Commodities, Emerging Markets, Energy

China’s Energy Demand And The South China Sea Dispute

South China Sea1

By Selcuk Colakoglu

The South China Sea is known for its complex maritime disputes. Though parties involved in the disputes have been careful to keep the issue of sovereignty discussed within the frame of diplomatic debate, the problem has nonetheless seen recent escalation. From an energy security perspective, it seems that the situation might make the global agenda that much busier.

The South China Sea (SCS) has hosted and still hosts the world’s most complex system of maritime disputes. Besides disagreement on the border of the continental shelf and the delineation of exclusive economic zones, there are disputes in the Sea over who has sovereignty over various small islands and skerries. Bordering the SCS, there are seven parties involved in the disputes over sovereignty of the islands, namely, Brunei, China, Indonesia, the Philippines, Malaysia, Taiwan and Vietnam. The Paracel and Spratly island groups, consisting of rocky archipelagos, are more or less controlled by all of these seven countries. Here, each party’s sovereignty claims overlap with those of at least two or three of the other countries, regardless if the island is a livable habitat, a rock, an atoll or a reef. Among the parties to the problem: (i) China cites two thousand year-old legislation that claims all maritime areas in the territorial waters of the other countries, including all the islands; (ii) Vietnam claims rights to the Paracel and Spratly islands, as well as the western half of the SCS; (iii) the Philippines, claims rights to the Spratly islands and the area surrounding them (iv) Taiwan claims the Paracel islands; and (v) Brunei, Indonesia and Malaysia have overlapping exclusive economic zones and claims to the continental shelf.

The Risk of Escalation

Seeing that it is an area over which multiple actors claim sovereignty, preventing the risk of escalation in the SCS is the most important item on the agenda for the involved parties as well as the international community. In fact, in 1974 and in 1988, bloody clashes broke out between China and Vietnam over control of the Spratly and Paracel islands. In recent years, growing tension has risen among the involved countries as a result of the SCS disputes. In 2012, China created a new prefecture named Sansha that consists of the Paracel and Spratly islands, an act that was met with strong protest by Vietnam and the Philippines. Again in 2012, the blockade of Vietnamese research vessels in the SCS by the Chinese navy caused a rise in political tension between the two countries. In 2013, the Philippines appealed to the International Court of Justice (ICJ) because of the disputes with China in the SCS, citing the UN Convention on the Law of the Sea. Generally, China prefers resolving SCS disputes through bilateral negotiations, and has thus stood in total opposition to the involvement of the ICJ in the matter. Other countries, however, would like to resolve the problem by way of international mediation and with the help of the skillset possessed by the ICJ, thereby avoiding the assumption of a direct stance against China. Barring China and Taiwan, all five other states involved in the disputes are ASEAN members, and with the spirit of cooperation enshrined within the framework of this organization, these countries were able to adopt a common position to resolve, or at least manage, the problem without escalating political tensions. Taiwan, a nonmember of ASEAN and not even recognized as an independent state, is of a similar opinion, namely, that the issue should be resolved through negotiations as to avoid a deterioration of the matter. On the other hand, in recent years, China is not only vocally reiterating its sovereignty claims over the SCS, but has also been pursuing a more active approach to assert these claims. In this way, the South China Sea problem is the most important issue in China-ASEAN relations.

The Importance of South China Sea Energy Resources for China’s Energy Needs

China, as the world’s largest oil importer, is highly dependent on oil from the Middle East and Africa. However, the long sea route to reach these regions also poses a risk in terms of energy security for China. Therefore, China is formulating various strategies to diversify its energy suppliers and to develop its own domestic energy resources; therefore, it has begun to explore the potentials hidden beneath the SCS,which it considers to fall under Chinese sovereign territory. In this vein, the China National Offshore Oil Corporation (CNOOC) has been appointed to prospect for deep sea oil and natural gas. In 2009, CNOOC declared a budget of $30 billion for over 20 years allotted to deep-sea resource prospection, thus showing the importance of the maritime area for the country. China now aims to complete the construction of a second deep-sea drilling platform in 2016.

China’s riparian regions that border the SCS are thought to be rich in energy resources. Here, even though there are proven energy reserves located under China’s Pearl River Delta and offshore from Hainan Island, the main wealth of the SCS is thought to be located in its southern half, off the coasts of Indonesia, Brunei, Malaysia, the Philippines and Vietnam. According to a recent geological survey, there are 11 billion barrels of oil and 4 trillion cubic meters of gas beneath the SCS. These figures better explain why China persistently refuses to recognize the other parties’ exclusive economic zones and claims to the continental shelf of the SCS. For logistical convenience and to minimize the security risks, after the projects around Hainan Island, China plans to start prospection and production in a region just a bit further out to sea – the Paracel Islands.

While Indonesia, Malaysia and Brunei have already commenced extraction in the SCS, the Philippines and Vietnam are also preparing to begin their own extraction operations. Vietnam is exploring the Nam Con Son and Cuu Long fields, while the Philippines is doing the same around Malampa and the Reed Bank area. Additionally, as a non-oil exporter that still imports refined petroleum products, Vietnam concedes to allow some European, American, Russian, Indian and Malaysian companies to conduct prospections in various areas of the SCS. Here, Malaysia’s Petronas company, with its foreign partners, has attained the capacity to explore both coastal regions and the deep sea.

As a result, the SCS, in terms of the overlapping and contentious claims to sovereignty as well as energy security, is most likely to feature more heavily on the global agenda. The parties have been trying their best to keep the sovereignty debate within the field of diplomacy. However, at the same time, tensions regarding China’s claims to the SCS, particularly with regard to opposition posed by Vietnam and the Philippines, have exhibited a tendency of escalation in recent years. This situationmay accelerate the development of the proposed military alliance between Vietnam and the Philippines, who feel that they are not strong enough in the face of the Chinese Navy. Considering this, it would not be a coincidence if the Philippines were to seek to expand its security cooperation with the US while Vietnam does the same to deepen its strategic relationship with the US.

Courtesy of JTW

JTW – The Journal of Turkish Weekly – is a respected Turkish news source in English language on international politics. Established in 2004, JTW is published by Ankara-based Turkish think tank International Strategic Research Organization (USAK).  For more information, please visit


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