopted
the same U-shaped claim in the South China Sea and Chinese
maps published since 1953 have displayed the nine-dotted line.14
The dotted line encloses the main islands, atolls and rock
outcrops of the South China Sea: the Pratas Islands in the far

north, the Macclesfield Bank roughly mid-way between Vietnam

and the northern Philippines, and also the Paracels and Spratlys.
(See Map 4.) At its full extent, the Chinese claim covers about
80 per cent of the South China Sea.
China asserts sovereignty over all the islands and their
adjacent waters, based on prior discovery, occupation and use
stretching back through centuries of history. But does the
contemporary Chinese claim mean that Beijing is asserting
sovereignty over all the waters within the dotted line? Does it
mean that Beijing regards them as internal waters or territorial
sea, and that the line is viewed as China’s maritime boundary in
the area, even though it is not defined by any coordinates?
The PRC’s 1998 law on its Exclusive Economic Zone and
Continental Shelf states that the legislation will not affect the
state’s “claim of historic rights”. This suggests that China may
maintain its claim to historic rights and waters within the dotted
line of the South China Sea. However, it may also indicate that
China no longer regards the waters within the line as historic
waters, because historic waters can only be treated as internal
waters or territorial seas. They cannot be included in exclusive
economic zones and continental shelves, as defined by the 1982
United Nations Convention on the Law of the Sea (UNCLOS),
which China ratified in 1996.15
Hasjim Djalal, who has served as President of the International
Seabed Authority and as Indonesia’s Ambassador-at-Large for the
Law of the Sea and Maritime Affairs, says it is presumed that what
China claimed, at least originally, was limited to the islands, rocks,
and perhaps the reefs, but not the whole sea area enclosed by the
nine-dotted line, which has no coordinates. He argues that it is
inconceivable that in 1947, when general international law still
recognized only a three-mile territorial sea limit, that China would

claim the entire South China Sea. He says that a careful reading of
recent Chinese law strengthens this assumption, despite the fact
that some Chinese writing seems to imply that Beijing also claims
the “adjacent sea” of the islands and rocks within the dotted line.
However, “adjacent sea” is not clearly defined and the concept
does not occur in UNCLOS, which China has ratified.
UNCLOS deals only with internal waters, archipelagic waters,
territorial seas, contiguous zones, exclusive economic zones,
continental shelves and high seas. Moreover, UNCLOS stipulates
that the measurements of those waters or zones should start from
base points on land, or appropriate baselines connecting legitimate
points, and not by arbitrarily drawing them on the sea.16
Tug-of-war at Sea
Why does the Chinese Government not clarify the situation? If
Beijing abandoned its U-shaped dotted line claim to a vast area of
the South China Sea, its Exclusive Economic Zone (EEZ) would
extend to a maximum 200 nautical miles from southern points of
Hainan Island. If China’s jurisdiction over the Paracels were
recognized, its EEZ would stretch further south. UNCLOS allows
pieces of land at sea to be defined as islands on two conditions.
First, if they are “a naturally formed area of land … which is
above water at high tide”. And second, if they are capable of
sustaining human habitation or economic life. Under international
law, only natural islands can generate a legitimate EEZ and
continental shelf claim. Of the Spratly Islands, perhaps only Itu
Aba (Taiping Dao) would meet the definition of being a natural
island. Itu Aba is occupied by Taiwan. It is the largest and one of
the most northerly islands in the Spratly archipelago. This would
significantly reduce the extent of China’s territorial and maritime
claims in the South China Sea.

Retaining the U-shaped claim may also be intended by Beijing

to keep a negotiating card in hand and rival claimants in a state of
uncertainty. There have been several armed clashes and numerous
standoffs among contending claimants to the Spratlys in the past
couple of decades. The main encounters have embroiled China
and Vietnam. In 1988, they fought a brief naval battle near one of
the Spratly reefs. More than seventy Vietnamese sailors were
killed and several of their vessels sunk.
There have been repeated incidents since then, raising
nationalist sentiment on both sides. In December 2007, China
announced the elevation of Hainan Province’s Xisha (Paracel)
Islands department to a level officially named “Sansha City”, which
would have administrative jurisdiction over the Paracel and Spratly
Island groups and the submerged reefs of the Macclesfield Bank.
(See Map 4.) A PRC spokesperson said that China had “indisputable
sovereignty” and effective jurisdiction over the islands of the
South China Sea “and the adjacent waterways”.
In reaction to China’s declaration, hundreds of Vietnamese
protesters demonstrated outside the Chinese Embassy in Hanoi.17
A Vietnamese Foreign Ministry spokesman said that Hanoi objected
to China’s move to administer the three island groups, including
Vietnam’s Hoang Sa and Truong Sa archipelagos. “This action is a
violation of Vietnam’s sovereignty, (and is) not in line with the
common perception of high-ranking leaders of the two countries
or beneficial to the bilateral negotiation process of seeking
fundamental and long-term solutions to sea-related issues”, the
spokesman added.18
In the Spratlys, the armed garrisons that all the claimants,
except Brunei, have stationed on the tiny dots of land they say are
theirs are still in place. In some cases, they have been reinforced.
Vietnam reportedly occupies 21 of the Spratlys, the Philippines 8,
China 7, Malaysia 3 and Taiwan 1.19

A code of conduct for the South China Sea, signed by Beijing

and ASEAN in 2002, is voluntary. The Declaration on the Conduct
of Parties in the South China Sea was signed by ASEAN member
states and China on 4 November 2002.20 Meanwhile, a joint seismic
survey of hydrocarbon resources, agreed by the national oil
companies of China, Vietnam and the Philippines in 2005, lapsed
in July 2008 and may not be renewed. Even when it was
operational, the tripartite seismic survey did not include other
Spratly Island claimants. Moreover, it covered only a small part of
the contested sea area.
Sino-Vietnamese Rapprochement?
In October 2008, China and Vietnam outlined new steps to resolve
their long-running territorial disputes in the South China Sea in an
effort to avert further conflict and put their relations on a steadier
footing for the future. Although both countries are ruled by
communist parties and share extensive land and sea borders, they
have had a tense relationship. But they now face political
challenges at home as their export-oriented economies and
investment slow under the impact of global financial turmoil and
deepening recession. They have evidently decided to give primacy
to strengthening bilateral party, trade and investment ties to offset
the wider economic downturn.
The latest measures to improve relations emerged during
the visit to China of Vietnam’s Prime Minister, Nguyen Tan Dung,
from 20–25 October 2008. It was his first official visit as prime
minister and came ahead of the Asia-Europe summit in Beijing.
Mr Dung held talks with his Chinese counterpart, Wen Jiabao,
and Chinese President Hu Jintao. A joint statement issued at the
end of the visit said the two sides believed that “to deepen the
bilateral all-round strategic cooperation partnership under
the current complicated international situation conforms to the

fundamental interests of both countries, ruling parties and

peoples”.21
Under the plan, Chinese and Vietnamese companies will be
encouraged to form joint ventures and engage in large-scale
projects in infrastructure construction, chemicals, transport,
electricity supply and home building. The aim of these projects,
and the new road, rail and shipping connections, is to bond the
neighbouring provinces of southern China and northern Vietnam.
This would be part of a growing network of highways linking
China with Southeast Asia. In an attempt to boost bilateral trade
to a targeted US$25 billion by 2010 from US$16 billion in 2007,
there will be a joint crackdown on cross-border smuggling,
counterfeiting and swindling. The two sides also agreed to promote
investment in two international economic corridors. One links
their land border towns while the other involves China’s Guangxi,
Guangdong and Hainan Island provinces as well as Hong Kong
and Macau, and ten coastal areas of Vietnam.22
Whether this promised increase in two-way trade and
investment materializes remains to be seen. But the proposed
expansion of economic ties will also depend on progress in
managing and eventually settling festering territorial disputes
between China and Vietnam. Both sides reaffirmed that they would
complete demarcation of their 1,350-kilometre land border by the
end of 2008, a deadline that was set in 1999. As agreed, they
finished the work on time.
What was new in the joint statement was an agreement to
start joint surveys in disputed waters outside the mouth of
Beibu Bay (the Gulf of Tonkin) at an early date and a promise
jointly to exploit the demarcated zones for their fisheries and
oil and gas potential. 23 Vietnamese analysts say that the
disputed waters referred to are a small area that immediately

connects to the mouth of the Gulf of Tonkin and that it is not

a reference to the wider South China Sea dispute. They add
that resolving disagreements in this area is perhaps among
the easiest of the territorial disputes that Vietnam faces in the
South China Sea.
South China Sea Stakes

The most contentious and difficult territorial issues in the
relationship between China and Vietnam are their conflicting
claims to the Paracel and Spratly Islands. In their 25 October joint
statement, China and Vietnam agreed to find a “basic and lasting”
solution to the South China Sea issue that would be mutually
acceptable. No detail was offered on how such a resolution might
be reached. But, significantly, they said it would be in accordance
with UNCLOS, the law of the sea treaty. Meanwhile, they would
observe the ASEAN-China code of conduct in the South China
Sea and refrain from any action that would complicate or escalate
disputes. They would also consult on finding a proper area and
way for joint petroleum exploration.
On the principle of starting with the easier steps, they agreed
to collaborate on oceanic research, environmental protection,
weather forecasting, and information exchanges between the two
armed forces.24 A strategic cooperation pact between state-run
China National Offshore Oil Corporation (CNOOC) and its
Vietnamese counterpart, PetroVietnam, is also reported to have
been signed during Dung’s visit to China.
Together, these accords would be important mutual-restraint
and confidence-building measures, provided their terms are strictly
and consistently observed by both sides — something that has
not been a feature of past agreements between China and Vietnam
on the South China Sea.

Changed Circumstances
However, several things may be different this time, apart from the
desire to build bilateral economic ties to cushion both countries
from global trouble. Beijing may want to defuse widespread
concern in Asia over its growing military power and the fear that
military muscle will be used to enforce territorial and maritime
boundary claims that China has in dispute with many of its
neighbours, stretching from Japan through Southeast Asia to India.
In this context, the South China Sea is a sensitive touchstone.
In October 2008, not long before the Vietnamese prime
minister arrived in Beijing, China banned its fishing fleet, one of
the biggest in the world, from operating in waters contested with
neighbouring countries. Fishing disputes in recent years have not
only pitted China against Vietnam. They have also become an
irritant in relations with North and South Korea, Japan, the
Philippines and Indonesia. In the South China Sea, Chinese
fishermen have been detained by the Philippines, allegedly for
illegal fishing in waters claimed by Manila close to the Spratly
Islands. Similar incidents have been reported in Vietnam. China’s
cabinet, the State Council, issued a directive for the coast guard
and fishery authorities to stop Chinese fishing vessels from entering
“key sensitive maritime areas”.25
Another new factor is the recent steep fall in the price of oil
and natural gas. This has removed some of the incentive for
petroleum companies to explore in ever deeper waters, further
and further from shore in the South China Sea. Deepsea drilling
is very expensive. But when the oil price surged past US$100 a
barrel for the first time at the start of 2008 and peaked at just over
US$147 a barrel in July, the expense seemed fully warranted.
Around that time, China told the U.S.-based oil giant
ExxonMobil to cancel planned oil exploration ventures off the

coast of Vietnam with PetroVietnam, implying that if it did not do

so it could be barred from operating in China. A Chinese Foreign
Ministry spokesman said China opposed any act “violating China’s
territorial sovereignty, sovereignty rights or administrative rights
in the South China Sea”.26
Following a similar warning from Beijing, BP halted plans in
2007 to carry out exploration work with PetroVietnam off southern
Vietnam, citing territorial tensions. This was also in an exploration
block approved by Vietnam, but contested by China, about
370 kilometres offshore, at the outer edge of Vietnam’s Exclusive
Economic Zone between Vietnam and the Spratly Islands.
With the oil price falling below US$40 a barrel by February
2009 as slowing global growth crimped demand, the race for
offshore hydrocarbon resources in the South China Sea had lost
some of its impetus. This has provided a political respite, allowing
China and Vietnam to pursue more conciliatory measures.
Energy Resources Cockpit

What could upset the fragile equilibrium in the South China Sea
and resurrect emotive issues of national sovereignty, prestige and
pride? The biggest risk is that economic recovery, rapid growth
and a resurgence of strong demand for energy in Asia will again
push China and its Southeast Asian neighbours into contention.
China’s oil and gas production has been failing to keep pace
with surging consumption and it is worried that existing reserves
will not last much longer. These concerns are shared by other
petroleum producers in the South China Sea, among them Vietnam,
Malaysia and Indonesia. They are currently net exporters of oil or
gas or both, but can see the time approaching when their energy
reserves will be insufficient to meet domestic demand. They want
to extend the life of their reserves by finding more oil and gas. As

in China, this is an energy security imperative and an economic

growth imperative, because oil and gas are vital for transport and
industry. Meanwhile, the Philippines, a net importer of both oil
and gas, urgently needs to find more fossil fuel and regards its
offshore zones in the South China Sea as a key to greater self-
sufficiency in future.27
For the Chinese Government, energy policy has become an
arm of foreign policy. From being a net exporter of oil in 1993,
China today relies on foreign supplies for about half the oil it
uses. It is also becoming a major gas importer. For reasons of
energy security, China has placed a high priority on getting as
much of its future oil and gas as it can from within its land
territory, from offshore zones, or as close to home as possible,
including Russia and Central Asia. At present, around 75 per cent
of China’s oil imports come from politically volatile areas of the
Middle East and Africa.28 They have to be shipped to China through
distant sealanes, which the Chinese armed forces do not yet have
the means to protect. These maritime arteries of energy supply
could be cut in a crisis.
NOCs Versus IOCs

It is not only countries that are under pressure to increase their
oil and gas reserves at a time of perceived looming scarcity and
high prices. So are major energy companies, whether they are
state-controlled or majority owned by private sector interests. In
the past few decades, national oil companies (NOCs) have emerged
to challenge the dominance of international oil companies (IOCs).
The NOCs are partially or wholly state-owned firms, through
which governments control access to reserves of oil and gas and
retain profits from production.29
Today, these national champions in Asia, the Middle East,
Africa and Russia control much of the world’s oil and gas. Thirty

years ago, the big international oil companies lorded over 75 per
cent of global reserves and 80 per cent of output. Now they
control about 6 per cent of oil reserves and 25 per cent of
production.30
Western energy giants, including ExxonMobil and BP, are
struggling to secure shares of new finds of oil and gas to boost
their reserves. ExxonMobil’s reserves-to-production ratio is just
over fourteen years and falling, while BP’s is twelve years and flat.
The IOCs need access to reserves they can “book” with the
Securities and Exchange Commission, the U.S. stock market
regulator. Only then can investors measure the health and
attractiveness of integrated energy companies that explore for,
produce, process and market oil, gas and related products.31
Meanwhile, leading international petroleum service firms are
helping national oil companies break their dependence on Western
energy majors by providing seismic survey, drilling, training and a
wide range of other skills and technology to both NOCs and
smaller listed firms, the so-called independents, as they move to
tap onshore and offshore resources.32
Deepwater Drilling
Advances in know-how and equipment are enabling NOCs, IOCs
and independents to explore and exploit what they find further
and further from land in ever deeper waters, although it remains
a very high-risk, high-cost business. Dozens of new drill ships and
rigs are being built to explore for oil and gas in the deepwaters of
places like the Gulf of Mexico, West Africa, Brazil, Australia, New
Zealand, India and the South China Sea.
In the next three years, ODS Petrodata, which tracks drilling
rigs and other industry equipment, expects 160 new offshore rigs
to enter service. Seventy-five of these rigs will be for ultra-
deepwater drilling. They can operate in waters up to 4,000 metres

deep and have a total drilling depth of as much as 13,000 metres.

Assuming enough engineers and drill crews can be found to operate
them successfully and safely, their arrival may reduce sky-high
charter rates for ultra-deepwater rigs. At the height of the oil price
boom in the first half of 2008, owners of these rigs were able to
charge as much as US$600,000 per day.33
The global credit crisis and recession will crimp deepwater
drilling for a while. But as the world economy recovers, demand
for oil and gas will revive and, when it does so, the rush to explore
for and produce hydrocarbons from beneath the seabed in ever
deeper waters will resume.
Among hydrocarbon explorers, deepwater drilling is usually
considered to mean working in depths of 800 metres or more.
Ultra-deep drilling starts at around 2,500 metres. Oceans and seas
cover just over 70 per cent of the surface of the Earth, and nearly
half of the world’s marine waters are over 3,000 metres deep. This
is a new frontier for the discovery and exploitation of oil, gas,
minerals and other valuable resources. The drill ships and rigs
being built in South Korea, Singapore, China and other parts of
the world that are capable of tapping into oil and gas reserves at
such depths are helping to reshape the global petroleum business.
The amount of oil pumped from deepwater fields will nearly
double between 2005 and 2010 to about 11 million barrels a day,
or about one eighth of estimated daily consumption in 2008,
according to the U.S. Energy Information Administration. The
consulting firm, Cambridge Energy Research Associates, offers a
slightly different but still bullish forecast. It says that deepwater
wells produced about 2 million barrels of oil a day in 2000, but are
expected to yield over 10 million barrels a day by 2015. Another
consulting firm, Douglas-Westwood, says capital spending on
deepwater oil and gas will rise US$25 billion annually by 2012,
nearly double the figure for 2003.

Enter CNOOC, Husky and Other Explorers

In December 2008, the Chinese Government approved a
programme by the state-owned China National Offshore Oil
Corporation (CNOOC) to spend 200 billion yuan (US$29.2 billion)
with partners to expand oil and gas exploration in the South
China Sea over the next ten to twenty years, starting in 2009. Of
course, the programme could be slowed or scaled back by the
recession and low oil and gas prices. CNOOC, the country’s third-
largest oil producer, said in November 2008 that it aimed to increase
hydrocarbon output in the South China Sea to 50 million tonnes
per year (1 million barrels per day), equivalent to the current
production of China’s biggest onshore oil field at Daqing.34 CNOOC
said it would focus on deepwater and ultra-deepwater oil-gas
exploration in water depths of between 1,500 and 3,000 metres.35
CNOOC says it already has 3.1 billion tonnes of oil equivalent in
proven reserves in its deepwater zone in the South China Sea.36
CNOOC announced in July 2008 that it was buying a
Norwegian oil exploration contractor, Awilco Offshore ASA, for
US$2.52 billion, so that it could reach depths of up to 1,500
metres. Awilco owns and operates deepwater drilling platforms
and equipment. At present, CNOOC itself is unable to drill in
depths of over 300 metres.37 CNOOC has also placed an order for
deepsea drilling rigs with a Norwegian supplier.
One of the independent oil companies that work with CNOOC,
Canada’s Husky Energy Inc., moved a new deepwater drilling rig
built in South Korea into the South China Sea in November 2008
on a three-year contract. It is delineating and evaluating a giant
gas field which Husky and CNOOC Ltd, the listed arm of the state-
owned parent company, announced they had found in June 2006
in the northern sector of the South China Sea.38
Husky, controlled by Hong Kong tycoon Li Ka-shing, who
has close ties to China, said the Liwan field could contain up to

6 trillion cubic feet of recoverable resources, adding around 7 per

cent to China’s total gas reserves. Significantly, it was China’s first
deepwater petroleum discovery. The exploration well was drilled
250 kilometres south of Hong Kong at a depth of 1,500 metres.
Husky announced in late February 2009 that it would soon
begin developing the Liwan field, 350 kilometres southeast of
Hong Kong, after the first of two appraisal wells confirmed a
major gas discovery. The flow rate from the 55-square kilometre
reservoir indicated that it could produce gas at a rate of over 150
million cubic metres per day. Under its production-sharing
agreement with Husky, CNOOC has the right to participate in
development of the field by taking a stake of up to 51 per cent.
Apart from Liwan, Husky has five other exploration blocks in the
South China Sea. The gas discovery in mid-2006 sparked a burst
of interest in the surrounding deepwater zone of the South China
Sea, with other independent energy companies including BG
Group, Devon Energy Group and Anadarko Petroleum Corp.,
preparing to drill in adjacent blocks.
South China Sea Bathymetry

The seabed area of the South China Sea consists of about one
million square kilometres of continental shelf that is less than 200
metres below the sea surface, and about two million square
kilometres of continental shelf deeper than 200 metres. The
shallower part of the seabed, known as the Sunda Shelf, is mainly
located in the western and southern zones of the South China Sea.
The deeper part, known as the South China Sea Basin, is in the
eastern and northeastern zones. In some areas, the water depth is
over 5,000 metres. This deeper basin is punctured by the outcrops
of the Spratly Islands. Much of this zone is now within reach of
deepwater and ultra-deepwater drilling vessels.

Methane Hydrates
It is not just the search for conventional oil and gas that is driving
energy companies further and further offshore into deeper and
deeper waters. China announced in 2007 that it had for the first
time managed to tap into seabed sediment containing gas hydrates
in the northern part of the South China Sea. Zhang Hongtao,
Deputy Director-General of the China Geological Survey, a
government agency, said that by collecting the gas hydrate samples
in May 2007, China had become the fourth country after the
United States, Japan and India to achieve this technological
breakthrough.
Some scientists have said that the huge quantities of methane-
rich hydrates kept stable by low temperature and high pressure
on the seafloor or below the Arctic could become an important
fuel for the future. Methane is the main component of natural gas.
Every cubic metre of gas hydrate, which is a solid crystalline
structure in its natural state, releases as much as 160 cubic metres
of gas.
Zhang was quoted as saying that initial estimates indicated
that the potential volume of gas hydrates on the continental
shelf in the area of the South China Sea tapped by China was
equivalent to more than 100 million metric tonnes of oil
(2 million barrels of oil per day) — about one quarter of China’s
oil consumption of 7.8 million bpd in 2007. However, he added
that because it was difficult to produce a continuous gas flow
from hydrates, China might not be in position to develop the
resource for many more years.
However, China is clearly in a race with Japan, the United
States, South Korea, India and perhaps other countries to try to
master the technology needed to exploit a potentially important
offshore energy source for the future.

Asia’s Rising Gas Demand

Meanwhile, China, the world’s second-largest energy consumer
after the United States, wants to increase its gas consumption to
reduce heavy reliance on coal, which causes serious air pollution.
Southeast Asian countries are also turning to cleaner-burning gas
in a big way to generate electricity, and for industrial and home
use. Natural gas use among Asian countries is forecast to rise by
about 4.5 per cent annually on average until 2025 — faster than
any other fuel — with almost half of the increase coming from
China. If this growth rate is maintained, Asian demand will exceed
21 trillion cubic feet, nearly triple current consumption, by 2025.
The South China Sea is considered to have greater gas than
oil potential. Most of the hydrocarbon fields explored in the South
China Sea areas of Brunei, Indonesia, Malaysia, the Philippines
and Vietnam, as well as China, contain gas, not oil. Estimates by
the U.S. Geological Survey indicate that between 60 per cent and
70 per cent of the region’s hydrocarbon resources is gas. Even so,
a significant proportion of the more than 6 million barrels of oil
per day produced by China and Southeast Asian countries comes
from the South China Sea region. A bigger proportion of the
region’s gas output of over 8 billion cubic feet per day comes from
the South China Sea basin, although no precise figures are
available. Chinese estimates of the overall oil and gas potential of
the South China Sea tend to be much higher than those of non-
Chinese analysts.39
The most bullish of the Chinese estimates suggest potential
oil resources as high as 213 billion barrels of oil, nearly fourteen
times China’s proven oil reserves of 15.5 billion barrels at the
end of 2007. For gas, the potential production level is put by the
most optimistic Chinese estimates at over 2,000 trillion cubic feet,
although only about half of this might be recoverable, even if

fields on this scale were found. China’s proven gas reserves at the
end of 2007 were 67 trillion cubic feet.40
China’s Southward Thrust

China’s emergence as an increasingly big gas consumer and the
emphasis it puts on getting as much of its future oil and gas from
as close to home as possible, may help explain why China rates
the energy potential of the South China Sea so highly. Such
estimates buttress its sweeping claims to sovereignty in the
area. Of course, these estimates have yet to be tested. Much of
the area, particularly in deepwaters, is unexplored because it is
remote and contested.
However, China seems intent on expanding its offshore
energy search. Until a few years ago, the state-owned Chinese
energy giants were discouraged from competing and CNOOC
had a virtual monopoly on offshore work. This has changed and
now all of the Chinese oil and gas majors can bid for onshore
and offshore projects, both local and foreign. PetroChina — an
arm of China’s biggest oil producer, China National Petroleum
Corporation — announced in March 2006 that it would be turning
its attention to the southern sector of the South China Sea in the
next few years.
As Southeast Asian governments and the energy companies
working for them push deeper into the South China Sea in their
hunt for more gas and oil, they can only hope that China’s
southward push will lead to better cooperation, not confrontation.
China has handed out exploration contracts or production licences
over most of its deepwater oil and gas blocks in the South China
Sea south of Hong Kong. These are contested only by Taiwan.
However, future Chinese permits seem set to overlap with
those from its Southeast Asian neighbours.41 Unlike in the 1980s

or 1990s, China may soon have the military power to enforce its
territorial claims against rivals in the region, should it decide to
do so. But at what cost to its international reputation, to stability
in the maritime heart of Southeast Asia and to its relations with
ASEAN?
China seems to be confronting ExxonMobil, the world’s
largest publicly traded oil company by market capitalization,
and BP, the third biggest oil firm by sales, with the choice of
pursuing their offshore plans in Vietnam or jeopardizing their
already substantial investments in China, potentially the world’s
biggest energy market. China, of course, would argue that it is
Vietnam which should exercise restraint. How will Vietnam react
if Chinese pressure again stops Western oil and gas majors from
going ahead with planned projects off the South China Sea coast
of southern Vietnam?
The United States and Japan

More important, how will the United States and its main Asian
ally, Japan, react when they see hard evidence of Beijing’s
southward extension of its offshore power projection into areas
of the South China Sea over which it claims sovereignty, a claim
that it has so far been unable to enforce? About a quarter of the
world’s trade and around 20 per cent of its daily oil consumption
are shipped through Southeast Asian straits and the South
China Sea.
Japan, which is entirely dependent on imported oil and gas,
gets over 80 per cent of its supplies via the South China Sea. South
Korea, another Northeast Asian ally of the United States and a
major energy importer, is also heavily reliant on shipments through
the South China Sea. Taiwan, too, depends on South China Sea
shipping routes for most of its energy imports.

The United States puts a high strategic priority on support

for its Asia-Pacific allies and also on maintaining freedom of
navigation around the world. America regularly sends warships,
including aircraft carriers, from its Pacific fleet through the South
China Sea, and the Malacca and Singapore Straits, to reinforce its
military presence in the Arabian Sea and Persian Gulf. This naval
“surge” capacity from the Pacific to the Indian Ocean is especially
important to Washington at times of crisis in the Gulf or Indian
Ocean region. If the world economy recovers and an era of
perceived petroleum scarcity and high prices returns, the United
States and Western nations will be under pressure to protect the
interests of their leading energy companies in any confrontation
with China in the South China Sea.
What Next from China

Beijing is likely to keep restating its sovereignty claims in the
South China Sea whenever it feels they are under challenge.
However, although China is building its own deepwater drilling
rigs, the first is not due to be delivered before 2010. Chinese
NOCs have limited experience in deepsea oil and gas exploration,
let alone production from such a challenging environment. They
will continue for quite a few more years to depend on the small
group of energy companies that have the necessary know-how
and equipment to work in deep waters in remote and stormy
locations. CNOOC says it can hire service companies to do the
work. But first China must persuade more energy firms that the
South China Sea is an attractive alternative to the world’s hottest
deepsea frontiers, among them the Gulf of Mexico and the
Atlantic Ocean off Brazil and West Africa, which account for
nearly 75 per cent of global deepwater expenditure by energy
companies.42 Energy firms are unlikely to go to the expense of

working in deepwater areas of the South China Sea unless they

are assured of a peaceful environment.
Meanwhile, Beijing has held out an olive branch to its
neighbours by publicly declaring on many occasions its preference
for joint development of energy resources in contested offshore
zones. In June 2008, it reached such a deal with Japan in the East
China Sea. But reaching a workable arrangement in an area like
the South China Sea, where there are multiple claimants, would
be much more difficult. Meanwhile, pressure within oil-short China
to tap oil and gas in the offshore areas it claims is intensifying as
its onshore production fails to keep pace with demand.
China-Southeast Asia Ties

As noted earlier, relations between China and Southeast Asia
have taken a great leap forward in the past couple of decades.
Mistrust from the Cold War and the days when Beijing supported
communist-led insurgencies in the region has largely been
dispelled. Two-way trade, investment and tourism are booming.
Security ties, though moving far more slowly, are also taking
shape. There is closer collaboration between China and ASEAN
countries in maritime security, search and rescue, disaster relief,
counter-terrorism and curbing transnational crime. China has said
it is ready to sign the protocol to the treaty that bans the
development, possession or storage of nuclear weapons in
Southeast Asia. But ASEAN is still negotiating the protocol with
the other four recognized nuclear-weapon states, Britain, France,
Russia and the United States. So these are easy, cost-free steps for
Beijing. To cement its ties with ASEAN for the long-term, China
could go further. Indeed, it may already have signalled a willingness
to do so.

China-Malaysia Deal
In October 2006, China and Malaysia announced a deal worth
around US$25 billion in which the Malaysian national petroleum
company, Petronas, will supply liquefied natural gas to Shanghai
for twenty-five years starting in 2009. The gas is to come from
Malaysian offshore fields in the South China Sea. Some of these
fields fall within, or straddle, China’s broken-line claim. The deal
with Petronas indicates Beijing now accepts that Malaysia, not
China, owns the fields. Beijing would not buy gas from another
country if it maintained a claim to ownership of the field from
which the gas was drawn.
Further Steps
China could pre-empt a potential future conflict over energy,
fisheries and sealane control in the South China Sea by formally
and finally abandoning its broken-line maritime boundary claim
in the area. This claim may not now be active. But it could always
be revived if China believed it had the military might to enforce
the claim. Dropping it would make it clear that Beijing bases
its claims in the South China Sea on UNCLOS and current
international law, not pre-modern law.
Alternatively, China and the Southeast Asian contestants could
agree to put their rival sovereignty claims to arbitration or
adjudication before the International Tribunal on the Law of the
Sea or the International Court of Justice, as some Southeast Asian
countries have done with their bilateral island and maritime
boundary disputes.
As an interim measure, China and the Southeast Asian
claimants to the Spratly Islands could move beyond their 2002
non-binding joint declaration on conduct in the South China Sea

and sign a mandatory code of conduct that would freeze unilateral

activities and permit no further occupation of atolls and reefs, or
new construction on inhabited parts of the widely scattered
archipelago.
Southeast Asian countries with significant navies or coast
guards could develop a more intensive programme of training
exercises with China that includes a search-and-rescue, counter-
terrorism and anti-piracy component, similar to programmes they
now have with the United States and Japan. For its part, China
could accept the standing invitation from the United States and
Southeast Asian countries to take part in regional military
cooperation exercises, such as Cobra Gold held annually in or off
Thailand, which has developed close ties with China. The main
focus of these exercises is no longer on defence from external
attack, but on peacekeeping, disaster relief, and combating
terrorism, piracy and other potential threats to safety and freedom
of navigation.
However, possibly the most effective action ASEAN countries
can take to pacify the South China Sea is to engage the commercial
interests of China and as many other countries and foreign
companies as possible in the search for offshore energy in the
area. This is already happening. However, it could be accelerated
by making contract terms more attractive to investors, especially
in costly, high-risk deepwater work.
In addition to an array of Western energy companies, firms
from Russia, India, South Korea, Japan, Australia and other ASEAN
dialogue partners are exploring for, or producing, oil and gas in
the zone claimed by Vietnam and in other parts of the South China
Sea that other Southeast Asian states say fall within their
sovereignty. China has close ties with many of these countries
and would not want to upset relations with them, particularly if it

felt it had substantial access to the resources of the region through

commercial ties.
For example, Indonesia has said it may offer the China
National Petroleum Corp an equity stake in its Natuna D-Alpha
block, near the Indonesian island of Natuna in the southern section
of the South China Sea. The block is estimated to hold 46 trillion
cubic feet of gas, making it one of the biggest reserves in Asia,
although it has a high carbon dioxide content, which will make it
expensive to exploit.43 On a visit to Indonesia in December 2008,
Chinese Vice-Premier Li Keqiang suggested that the two countries
combine to explore for energy in third countries and “jointly tap
oil and gas in the South China Sea”.44
Conclusion
Some analysts believe that China is biding its time until it has the
military muscle to enforce its claims to sovereignty and resource
control in the South China Sea. Then it would be able to negotiate
with other claimants from a position of strength. But this approach
would not enhance mutual trust and security cooperation between
China and Southeast Asia, or between China and other important
players in the region.
Notes
1. The ten ASEAN countries are Brunei, Cambodia, Indonesia, Laos,
Malaysia, Myanmar, the Philippines, Singapore, Thailand and
Vietnam.
2. ASEAN’s Dialogue Partners are Australia, Canada, China, the
European Union, India, Japan, New Zealand, Russia, South Korea,
the United States and the United Nations Development Program.
ASEAN also promotes cooperation in some areas of mutual interest
with Pakistan, although it is not a Dialogue Partner. <http://www.
aseansec.org/147.htm>.

3. <https://www.cia.gov/library/publications/the-world-factbook/geos/
pg.html>.
4. <https:www.cia.gov/library/publications/the-world-factbook/print/
pf.html>.
5. U.S. Defence Department, “Military Power of the People’s Republic
of China 2008”, pp. 23 and 25.
6. Richard C. Smith, “Asian Military Modernisation”, Lowy Institute
for International Policy, October 2008, pp. 2–4.
of China 2008”, p. 54.
8. “China Hint at Aircraft Carrier Project”, and “Chinese Army Turns
on Charm”, Financial Times, both 17 November 2008.
9. Richard A. Bitzinger, “China’s Military-Industrial Complex: Is It
(Finally) Turning a Corner?”, RSIS Commentaries, 21 November
2008.
of China 2008”, p. 22.
11. <http://news.xinhuanet.com/english/2008-12/31/content_
10587281.htm>.
12. Rodolfo C. Severino, “Deng Legacy after 30 Years”, Japan Times,
29 December 2008.
13. ASEAN Declaration on the South China Sea, Manila, Philippines,
22 July 1992. <http://www.aseansec.org/1545.htm>.
14. Li Jinmeng and Li Dexia, “The Dotted Line on the Chinese Map of
the South China Sea”, Ocean Development & International Law,
34 (2003): 287–90.
15. Ibid., p. 293.
16. H. Djalal, “South China Sea Disputes”, The Raffles Bulletin of
Zoology, Supplement No. 8 (2000): 2 and 3.
17. <http://www.economist.com/world/asia/PrinterFriendly.
cfm?_id=10286863>.
18. <http://www.mofa.gov.vn/en/tt_baochi/pbnfn/ns071204135539/
newsitem_print_preview>.

19. <http://www.globalsecurity.org/military/world/war/spratly-
claims.htm>.
20. <http://www.aseansec.org/13165.htm>.
10250361.htm>.
10250363.htm>.
10250307.htm>.
24. <http://news.xinhuanet.com/english/2008-10/content_10250049.htm>.
25. <http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.
co.uk/2/hi/asia-pacific/76>.
8749356.htm>.
27. Asia’s Energy Future, East-West Center, 2007, p. 126.
28. World Energy Outlook 2007, International Energy Agency,
p. 325.
29. The Economist, Special Report on national oil companies, 12 August
2006.
30. “To BP or not to BP”, Lex column, Financial Times, 30 July
2008.
31. Ivo J.H. Bozon, Stephen J.D. Hall, and Svein Harald Oygard, “What’s
Next for Big Oil?”, The McKinsey Quarterly, May 2005.
32. Carola Hoyos, “Nationals’ Champion: How the Energy-rich Rely on
Schlumberger”, Financial Times, 30 July 2008.
33. Jad Mouawad and Martin Fackler, “Dearth of Ships Delays Drilling
of Offshore Oil”, New York Times, 19 June 2008.
34. <http://www.chinadaily.com.cn/bizchina/2008-12/16/content_
7310101.htm>.
35. <http://www.china.org.cn/business/highlights/2008-12/16/content_
16959874.htm>.
36. <http://www.forbes.com/afxnewslimited/feeds/afx/2008/12/15/
afx5824867.html>.

37. <http://www.china.org.cn/business/2008-12/18/content_
16970399.htm>.
38. <http://www.energycurrent.com/index.php?print=14904>.
39. U.S. Energy Information Administration, Country Analysis Briefs,
South China Sea, March 2008, pp. 4 and 6.
40. BP Statistical Review of World Energy June 2008, pp. 6 and 23.
41. Reuters, “China’s Deepsea no Easy Waters for CNOOC”, 2 November
2007.
42. “Deepwater: A Robust Market in a Climate of Uncertainty?”,
Douglas-Westwood news release, 5 February 2009.
43. “Uncertainty over Natuna as ExxonMobil Fights Back”, Jakarta
Post, 9 January 2009.
44. <http://english.people.com.cn/90001/90776/90883/6561375.html>.

COMMENTARIES
In Response to lead article,
“Energy and Geopolitics in the
South China Sea:
Implications for ASEAN and
Its Dialogue Partners”,
by Michael Richardson


Commentary by Sam Bateman 41
Commentary
by Sam Bateman, Senior Fellow at the S. Rajaratnam School of
International Studies (RSIS), Nanyang Technological University,
Singapore.
The South China Sea continues to generate considerable interest

and debate. Michael Richardson’s article is a timely contribution
to this debate, particularly with its review of China’s claims in the
region, its identification of the energy security factor as a major
cause of potential tension, and its summary of developments with
the exploration and exploitation of oil and gas. I agree substantially
with what Richardson says although with some qualifications as
to his views on what China’s maritime claims portend. Recent
events will be seen by some to reinforce his views, but basically,
I have a more relaxed view than Richardson regarding China’s
ability to play a positive role in the South China Sea in the future.
Recent Events
March 2009 has seen two major developments that stirred up
controversy in the South China Sea all over again, and highlighted
the difficulties of achieving stability in the region. One was the
clash on 8 March between Chinese vessels and a U.S. ocean
surveillance ship off Hainan,1 and the second was approval of the
2009 Philippines Baselines Bill by the Philippines Congress and
President Arroyo.2
China sternly protested the Philippines bill because it encloses
Huangyan Island (Scarborough Shoal) and some islands of the
Nansha group (the Spratly Islands) as part of Philippine territory.
These features are claimed by China, as well as by Vietnam, which
also protested the bill warning that the Philippine action threatened
peace and stability in the region.3

Because China is a major player in both developments, they

have led to a new round of criticisms of China by Western
commentators. This increased when China announced it would
strengthen its marine surveillance force in the South China Sea,
albeit with civil patrol vessels rather than warships.4 The situation
was further aggravated with the release of the U.S. Department of
Defence annual report on the military power of China. This was
highly critical of Chinese military expansion. It produced a strong
response from China condemning the American analysis and the
provocative message that China thought it sent.5
While the strengthening of Chinese surveillance forces in the
South China Sea has been interpreted by some observers as a
response to both developments, the causes of the two events are
very different. They are almost certainly unrelated. The clash
between Chinese ships and the U.S. vessel is just another act in a
long-running law of the sea dispute between China and the United
States,6 while the Philippines Baseline Bill is another manifestation
of the intractable sovereignty disputes over islands and reefs in
the South China Sea.
Optimism or Pessimism?
Ralf Emmers and I have edited a recent book on the South China
Sea.7 My conclusion in that work noted that the chapters in the
book reflected a range of opinions from the pessimistic to the
optimistic about the prospects for an effective cooperative
management regime in the South China Sea. However, my
conclusion leant more towards the pessimistic. While the risks of
conflict may have fallen, there are no effective regimes in the area
for providing key elements of cooperative marine management:
the safety and security of shipping; the preservation, protection
and conservation of the marine environment; agreed arrangements

for the exploration and exploitation of marine resources; the

prevention of illegal activity at sea; and the conduct of marine
scientific research. Recent events, particularly the Philippines
Baselines Bill and the reactions to it by other claimant countries,
strengthen the pessimistic view.
Despite some progress over the years with cooperative
arrangements, mainly on a bilateral basis, we are still well short
of good order at sea in the South China Sea. There is no effective
environmental management regime for the area, and a relatively
high level of illegal activity, with illegal, unregulated and unreported
(IUU) fishing, arms and drug trafficking, and some incidents of
piracy and armed robbery against ships, as well as anecdotal
reports of ship-sourced marine pollution. This illegal activity can
flourish, and maritime safety can fall short of what is required,
because there are few agreed limits to national jurisdiction in the
South China Sea.
Effective management of maritime areas normally flows from
having agreed limits to national jurisdiction. However, maritime
boundary-making in the South China Sea is problematic. Straight-
line maritime boundaries, as one normally expects to see between
two countries, are unlikely in the area. This is a consequence of
its geography. The sea is sandwiched between the Asian mainland
and off-lying archipelagos with several different littoral countries,
and numerous islands “in the stream” subject to conflicting
sovereignty claims. Many boundaries, or at least their end points
or turning points, require the agreement of three, or even more,
countries.8 Past experience in Asia and in other parts of the world
shows that this agreement can be very hard to achieve.
In the absence of agreed boundaries, and with little likelihood
of achieving them, it is necessary to find some other means of
managing the area in dispute, which is not based on unilateral

jurisdiction and sole ownership of the resources. This invariably

leads to a functional approach where separate regimes are
established for each purpose within an agreed geographical area.
The geographical limits for each function need not coincide.
Unfortunately support for a functional approach in the South
China Sea has been largely rhetorical so far with no good practical
examples of it having effect. The littoral countries still want “their
fences in the sea” and exclusive jurisdiction to maritime zones.
They remain committed to a nationalistic approach to their claimed
waters and are reluctant to embark on initiatives that may appear
to compromise their sovereignty. As Mark Valencia observed some
years ago, “Indeed, when countries in Asia think maritime, they
think first and foremost about boundary disputes, not protection
of the deteriorating marine environment or management of
dwindling fisheries. It is these perceptions that must change.”9
Michael Richardson notes that the biggest risk to the current
fragile equilibrium in the South China Sea is economic recovery,
rapid growth and a resurgence of strong demand for energy in
Asia. I support his view. Resources competition, with the levels of
energy self-sufficiency in East Asia falling and the pressures of
energy security, may lead claimant countries to become more
assertive about their claims in the South China Sea. This situation
will be aggravated further should commercially significant reserves
of oil and gas be found in disputed areas. This may not occur in
the short term as the international oil companies (IOCs) tend to
keep clear of exploration in disputed areas unless an agreed
arrangement for joint development and exploration provides a
firm legal basis for their investment.
Mak Joon Num has pointed out that the littoral countries to
the South China Sea still see ownership of potentially rich maritime
zones in “zero-sum terms”.10 If one country gains access to

resources, then another loses. A particularly serious issue

associated with this “zero-sum” approach is the lack of agreement
on some fundamental legal principles relating to boundary
delimitation, the regime of islands,11 and maritime jurisdiction in
the South China Sea. And the obligations under the 1982 UN
Convention on the Law of the Sea (UNCLOS) Part IX on enclosed
and semi-enclosed seas, such as the South China Sea, are largely
being ignored.
“Stumbling Blocks”
There are major “stumbling blocks” that inhibit progress with
functional cooperation and joint development in the South China
Sea. Richardson notes most of these, especially the strong element
of nationalism that pervades the disputes. Nationalism can become
a strong “stumbling block” to the resolution of disputes, and even
functional cooperation. Public expressions of nationalism destroy
political will and militate against cooperation and dialogue that
might be perceived as compromising national sovereignty. Geoffrey
Till has observed previously that “claims to the sovereignty of
islands can be important symbolically, perhaps especially in times
of national difficulty”.12 The unrest in the Philippines over the
Joint Maritime Seismic Undertaking (JMSU), because it appeared
to weaken Philippine sovereignty claims, is a clear manifestation
of nationalism at work.13 The popular demonstrations of support
in the Philippines for the Baselines Bill are another example.14
The most intractable “stumbling blocks” are the ambit claims
to all features in the sea by China, Taiwan and Vietnam. These
mean that there are few prospects for resolving sovereignty in the
foreseeable future but even more seriously, they make functional
cooperation more difficult. Admittedly under the “one China”
approach, China sees Taiwan’s claims as an extension of its own

claims. Although other ASEAN members claim features in the

South China Sea that fall within Vietnam’s ambit claim, Vietnam
has expectations that ASEAN collectively might support its claims
to other features against those of China. However, some of the
features claimed by Vietnam are also claimed by Malaysia and/or
the Philippines.
Divisions within ASEAN can also inhibit progress towards
cooperation. Its membership in ASEAN and exploiting ASEAN
solidarity has been part of Vietnam’s attempts to internationalize
the disputes.15 Philippine agreement to participate in the now
defunct JMSU was perceived by other ASEAN members,
particularly by Malaysia, as a breach of ASEAN solidarity.16
China’s Claims
Michael Richardson accurately appreciates China’s approach to
the South China Sea, and its apparent preparedness to “shelve”
the conflicting sovereignty claims to land and water. China’s claims
are very important to China strategically, although the South China
Sea islands are not a “barrier”, as claimed by Richardson. Shipping
generally does not pass through the islands, which do not obstruct
China’s access to the Pacific Ocean in the same way as the major
Japanese and Philippine archipelagos do. China’s first island chain
is comprised of the Japanese, Philippine and Indonesian
archipelagos, while the second island chain runs down through
the northern Marianas, Guam and Palau.
Richardson notes that some countries might be wary of having
to share a common boundary with China. But that is inevitable,
just as indeed is the rise of Chinese maritime power in the region.
China will not walk away from all its maritime claims, although it
could yield sovereignty over particular features to other claimants.
That would be the outcome of a long process of bargaining and

negotiation that is still some time away in the future. Although

there may be areas where no maritime boundaries are possible,
some new boundaries will be required between China and ASEAN
countries.
China is showing no inclination to enforce its claims in the
South China Sea by the use of force and, in fact, continues to use
civil patrol or coast guard equivalent vessels for that purpose.17 It
is making use of soft maritime power with capacity-building
assistance for regional countries and active participation in a
range of marine and environmental initiatives, such as Partnerships
in Environmental Management for the Seas of East Asia
(PEMSEA), the UNEP/GEF South China Sea project,18 and the
Cooperative Mechanism for Navigational Safety and
Environmental Protection in the Malacca and Singapore Straits.19
It has withdrawn its fishing boats from disputed areas and shown
active interest in joint development. These are all evidence of
China’s preparedness to be, in Richardson’s words, “enmeshed
more fully into a regional relations system based on international
law, non-use of force and negotiated settlement of disputes”.
On the whole, Southeast Asian countries may feel less
threatened by the expansion of China’s military power than many
Western commentators allege. This was demonstrated during the
recent visit by senior ASEAN military officers to China.20 Southeast
Asians recognize the inevitability of the rise of China while
continuing to seek the involvement of the United States as a
balancing force.
Richardson speculates on the nature of China’s U-shaped
line in the South China Sea. This continually pops up in Western
commentaries, where it is often misunderstood. The claim is
frequently made that it somehow constitutes a boundary claim
or a claim by China to territorial sea, or even internal waters.

This is not so. The line is comprised of nine segments and

cannot be regarded as a line delimiting historic waters.21 China
has never promulgated geographical coordinates for the segments
of the line, which cuts across several maritime boundaries that
have been agreed previously by other countries in the South
China Sea. More logically, the line is a short-hand way of
describing the extent of its sovereignty claims over islands and
reefs. Once sovereignty has been established, maritime zones in
adjacent waters will then be claimed in accordance with
international law.22
The Way Ahead

The expansion of economic, financial and trade links between
ASEAN and China has created a more favourable atmosphere for
cooperation and dialogue in the South China Sea. Most regional
analysts agree that conflict between the parties is most unlikely.
However, there is a need to acknowledge that sovereignty claims,
and hence maritime boundaries, will not be resolved in the
foreseeable future. We must get away from the notion that the
South China Sea can be managed effectively on the basis of
unilateral jurisdiction and sole ownership of the resources. A
cooperative management regime is the only solution.
The only acceptable framework for such a regime would
appear to be a web of provisional arrangements covering
cooperation for different functions and perhaps even with
different geographical areas for each function. The functions to
be considered might include development of oil and gas
resources, fisheries management, marine safety, law and order
at sea, marine scientific research, and preservation and protection
of the marine environment. However, such an approach requires
a lot of talking, bargaining and some “give and take”. This is not
occurring at present.

With this web of functional cooperation, bilateral

arrangements should be avoided except in areas where there is
clear acceptance that only two parties are involved. For the same
reason that maritime boundaries are unlikely in the South China
Sea, joint development between two parties can cause problems
in areas with multiple claims. A bilateral agreement between two
parties can frequently disadvantage a third party, but then
negotiating a joint arrangement among three or more parties can
prove extremely difficult.
All the parties to the recent developments feel justified in
taking the actions they have. China and the United States both
believe their positions on the conduct of military activities in an
EEZ are supportable under international law. The claimants to
islands and reefs in the South China Sea all contend their own
claims are the best. In the meantime, we have doubt and
uncertainty, and large areas of sea with no effective resource
management, marine environmental protection, or effective
countering of illegal activity, such as piracy and armed robbery
at sea.
The disputes are not going to be resolved in the foreseeable
future. They are not amenable to resolution by international
arbitration. No party is likely to see arbitration as in its best
interests. International courts have a bad habit of coming up with
decisions that please nobody. In any case, under the dispute
settlement regime established by UNCLOS, countries can opt out
of compulsory arbitration for disputes related to maritime
boundaries or military operations.
There is a pressing need for more dialogue to address these
difficult problems. Confidence-building measures might be
possible, such as a common understanding of rights and duties in
an EEZ, a more comprehensive code of conduct for the South
China Sea, and an incident at sea agreement to ensure that

incidents at sea do not escalate. The risks of these incidents

increases as regional navies, not just China’s, expand their
capabilities. The new Inter-Sessional Meeting (ISM) on Maritime
Security established by the ASEAN Regional Forum (ARF) is a
possible forum for the required dialogue. However, statements by
U.S. officials and commentators critical of the Chinese response
to the recent developments do not assist in establishing the right
atmosphere for dialogue.
Notes
1. Mark J. Valencia, “Tempting the Dragon”, Far Eastern Economic
Review, 11 March 2009 <http://www.feer.com/international-
relations/20098/march58/tempting-the-dragon> (accessed
16 March 2009).
2. “Arroyo to Sign Baseline Bill despite Protest from China”, Manila
Standard Today, 20 February 2009 <http://www.manilastandard
today.com/?page=news_Feb20_2009> (accessed 24 February 2009).
3. Joel D. Adriano, “China, Philippines Stoke Island Tensions”, Asia
Times online, 27 March 2009 <http://www.atimes.com/atimes/
Southeast_Asia/KC27Ae02.html> (accessed 27 March 2009).
4. Li Xiaokun, “Patrol Ship’s Trip ‘Shows Restraint’ ”, China Daily,
21 March 2009 <http://www.chinadaily.com.cn/china/2009-03/17/
content_7585087.htm> (accessed 21 March 2009).
5. “China Voices Strong Dissatisfaction over U.S. Military Report”,
China View, English.chinamil.com.cn. <http://news.xinhuanet.com/
english/2009-03/26/content_11079336.htm> (accessed 27 March
2009).
6. Mark J. Valencia, “Tempting the Dragon”.
7. Bateman, Sam and Ralf Emmers, eds., Security and International
Politics in the South China Sea: Towards a Cooperative
Management Regime (Abingdon: Routledge, 2009).
8. When several countries are opposite and/or adjacent to each other,

a bilateral boundary between any two of them will inevitably reach

a point where it intersects with the claim of another country (or
countries) (the “tripoint”).
9. Mark J. Valencia, “Northeast Asia: Navigating Neptune’s
Neighborhood”, in Confidence-Building Measures and Security
Issues in Northeast Asia, Report No. 33 (Washington, D.C.: Stimson
Centre, 2000), p. 2.
10. Mak Joon Num, “Sovereignty in ASEAN and the Problem of Maritime
Cooperation in the South China Sea”, in Security and International
Politics in the South China Sea, edited by Bateman and Emmers
(Abingdon: Routledge, 2009), p. 121.
11. The determination of which features qualify as “islands” under the
regime of islands in Part VIII of UNCLOS, and thus generate a full
suite of maritime zones, remains a major issue. Clive Schofield,
“Dangerous Ground: A Geopolitical Overview of the South China
Sea”, in Bateman and Emmers, ibid., p. 20.
12. Geoffrey Till, “The South China Sea Dispute: An International
History”, in Bateman and Emmers, eds., ibid., p. 38.
13. Mak Joon Num, “Sovereignty in ASEAN”, p. 121.
14. T.J. Burgonia and Joel Quinto, “Arroyo Signs Controversial
Baselines Bill”, Philippine Daily Inquirer, 12 March 2009 <http://
newsinfo.inquirer.net/inquirerheadlines/nation/view/20090312-
193661/Arroyo-signs-controversial-baselines-bill> (accessed
13 March 2009).
15. Li Minjiang, “China’s South China Sea Dilemma: Balancing
Sovereignty, Development and Security”, in Bateman and Emmers,
eds., op. cit., p. 144.
16. Mak Joon Num, op. cit., p. 121.
17. Glenn D. Tiffert, “China Rises Again — Part II — By Provocatively
Engaging the US Navy, Beijing may be Trying to Change the
International Rules”, YaleGlobal online, 27 March 2009 <http://
yaleglobal.yale.edu/display.article?id=12174> (accessed 29 March
2009).

18. David Rosenberg, “Fisheries Management in the South China Sea”,

in Bateman and Emmers, eds., op. cit., p. 71.
19. International Maritime Organization (IMO), “Milestone Agreement
Reached on Co-operation over the Straits of Malacca and Singapore”,
IMO Briefing 29/2007, 18 September 2007.
20. Christopher Bodeen, “Southeast Asia Military Delegates Tour
China Base”, Seattle Post-Intelligencer, 31 March 2009 <http://
www.seattlepi.com/national/1104ap_as_china_southeast_asia.html>
(accessed 1 April 2009).
21. Zou Keyuan, “The Chinese Traditional Maritime Boundary Line in
the South China Sea and Its Legal Consequences for the Resolution
of the Dispute over the Spratly Islands”, The International Journal
of Marine and Coastal Law 14, no. 1 (1999): 50.
22. Ibid., p. 53.

Commentary by B.A. Hamzah 53
Commentary
by B.A. Hamzah, Senior Research Fellow at the Institute of
Ocean and Earth Sciences (IOES), University Malaya, Kuala
Lumpur, Malaysia.
Pax Sinica and Regional Maritime Order

in the Spratlys
Michael Richardson’s article on the geopolitics of energy in the
South China makes interesting reading. His major thesis is that
China now has the military means to enforce claims in the
hydrocarbon-rich South China Sea. This could spell trouble for
the region because Beijing could pose a security threat to the
region and other ASEAN dialogue partners.
His assertion is premised on China’s military build-up in the
South China Sea. The development of the naval base at Sanya in
Hainan (reportedly able to house forty submarines), the large
military expenditure and the willingness of the People’s Liberation
Army (PLA) to openly challenge unauthorized U.S. military
presence in its Exclusive Economic Zone (EEZ) have been cited
by many as reasons to fear China.
As a long-time critic of China’s military policy in the South
China Sea, I am no longer convinced by the usual stereotype of
viewing China as a threat to regional maritime security.
Over the years China’s interest in Southeast Asia has
changed. It is no longer interested in subverting the region. On
the contrary, China counts on Southeast Asian states as regional
allies, an important market for its manufactured products and a
source of capital and primary commodities like rubber and palm
oil. While many in Southeast Asia may still be suspicious of
China’s political motives, the younger generation has little
memory of China’s hostile past and most would embrace China
as a friendly economic powerhouse.

The failure to recognize changes in China’s geopolitical

outlook, its economic prowess and its desire to be involved in the
mainstream of international politics and participate in bigger issues
in international relations like its role in the current economic
downturn has blinded many. Many are stuck with the old-China
mentality. It is time to embrace a new China that is fast becoming
an economic superpower whose financial resources can make a
difference in the current economic downturn.
China may take many more years before it can supplant the
United States as a military superpower. While the future remains
uncertain, a strong China is not likely to be a “Yellow Peril”.
China has always considered the South China Sea as its
strategic soft underbelly that requires more than military
presence. During the height of the Cold War, China relied on
the Soviet Union to keep the United States forces at bay in the
region, away from its shores. With the United States and the
Soviet Union out of the region, there was little resistance to
China’s policy to convert the South China Sea into a “Chinese
Lake”. Of course along the way, China has had to use force to
make its military presence felt: the seizure of the Paracels in
1974 and the naval skirmish in 1988 with Vietnam in the Spratlys
are just two examples.
At the more strategic level, China took bold steps to modernize
its economy and legal system. With a more predictable legal system,
China was able to impress foreign investors who came in droves.
Over the years, as it repairs its economy, it also expands its
archaic military institutions (by comparison with the United States
and Japan). In my view, China’s military expansion is still not
complete; more money will be needed to improve its military
capability (both conventional and nuclear) in the future. China
needs a strong military to become a superpower. It will take years
before the PLA can match the U.S. military arsenal; the PLA navy

and air force are inferior even to their counterparts in the Japanese
self-defence forces!
While motives and intentions are difficult to determine,
examining the conduct can explain certain behaviour traits. With
regard to the South China Sea, there is a tendency to ignore an
important aspect of China’s relations with the claimant states.
China does not lump the claimants as a group with a common
identity or interest. Like any other power, China does not treat
bilateral relationships the same or on equal footing. China’s
relations with Vietnam have been quite hostile until the latter
made some peaceful overtures in 2007 onwards. With Malaysia, it
maintains a stable relationship despite occasional demarches or
protest notes from Beijing on the occupation of some features in
the Spratlys.
Manila-Beijing relations have been on a roller-coaster, more
difficult during President Ramos than under Arroyo. However,
the decision by Arroyo to promulgate the new baselines law in
April 2009 has caused some uneasiness. Future relations depend
on Manila’s next move. Manila would invite trouble if it were to
station permanent troops on Scarborough Reef.
China treats other powers in the South China Sea differently.
It uses different sets of rules of engagement for different parties.
The unfortunate incidents involving the Impeccable and the
Bowditch in China’s EEZ in April 2009 are viewed by many in the
West as a reminder of a more assertive China. Western media do
not report China’s claim that the U.S. vessels had violated its EEZ
legislation. Imagine if Chinese vessels were caught mapping the
ocean floor 125 kilometres from San Francisco. Hell would have
broken loose at Foggy Bottom!
China has been accused of subverting customary international
law by hampering freedom of navigation on the high seas when it
asked the USNS Impeccable to leave its EEZ on 9 April 2009 for

violating its domestic legislation. This is not a case of selective

harassment. I think China will not hesitate to harass any foreign
vessel engaging in non-authorized activities in its EEZ.
Evidently, because of their proximity to the mainland, China
views the Pratas, the Paracels and the Macclesfield Bank in the
South China Sea more important than the Spratlys. The occupation
of these areas (the Pratas, the Paracels and the Macclesfield
Bank) by outside forces could a trigger military response. Of
course, China would continue to tolerate Taiwan’s presence on
the Pratas and Itu Aba (Taiping Dao) for obvious reasons. By the
same token, China will not tolerate unauthorized military activities
within the area by any foreign power. On the other hand, China
has only sent protest notes to the claimants for occupying some
features at sea in the Spratlys.
I first noted the importance of the Paracels during the
discussion on managing potential conflicts in the South China
Sea, which began in1990 at Bali (China boycotted this meeting).
The workshop series was organized by the Indonesian Ministry of
Foreign Affairs with financial support from the Canadian
International Development Agency (CIDA). At the second meeting
in Bandung (July 1991), China’s representatives (mainly staff from
its embassy in Jakarta) made two demands: that the Paracels be
removed from the workshop agenda and no discussion on
jurisdictional issues be permitted. Although there were protests
from other participants, especially Vietnam, the Indonesian hosts
caved in. It was only after Jakarta had agreed not to discuss the
jurisdictional issues and to remove the Paracels from the workshop
agenda that China decided to formally participate in the
discussions. After the 1991 Bandung Meeting, China dispatched
some senior officials from the Ministry of Foreign Affairs in Beijing
to the workshop.

This distinction (that is, treating the Spratlys differently from

the Paracels) is often overlooked by China watchers.
China has tolerated the occupation of features which are
within the nine-dash boundary line in the Spratlys following the
occupation of Mischief Reef in 1995. However, this may change in
the future. The most recent decision (March 2009) by the
Philippines to promulgate the new baselines for its offshore islands
has angered China. Manila’s indiscretion over the inclusion of
Scarborough Reef (shoal) in its offshore islands territory could be
the tipping point. Elsewhere, I have argued that China will not
tolerate the militarization of the reef which it considers vital to its
influence in the Spratlys. Stationing military troops on the reef
will certainly invite a military response from Beijing.
China also views any new occupation as violating the 2002
Declaration on the Conduct Parties in the South China Sea.
To add salt to injury, the Scarborough Reef is outside the
1898 Philippine’s treaty limits.
Beijing’s policy towards the South China Sea region and in
the Spratlys proper has evolved over the years. China has drawn
an “off-limits line” around the Pratas, the Paracels and the
Macclesfield Bank north of the Spratlys (north of 10 degrees
latitude). By “off-limits line” I mean China will not tolerate any
unauthorized activities on the sea that violate its domestic
legislation and those which are not consistent with customary
international law.
The decision in 2007 to establish Sasha City is an endorsement
of the strategic significance of the region. The rationale for
choosing Woody Island as the new headquarters for the
administrative enclave is quite obvious. One, it has to do with
accessibility and its proximity to Hainan and the mainland. Two,
sending a clear message to the powers navigating the area that

their activities in the region, military and otherwise, are being

closely monitored. Three, the reorganization of the administration
of the area was intended to give Hainan more control over the
entire South China Sea.
The Institute of South China Sea at Haikou, Hainan, organized
an international conference in December 2008 on regional
economic cooperation under the pretext of the China-ASEAN
Free Trade Area agreement. Hainan and Guangdong have also
organized other programmes to promote economic cooperation.
Before this, China resisted many attempts to internationalize the
South China Sea.
Michael Richardson suggests that “some would be wary to
share a common maritime boundary with … an increasingly
powerful nation as China, or even having it as a very close
neighbour”. Agreed. But states do not have the luxury to change
the geographical attribute and choose neigbours. What they can
do and should do, in a situation like this, is to manage their
relationships. While size and strength matter in forging stable
relationships between states, the tie that binds relationships has
always been a strongly shared interest.
The reality of international relations is such that it demands
that states give meaning to Lord Palmerston’s advice that there
are no permanent friends or enemies, only permanent interests in
international relations. The challenge to both China and its
neighbours in Southeast Asia is to establish stable mechanisms
that could promote friendly relations based on respect for each
other’s national interest and, where such interests do not coincide,
to take steps to prevent an adversarial relationship.
China is keen to strengthen stable relations with the ASEAN
states, including the claimant states. Beijing will not harm the

claimant states so long as they, either separately or in concert

with each other, do not conspire to undermine China’s interest.
This brings me to another point. In my view, in accepting the
present political status quo in the Spratlys, China expects the
claimants to play by certain rules. The first rule is not to ally with
powers hostile towards China. Any attempt to collude with the
United States in the Spratlys, for example, will spell trouble. This
is because Beijing considers the United States a military threat.
Since 2000, considerable goodwill has emerged from both
sides of the fence (ASEAN and China) as evident in China’s decision
to accede to the Treaty of Amity and Cooperation in Southeast
Asia, as well as the 2002 ASEAN-sponsored Declaration on the
Conduct of Parties in the South China Sea. There are also separate
moves from Beijing and from the other claimants to desecuritize
the region, especially in the Spratlys. As one example, the decision
by China to expand economic relations with Vietnam could set
the stage for Sino-Vietnamese rapprochement that Michael
Richardson has alluded to in his article. Another example is the
decision by Malaysia and Brunei to resolve their overlapping
claimed maritime regimes in March 2009.
China has used force twice — in 1974 and 1988. On both
occasions, it was against Vietnam, with which China had an uneasy
relationship. In my view, the Vietnam incident cannot be used as
an indicator of what lies ahead in the Spratlys. The political
landscape has changed, and China has larger global interests to
pursue. Getting bogged down in the Spratlys may be the last thing
on its mind.
Although the correlation of forces is currently in China’s
favour, it has refrained from using force against the other claimant
states because, in Beijing’s view, they do not pose any military

threat to China. None of the other claimant states has the military
strength to prevail over the PLA navy in the South China Sea,
specifically in the Spratlys. Here, I am not suggesting for a moment
that in the event of a conflict the other claimant states should just
surrender because China is much stronger militarily. On the
contrary, the thrust of my argument implies that the other claimant
states do not need to fear China in the Spratlys except in situations
described earlier. By the same token, the other claimant states
should continue with their economic activities (including
exploiting hydrocarbon and fishery resources) in the Spratlys as
they have always done before. They should also refrain from
occupying new features.
I do not expect China to interfere with oil exploration by
national oil companies in the Spratlys. No outside power has
interfered with the development of hydrocarbon resources off
Brunei or Malaysia in the Spratlys since Brunei drilled its offshore
oilfield in 1953.
Michael Richardson has recommended that China should
remove the 1947 nine-dotted line which some have described as
an illegal maritime boundary in the South China Sea. Perhaps it
will be easier for China to make the line more consistent with the
1982 Law of the Sea Convention that China has ratified. But
Beijing may not do it on various grounds. First, the line preceded
the coming into force of the UNCLOS. Second, there is little
incentive for China to remove the line until all other claimants in
the Spratlys have rationalized theirs.
In his commentary on Richardson’s article, Sam Bateman
has pointed to the difficulty of establishing maritime boundaries
in the South China Sea, especially with regard to the rampant use
of straight baselines by the claimant parties, including China, off
the Paracels. Third, no political leaders in China will be willing to
drop the line for fear that they may be accused of dropping their

historical claim to the South China Sea. Fourth, China knows that
without the coordinates the line is not legal; it only shows its
dominion or suzerainty in the South China Sea. It is a political line
that may come in handy in crisis times, a point that Richardson
has alluded to. Nonetheless, it will indeed be a gesture of goodwill
to take steps to make the line consistent with UNCLOS.
I would like to support remarks by Sam Bateman on conflict
resolution. Like him, I do not think the disputing parties are keen
to submit their disputes to the International Court of Justice (ICJ)
or International Tribunal on the Law of the Sea (ITLOS) for judicial
settlement. It is easier to seek judicial resolution in disputes that
involve two parties, for example between Indonesia and Malaysia
over Ligitan and Sipadan. Thus far, no multilateral territorial
disputes have appeared before the ICJ or ITLOS.
I am very supportive of functional cooperation mechanisms
in managing disputes in the Spratlys. Many years ago, while at
Maritime Institute Malaysia (MIMA) we started a programme on
building confidence at the commanders’ level. Since most low-
level military incidents in the Spratlys were caused mainly by
overzealous military commanders (naval and air), restraining
the trigger-happy commanders via Incident-At-Sea Agreements
(INSEA), in our view, could prevent further escalation of
conflicts.
A group of Malaysian scientists are toying with an idea. They
want to initiate a Large Marine Ecosystem (LME) project in the
Spratlys. The purpose of the LME is to conduct research on the
ecosystem that will provide the baseline data for use by policy
planners. The LME has been tried elsewhere with some success
but rarely in disputed areas.
Other colleagues are keen to emulate the research activities
in Antarctica, where science has triumphed over politics, and
apply them to the Spratlys.

I am also encouraged by what I saw during a recent visit to

Pulau Layang-Layang (Swallow Reef) in April 2009. The presence
of foreign tourists in the Malaysian resort gave me hope. These
tourists went about their underwater activities without any concern
for overlapping claims; they seemed to be oblivious of the foreign
naval vessels in the area. The existence of such resorts in the
Spratlys which are open to tourists can help bring about greater
transparency. I hope the proposal by Vietnam to convert one of
the disputed islands (Spratly/Storm) into a resort will materialize
soon. Incidentally, Taiwan has opened the Pratas to tourists.
By the way, Malaysia has occupied five features (Richardson
says three) in the South China Sea. They are Layang-Layang,
Ubin, Perahu, Mantunani and Peninjau.
No one doubts that Pax Sinica will need to oil its engine.
The hydrocarbon resources from the Spratly region will not be
enough to feed the proverbial awakened giant. Its hydrocarbon
resources will continue to come from the Middle East, Latin
America, Africa, Canada, Russia, Europe and Central Asia. China’s
oil policy will be scrutinized by the entire world; any slip-up will
be perilous to its credibility.
As Richardson has noted, a large portion of China’s oil supply
will be transported by sea. Hence it needs to secure the sealanes
of communication (SLOCs) like the Straits of Malacca and
Singapore. In my view, China’s reliance on SLOCs is expected to
decline once the alternative overland routes through Pakistan
and Myanmar are ready. China knows that it needs friends and
good diplomacy to guarantee safe passage for its imports (and
exports) through SLOCs and by overland routes. Because of the
increasing interdependence, no country is today an island.
China understands the limits of military power in international
relations. Yet without a strong military Pax Sinica will remain a

paper tiger. With this in mind, China will not engage in any activities
that could draw the wrath of its friends in Southeast Asia and
elsewhere.
Beijing’s overall relations with Washington under the new
Obama administration will hopefully be less testy and less
confrontational.
Notwithstanding the above, China will continue to harass
foreign vessels conducting unauthorized activities (for example,
military) in its EEZ, especially around the Pratas, the Paracels
and the Macclesfield Bank, as its recent skirmish with the
Impeccable and the Bowditch has demonstrated. However, as a
signatory to UNCLOS, China must guarantee the world that
freedom of navigation in the high seas is always upheld.
Efforts to demonize China will not stop the emergence of
Pax Sinica.
Territorial claims are by definition difficult to resolve. The
challenge is to manage the disputes and prevent them from
escalating into military conflicts. The current status quo in the
Spratlys is far from ideal. Yet in spite of rising nationalist
tendencies, the likelihood of a military conflict is remote. The one
power that can make the difference in the Spratlys is China. In my
view, China does not pose a military threat to the ASEAN region.
Beijing’s preoccupation with other, more important geostrategic
considerations, like solving the global economic downturn, may
result in the Spratlys being downgraded to a sideshow.
The current global economic downturn has exposed the
vulnerability in many world economies, including China’s, which
in the opinion of many experts, is likely to escape the worst and
to recover faster than many. Its recovery will put China on firmer
ground and its emergence as a superpower-in-waiting is almost
assured.

China is not likely to shift from its soft-power approach in

the Spratlys, which has given it handsome dividends. As it takes
two to tango, the claimants must also know the limits of tolerance.
The Scarborough Reef can be the tipping point should Manila
station troops there.
I have noted in a paper on the geopolitics of overlapping
maritime boundaries in Southeast Asia (2008) that China has
been slowly exerting influence in the South China Sea, for a long
time its weakest military flank. While I share Richardson’s
contention that China may use its military to secure its energy
supply lines, including its greater desire to have some control
over access to SLOCs like the Straits of Malacca, Hormuz and
Singapore, I am not convinced that China will use force to secure
its hydrocarbon resources in the South China Sea.
In conclusion, the pessimists cannot be faulted for thinking
that Pax Sinica will destabilize the region and the entire world
without the benefit of historical precedents for guidance. In the
past, large power transitions even among those with shared
political values (for example, from Pax Britannica to Pax
Americana) have been marked by instability and conflict. It is
natural to expect the changeover to be less than stable, although
history never travels in a straight line.
Imbued with a different cultural tradition, the rise of China
that will involve changing the global power equation is viewed by
many with cynicism. The challenge is to get beyond the past and
look forward more positively.

This article was published in the Straits Times on 15 April 2009.
FLASHPOINT: SOUTH CHINA SEA
K. Kesavapany
A couple of moves in the past few weeks by claimants to parts of

the South China Sea have brought that contentious maritime area
to the front pages once again. The South China Sea has been
generally considered a potential “flashpoint” for armed conflict
for some time. Although the potential for such conflict is perceived
to have diminished in recent years — partly because of
commitments the parties have made to the peaceful settlement of
disputes and non-use of force — it still exists. Conflicting claims
to the area have not been resolved or reconciled.
To be sure, countries in Southeast Asia and, of late, China
have pursued their conflicting territorial claims peacefully, as
they are committed to do so under the Treaty of Amity and
Cooperation in Southeast Asia (TAC), the United Nations Charter
and the UN Convention on the Law of the Sea. These commitments
were also embodied in the 1992 ASEAN Declaration on the South
China Sea and the 2002 Declaration on the Conduct of Parties in
the South China Sea (DOC).
What makes the South China Sea question so vexing — and
thus dangerous — is the fact that it is subject to multiple, not just
bilateral, claims. Brunei, Malaysia, the Philippines and Vietnam —
not to mention mainland China and Taiwan — have all made
overlapping claims. The involvement of a big, strong and rapidly
rising power — China — and what others perceive to be Beijing’s
extravagant, if ambiguous, claims are additional complications.

The importance of the South China Sea to international

navigation is also a factor.
In 1974, practically on the eve of Vietnam’s reunification,
Chinese armed forces dislodged the South Vietnamese from the
Paracels. In 1988, a brief naval battle between China and Vietnam
in the Spratlys area sank a number of Vietnamese vessels and
killed around seventy Vietnamese. The Philippines has, on a
number of occasions, arrested mainland Chinese and Taiwanese
fishing in the disputed area and confiscated their vessels.
Because of the continuing tensions in the area, the ASEAN
Regional Forum (ARF) specified in its early years the South
China Sea as one of the regional “flashpoints” that had to be
addressed. Soon, however, the item was quietly dropped from
the ARF’s agenda.
Several measures have calmed things down. One has been
Beijing’s repeated assurance of its readiness to “shelve” the
sovereignty disputes. Another has been the gradual shift of the
Chinese position from an insistence on dealing bilaterally with
each individual Southeast Asian claimant to a willingness to discuss
the issue with ASEAN as a whole.
ASEAN and Chinese officials have been holding annual
political consultations since 1995. China’s relations with ASEAN
as a whole and with its individual members have improved
substantially in recent years. China has acceded to TAC, which
commits it to resolve disputes peacefully and not to resort to the
use or threat of force in interstate relations.
Since 1990, Indonesia has been convening a series of informal
workshops on “Managing potential conflicts in the South China
Sea”. Representatives of mainland China and Taiwan, as well as of
all ASEAN countries, participate in their “private capacity”. China
and ASEAN concluded the DOC in 2002.

Notwithstanding these positive developments, last month

alone witnessed two moves by claimants that provoked protests
from others. One was the visit by then-Malaysian Prime Minister
Abdullah Badawi to Terumbu Layang-Layang, or Swallow Reef,
long developed by Malaysia in an area claimed by China, Taiwan,
Vietnam and the Philippines. The other was the passage of
legislation in the Philippines redefining the country’s archipelagic
baselines.
These actions — and the reactions to them — remind us of
the fragility of the situation in the South China Sea. In February
2007, Chen Shui-bian, then President of Taiwan, visited Taiping
Dao, or Itu Aba, in the Spratlys. More assertive was the Chinese
construction, discovered in early 1995, of obviously military
facilities, disguised as “fishermen’s shelter”, on the appropriately
named Mischief Reef, about 200 kilometres from the Philippine
island of Palawan.
In the meantime, the Straits Times has quoted China’s
Major-General Qian Lihua as saying that Beijing “might” build
an aircraft carrier by 2010, in addition to deploying five nuclear-
powered, missile-carrying submarines. “According to some
projections”, the Straits Times reported, “China would have a
blue-water navy by 2020. The total displacement of Chinese
navy destroyers and frigates will have more than doubled to
350,000 tonnes by then.”
East Asia cannot afford to be distracted by rising tensions in
a body of water vital to international trade and security. All
concerned would do well to abide by their commitments to the
peaceful settlement of disputes and the non-use of force. Every
claimant needs to refrain from undertaking provocative acts in
the area. China, in particular, needs to reassure its rival claimants
that it does not intend to use force again in asserting its claims.

WHITHER THE SOUTH CHINA SEA DISPUTES?
Mark J. Valencia
Several recent international incidents in quick succession have

rekindled the sovereignty disputes over the Spratly islets and
reefs in the South China Sea and recast a spotlight on the issues.
These incidents include the early March visit by Malaysian Prime
Minister Abdullah Badawi to disputed Swallow Reef, the signing
by President Gloria Arroyo of the Philippines Baselines Bill, which
included the Spratlys in a “regime of islands”, and the unrelated
confrontation between a U.S. military survey vessel — the
Impeccable — and Chinese vessels. Earlier, in February 2007,
then Taiwan President Chen Shui-bian’s visit to Taiping Dao drew
protests from China, Malaysia, the Philippines, and Vietnam.
Nevertheless, the general political environment in the South China
Sea seems to have come a long way from the 1980s and 1990s
when it was a locus of confrontation and armed conflict. But
these latest incidents raise the question of whether these gains
are fundamental and durable — or fragile and temporary.
From an optimistic perspective, the China-Vietnam clash of
1988 in which about seventy Vietnamese died, and China’s brazen
1995 occupation and building of structures on the Philippines-
claimed Mischief Reef, seem like relics of a previous era. Conflict
has given way to cooperation in which China, Vietnam and the
Philippines are undertaking cooperative seismic surveys in an
agreed area of their overlapping claims.
In 2002, ASEAN and China signed a Declaration on Conduct
in which they promised “to resolve their territorial and

jurisdictional disputes by peaceful means without resorting to the

threat or use of force” and “to exercise self-restraint in the conduct
of activities that would complicate or escalate disputes and affect
peace and stability”. And China, Vietnam and the Philippines
agreed on a web of bilateral codes of conduct. All have also
agreed to move towards a more formal and legally-binding
multilateral Code of Conduct — although it remains out of reach.
Overall the region — at least at sea — has moved to a lower
level of securitization. According to Ralf Emmers of Singapore’s
Rajaratnam School of International Studies, the reasons include
China’s “charm offensive”, the lack of discovery of significant
petroleum deposits, and self-restraint on nationalist tendencies.
Perhaps most important has been the distraction of the United
States in the Middle East and the “war on terror”, and thus a
damping of China-U.S. competition in Southeast Asia and the
South China Sea. To this eclectic mix one should add the
expansion and strengthening of ASEAN and its growing unity
and confidence in its approach to China. But these factors are
neither fundamental nor durable and the apparent stability is
fragile. Indeed, the recent wave of incidents may indicate that it
was just a lull before a storm.
Fear is still racing hope. One trend is toward a post-modern
world moving away from the Westphalian national state system.
This construct would downplay sovereignty and focus on common
security and common prosperity and be evidenced by codes of
conduct, sharing of resources and cooperation to protect the
environment. This is the hope.
But the fundamental conflicts over islands, maritime space
and resources have not been resolved. The fear is that increasing
competition for energy and fish will exacerbate these conflicts
and refuel nationalism and sovereignty issues in the South China

Sea. Indeed in China, Taiwan, the Philippines and Vietnam,

domestic laws have incorporated the islands into the nation’s
territory and the national psyche, and they have thus become
symbolic of the nation and the legitimacy of the government. For
these governments, the islands must be defended at “all costs”.
For example, China has formed a Sansha administrative unit
based on Hainan to govern the Paracels Islands (also claimed by
Vietnam), the submerged Macclesfield Bank and the Spratly
Islands. This prompted a formal protest from Vietnam and rare
anti-Chinese street demonstrations in Hanoi and Ho Chi Minh
City. This trend toward conflict is also fuelled by fear of the
unknown — that some unknown resource will be foregone or lost
through compromise or relinquishment of claims — the “Alaska
syndrome”. So as Geoffrey Till of the War Studies Group at King’s
College London puts it, there is a “collision of assumptions” and
resultant actions that support each trend. This makes the situation
ambiguous, difficult to resolve, and unpredictable.
To some analysts, China is striving for domination of the
South China Sea. They point to its web of electronic and physical
infrastructure extending into the Spratlys and its acquisition of
naval and air assets that would satisfy this goal. Others argue that
China is simply trying to defend itself and obtain some “breathing
room” by protecting vital sealanes against a U.S.-Japan-India
encirclement and containment.
China’s intent (and claims) remains uncertain. It has recently
growled at Vietnam regarding Vietnam’s plan to build a pipeline
from British Petroleum gas discoveries 230 miles offshore on its
claimed extended continental shelf. The new fields to be connected
are near fields that already produce gas which is shipped onshore
through an existing pipeline. In its rant, China slipped back into
its legally dubious historic claim to most of the South China Sea

and the nationalist rhetoric that accompanies it. China’s Foreign

Ministry spokesperson Qin Gang said “any unilateral action taken
by any other country in these waters constitutes infringement
into China’s sovereignty, territorial rights and jurisdiction”.
Moreover, according to Qin, Vietnam’s action “goes against the
important consensus reached by the leaders of the two countries
on the maritime issue”.
When the price of oil and gas skyrocketed, interest in
harvesting hydrocarbons from the area grew dramatically,
especially in China, which has the capability to harvest the
deepwater resources. The Philippines, China and Vietnam have
carried out a joint seismic survey of part of the Spratly area and
considered trilateral hydrocarbon exploration including drilling.
However, the agreement has not been extended due to domestic
political controversy in the Philippines. The Philippines and China
also agreed to set up a common fishing area in the Spratly area
and to consider asking other claimant countries like Vietnam to
participate in cooperative fishing activities.
However, the joint surveys between China, Vietnam and the
Philippines were only made possible by what some would say
was a “sell-out” on the part of the Philippines. The Philippines
presumably agreed to these joint surveys on parts of its legal
continental shelf that China and Vietnam do not even claim for
higher political purposes. But in so doing it gave legitimacy to
China and Vietnam’s legally dubious claims to that part of the
South China Sea, and rewarded China’s persistence in its extreme
claim.
According to Taiwan’s then President Chen, these activities
have “seriously invaded Taiwan’s rights”. Indeed a pesky problem
that cannot be ignored indefinitely is Taiwan’s claims in the area
and its occupation of Taiping Dao, at 0.5 kilometres the largest of

the Spratly Islands. Indeed, its recent construction of a military

airfield there is bound to increase tension. Although Chen’s visit
to the feature contributed to this tension, his declaration of a
Spratly Initiative which calls on all claimants to put environmental
protection ahead of development was potentially an important
step in the right direction.
So where does this leave the imbroglio? As Malaysia’s late
Noordin Sopiee — one of Asia’s leading intellectuals — used to
say: “Make peace while there is peace.” What this means for the
South China Sea is that while tension is reduced — for whatever
reasons — a gossamer web of cooperative commitments and
functional arrangements should be negotiated and cemented.
This would not only be in the claimants’ interests vis-a-vis
China but in China’s interest as well. It would be a logical
extension of its accession to the Treaty on Amity and Cooperation
in Southeast Asia and firm up the legitimacy of its presence in
the South China Sea.
In the wake of the recent incidents, the Philippines has
called for talks among all the claimants. There are several
concrete objectives that could be attained. The claimants could
formalize a code of conduct for the South China Sea and adhere
to it. They could dispense with nationalist rhetoric and legally
unsupportable claims. They could build a web of functional
cooperative arrangements in marine environmental protection,
marine scientific research, navigational safety and search and
rescue. Although located outside the Spratlys proper, the Pratas
Island Reef National Marine Park recently declared by Taiwan
could serve as a model. And they could negotiate a set of specific
voluntary guidelines regarding military activities in the disputed
area. None of these arrangements would threaten existing
positions and they could all contain a clause that affirms that

such arrangements are non-prejudicial to sovereignty and

jurisdictional claims.
The basic lesson is clear — “slow and steady wins the race”.
Patience and perseverance are necessary ingredients. The process
must be a step-by-step building of functional cooperative
arrangements that will eventually result in a web too politically
costly to undo.
As for a grand solution to the South China Sea disputes, this
will be a long time in coming — if ever. But the alternative — a
festering sore covered by a scab that can be picked every time
relations deteriorate or extra-regional powers wish to do so —
should be a nightmare no regional state wants to repeat. As
Noordin said, “The time to make peace is when there is peace.”
That time is now.

CLARIFYING THE NEW PHILIPPINE

BASELINES LAW
Rodolfo C. Severino
On 10 March 2009, President Gloria Macapagal-Arroyo signed a

new law adjusting the Philippines’ archipelagic baselines. Baselines
are lines on a map, identified by coordinates, from which is
measured the twelve-mile territorial sea, where, according to the
United Nations Convention on the Law of the Sea (UNCLOS), a
coastal state or an archipelagic state like the Philippines has
sovereignty. The UNCLOS provides for a “contiguous zone”, with
a maximum breadth of twenty-four miles from the baselines,
where the coastal or archipelagic state enforces “its customs,
fiscal, immigration or sanitary laws and regulations”. States also
have an exclusive economic zone, measured up to 200 miles from
the baselines, where they have “sovereign rights” to explore,
exploit, conserve and manage the natural resources in the waters
and on and beneath the seabed.
Significantly, the new Philippine law, in its title, indicates its
purpose as mainly to amend the existing baselines act and “to
define the archipelagic baselines of the Philippines”. It does not
extend the baselines to the Spratlys or to Scarborough Shoal,
both of which China and Vietnam claim in their entirety, while the
Philippines claims a part of what are called the Spratlys and all of
Scarborough Shoal.
Unfortunately, some observers and commentators think that
the new law extends the baselines to encompass both the claimed

area of the Spratlys and Scarborough Shoal. It does not. The

contrary impression may have arisen from the fact that the first
bill that would adjust the baselines, which Representative Antonio
Cuenco filed in the House of Representatives in November 2007,
would extend those baselines to parts of the Spratlys and
Scarborough Shoal. The basepoints that the Cuenco-proposed
baselines would connect would include twelve in the Spratlys
area and six in Scarborough Shoal.
However, the Department of Foreign Affairs opposed this
provision in the Cuenco bill. Instead, it backed, and President
Arroyo endorsed, a Senate version that would limit the baselines
to the main Philippine archipelago and declare a “regime of islands”
for the land features in the areas of the Spratlys and Scarborough
Shoal that Manila claims.
According to Article 121 of the UNCLOS, an island, “a naturally
formed area of land, surrounded by water, which is above water
at high tide”, can generate its own territorial sea, contiguous
zone, exclusive economic zone, and continental shelf. On the
other hand, rocks, “which cannot sustain human habitation or
economic life of their own”, cannot.
In the Senate-House committee that reconciled the differences
between the Senate and House bills, the Senate version basically
prevailed. It was this reconciled version, substantially the Senate
text, that the Philippine Congress eventually passed and the
President signed into law on 10 March.
Thus, the new law keeps the Philippine baselines around the
main archipelago and, invoking Article 121 of the UNCLOS,
declares a “regime of islands” within the areas that the Philippines
claims in the South China Sea. Although it does not indicate
which land features are islands in the UNCLOS sense and which
ones are mere rocks, the new legislation brings the Philippine

claim closer to consistency with the law of the sea, as far as

maritime regimes are concerned.
While Beijing and Hanoi may feel obliged to voice protests,
which they did promptly upon the Philippine law’s enactment,
this is something that they should take into account in considering
the Philippine claim and in adjusting their own in the light of the
UNCLOS provisions on maritime regimes.

About the Contributors 77
ABOUT THE CONTRIBUTORS
Michael Richardson (lead article author) is a Visiting Senior

Research Fellow at the Institute of Southeast Asian Studies
(ISEAS), Singapore and former Asia editor of the International
Herald Tribune. His current research focuses on maritime, energy
and sealane security. He has completed a book, A Time Bomb for
Global Trade: Maritime-related Terrorism in an Age of Weapons
of Mass Destruction (Institute of Southeast Asian Studies 2004).
Sam Bateman (commentator) is a Senior Fellow at the

S. Rajaratnam School of International Studies (RSIS), Nanyang
Technological University, Singapore. He is a former Australian
naval officer with a special interest in political and strategic aspects
of the international law of the sea. He completed his doctorate at
the University of New South Wales in 2001. He has written
extensively on defence and maritime issues in Australia, the Asia
Pacific and Indian Ocean.
B.A. Hamzah (commentator) is a Senior Research Fellow at the

Institute of Ocean and Earth Sciences (IOES) and Faculty of
Arts and Social Sciences, University of Malaya, Kuala Lumpur.
He was a Visiting Fellow at the European Commission and at the
Institute of Southeast Asian Studies, Singapore before serving
as Director-General of the Maritime Institute Malaysia (MIMA).
He helped found, and is appointed Fellow and Assistant Director-
General, of the Institute of Strategic and International Studies of
Malaysia (ISIS).
02 Energy_Geopolitics Authors 77 9/28/09, 12:44 PM

K. Kesavapany has been the Director of the Institute of Southeast

Asian Studies (ISEAS) since 1 November 2002. Prior to his
appointment, he was Singapore’s High Commissioner to Malaysia.
In his thirty-year career in the Foreign Service, he served as
Permanent Representative to the United Nations in Geneva
(December 1991–March 1997) and held key staff appointments in
the Ministry of Foreign Affairs of Singapore. He was an active
participant in the final phase of the Uruguay Round negotiations
and was the first Chairman of the WTO’s General Council in 1995.
Mark J. Valencia is a Visiting Senior Fellow at the Maritime

Institute of Malaysia. He has a M.A. in Marine Affairs from the
University of Rhode Island and a Ph.D. in Oceanography from the
University of Hawaii. Before joining the East-West Center, he was
a Lecturer at the Universiti Sains Malaysia and a Technical Expert
with the UNDP Regional Project on Offshore Prospecting based
in Bangkok. He has been a Fulbright Fellow and a Visiting Fellow
at the International Institute for Asian Studies, Leiden University.
Rodolfo C. Severino is Head of the ASEAN Studies Centre at the

Institute of Southeast Asian Studies (ISEAS), Singapore, and
former ASEAN Secretary-General. He has completed a book,
Southeast Asia in Search of an ASEAN Community (Institute of
Southeast Asian Studies 2006). Before assuming the position of
ASEAN Secretary-General, he was Undersecretary of Foreign
Affairs of the Philippines. He was Ambassador to Malaysia from
1989 to 1992. He twice served as ASEAN Senior Official for the
Philippines.
02 Energy_Geopolitics Authors 78 9/28/09, 12:44 PM

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ENERGY AND GEOPOLITICS

IN THE SOUTH CHINA SEA

00 Energy_Geopolitics Prelims 2 9/28/09, 12:44 PM

ENERGY AND GEOPOLITICS

INSTITUTE OF SOUTHEAST ASIAN STUDIES

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© 2009 Institute of Southeast Asian Studies, Singapore

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00 Energy_Geopolitics Prelims 4 9/28/09, 12:44 PM

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• Whither the South China Sea Disputes? 68

• Clarifying the New Philippine Baselines Law 74

About the Contributors 77

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The South China Sea is generally considered as one of the

00 Energy_Geopolitics Prelims 7 9/28/09, 12:44 PM

Centre of the Institute of Southeast Asian Studies (ISEAS) chose

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express their personal views and not necessarily those of their

00 Energy_Geopolitics Prelims 9 9/28/09, 12:44 PM

01 Energy_Geopolitics 1 9/28/09, 12:47 PM

Sc.alc- I:J2.000.000 olC S..ti

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Asian countries have coastlines overlooking or close to the South

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Other South China Sea Claims

Source: CIA Maps and Publications for the public.

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0 Gas/ Oil fields 500

busy international sealanes in the South China Sea. (See Maps 4

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Source: Wikipedia commons.

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Source: CIA World Factbook 2008 online.

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thirds of the way between southern Vietnam and the southern

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Both China and Vietnam protested in February 2009 after the

China’s U-shaped Claim

China’s Growing Military Power

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Source: U.S. Department of Defence, Annual Report to Congress: Military

China’s annual military spending has grown four-fold or more

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allowing for this, China’s declared spending on military

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China’s policy since 1975 has been to “shelve” the conflicting

What do China’s Maritime Claims Portend?

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north, the Macclesfield Bank roughly mid-way between Vietnam

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Retaining the U-shaped claim may also be intended by Beijing

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A code of conduct for the South China Sea, signed by Beijing