The Implications of Hydrocarbon Development in the South China Sea

Abstract

The Spratly Islands are increasingly seen as the next flashpoint for international conflict in the Asia Pacific. These very small islands, reefs, and coral cays are important because they sit aside vital sea lanes which connect Singapore and Hong Kong, the two busiest ports in the world, and through which 75 per cent of Japan's imported oil is transported. The South China Sea also holds vast economic potential because of its large quantities of mineral and living resources. Moreover, most international press reports describe the Spratlys as 'oil rich.' This may indeed be the case, as preliminary exploration in the South China Sea has proved promising, but it could take several years, millions of dollars, and numerous wells to find out just how much oil lies beneath the scattered atolls and islands of the Spratlys.(f.1) Who will pay for the development and who will benefit from it remains to be seen because the Spratlys are claimed in whole or in part by China, Taiwan, Vietnam, the Philippines, Malaysia, and Brunei. Many pundits claim that the search for oil in the area -- and the economic bonanza large oil finds would have for the littoral states -- increases the importance of the territorial disputes for each claimant. The possibility of oil was first predicted in 1968 when the United Nations sponsored a survey of the area which revealed the presence of a continental shelf in the South China Sea. Following this discovery several claimants unilaterally declared boundary lines, many of which overlap, and deployed troops to occupy several of the features in the Spratlys. This resulting crisscross pattern of occupation in all reefs, islets, and atolls that sit above high tide levels has kept tensions high in an area in which the two closest occupied features are only 3.5 nautical miles apart. It has also led to violent clashes between rival claimants, not just in the Spratlys but in other parts of the South China Sea as well. In 1974 Chinese naval units expelled South Vietnamese forces from the Paracel Islands and in 1988 Chinese and Vietnamese naval units clashed in the Spratlys over the Chinese occupation of South Johnson Reef. More recently both countries have been involved in military confrontations over oil exploration in the disputed area. The belief that the South China Sea contains large deposits of non-renewable resources has complicated the pursuit of peaceful resolutions to territorial disputes. While the claimants have agreed, in principle, to renounce the use of force to resolve the disputes, there is almost no agreement on how a resolution should be developed. One problem is that there is no agreement amongst the claimants on what constitutes a legitimate basis for a claim. China, Taiwan, and Vietnam all base their claims on historic rights of sovereignty. The Philippine's claim is based on rights of discovery, while Malaysia and Brunei claim only those features that are within their exclusive economic zones (EEZs). Moreover, there is considerable disagreement over whether multilateral forums are appropriate for resolving the disputes. The Chinese are reluctant to allow the issue to be raised in multilateral discussions because they fear that internationalizing the dispute in this way will gain sympathy for the smaller states, who will be seen as being bullied by 'big, bad' China. As for the other claimants, the Philippines, being the weakest militarily, is the most supportive of multilateral forums, while Malaysia, having the farthest claim from China, is less supportive, thinking it is in a more favourable position than the others and perhaps less likely to come into direct conflict with the Chinese. One frequently suggested option for conflict prevention are joint development agreements (JDAS) under which claimants would agree to set aside questions of sovereignty and cooperate in joint resource development in the disputed area. The problem with this approach, however, is that agreement among the claimants as to how and where they would co-operate is a long way off. …