Why China Thirsts for South China Sea

This is an excerpt for an article entitled "The Ecology of Strategic Interests: China’s Quest for Energy Security from the Indian Ocean and the South China Sea to the Caspian Sea Basin" by Tarique Niazi (China and Eurasia Forum Quarterly, Volume 4, No. 4 (2006) p. 97-116). This article also explains why China keeps refusing any proposal for international arbitration for fear of losing its weak case.


The South China Sea (East and Southeast Asia)

Unlike the Indian Ocean region, the South China Sea region is perceived
as China’s home turf. Yet China has several challenges even here. Most
of these relate to the contested ownership of the South China Sea,
especially its islands and their surrounding waters, which boast of
immense untapped natural resources, especially natural gas and oil. Thus,
the battle is over natural resources as well as the critical shipping seaways
in South China Sea region.

Who Owns the South China Sea

China and Taiwan lay territorial claims to the South China Sea and all
its islands, reefs and rocks.35 Yet their claims do not go uncontested. Many of China’s Southeast Asian neighbors are rival claimants to an
assortment of islands in the South China Sea, which is bordered by
China and Taiwan in the north, Vietnam in the west, Malaysia,
Indonesia and Brunei in the south, and the Philippines in the east.36
China’s neighbors also assert their claims to the waters that surround the
contested islands. The major conflict, however, is over two sets of
islands: the Xisha (Paracel) Islands and the Nansha (Spratly) Islands. All
of the Xisha (Paracel) Islands are contested among three contenders:
China, Taiwan and Vietnam, although only China has physically
occupied them since 1974. The Nansha (Spratly) Islands, on the other
hand, are claimed by Brunei, China, Malaysia, the Philippines, Taiwan,
and Vietnam.37 Most of these claimants occupy several of the Nansha
(Spratly) Islands, which will subsequently be referred to as the Spratlys.
China occupies 8, Taiwan 1, the Philippines 9, Malaysia 9, and Vietnam
27. Brunei lays territorial claims to several of these islands, but occupies
none.38

The total area of Spratlys is less than three square miles, but each are
important as the basis for staking out claims to the surrounding waters as
an Exclusive Economic Zone (EEZ), which, under the United Nations
Convention on the Law of the Sea (UNCLOS), extends to 200 nautical
miles from the territorial sea. China grounds its claims to the Spratlys
through its history by invoking their ownership by successive Chinese
dynasties.39 Beijing points to the fact that the international community
has continued to accept its sovereignty over these islands since China’s
independence in 1949. Yet many authorities believe that the Chinese
claim of sovereignty over the disputed islands is inconsistent with the
UNCLOS, which limits sovereignty claims to 12 nautical miles.40 Article
3 of the UNCLOS says that, “every state has the right to establish the
breadth of its territorial sea up to a limit not exceeding 12 nautical
miles.”41 Articles 55-77 define the concept of an Exclusive Economic Zone
(EEZ) as an area up to 200 nautical miles beyond and adjacent to the
territorial sea. The EEZ gives coastal states “sovereign rights for the
purpose of exploring and exploiting, conserving and managing the
natural resources, whether living or non-living, of the waters superjacent
to the seabed and of the seabed and its subsoil…”42 Observers argue that it is also unlikely that any of the South China Sea islands, especially the
Spratly islands, meets the criteria to extend the territorial claims to the
surrounding waters as an EEZ.43

Natural Wealth of the South China Sea

Nonetheless, it is not just the islands and their surrounding waters that
drive the disputants’ territorial claims; it is rather sub-surface natural
wealth, which lies unexplored in the waters surrounding these islands,
that fuels the contested claims. According to the U.S. Energy
Information Agency, the South China Sea has proven oil reserves of 7.8
billion barrels.44 Current oil production in the region is over 1.9 million
barrels per day. According to a 1995 study by Russia’s Research Institute
of Geology of Foreign Countries, 6 billion barrels of oil might be present
in the Spratly islands, in addition to vast reserves of natural gas.45
Chinese media describe the South China Sea as the second Persian Gulf.
Some Chinese specialists have asserted that the South China Sea could
contain as much as 150 billion barrels of oil and natural gas.46 In the
Spratlys, which are the most contested territory, the exploratory work
has yet to be done to quantify proven oil reserves. In 1995, a China Youth
report stated that the Spratlys are the key to controlling 10 billion tons of
oil, more than one-eighth of China’s reserves of about 78 billion tons.47
The report claimed that the South China Sea is destined to be another
Middle East.

The South China Sea’s Shipping Edge

Besides its natural wealth, the South China Sea is equally important to
Beijing as the primary seaway for its energy shipments, especially those
from the Middle East. In recent years, the South China Sea has become
one of the world’s busiest international sea lanes. More than half of the
world’s annual merchant shipping traffic sails through the Straits of
Malacca, Lombok, and Sunda.48 Crude oil, liquefied natural gas, coal, and
iron ore comprise the bulk of shipping traffic. Over 100,000 oil tankers,
container ships, and other merchant vessels transit the straits each year.49
Oil tankers carry over three million barrels of crude through the straits
each day. Over 9.5 million barrels of oil per day flow through the Straits
of Malacca alone. More importantly, major East Asian nations such as
Japan, South Korea and Taiwan have over 80% of their oil imports shipped through the South China Sea. The estimated volume of future
fuel shipments, across the South China Sea, further enhances its strategic
significance, and makes the Strait of Malacca a major chokepoint in the
world’s oil transport system. Given its congestion, insecurity, and
China’s near-total dependence on it, leads one observer to describe the
Strait of Malacca as China’s dilemma.50

Because of its unequaled strategic significance, the South China Sea
and its islands, especially the Spratly islands, are hotly contested between
China and the neighboring East-and-Southeast Asian nations. All but
Brunei have backed up their respective claims with a military presence on
at least one of the Spratlys. Although their claims to EEZs overlap, all six
claimants – Brunei, China, Malaysia, the Philippines, Taiwan, and
Vietnam – invoke the UNCLOS in support of their claims.51 China,
Taiwan and Vietnam tend to claim even part of Indonesia’s territory in
the Natuna Island area.

Sino-Indonesian Relations

Like China, Indonesia is also a littoral state of the South China Sea. It is
the region’s second most populous nation, with 200 million people spread
over 740,000 square miles, and almost straddles four straits that are
critical to international maritime traffic.52 Indonesia has long contested
the gas-rich offshore fields of Natuna Island. This contestation
embittered Sino-Indonesian relations. What irked Indonesia the most
was Chinese cartography of the disputed territory that implied Chinese
ownership of the natural gas field that sits 180 kilometers northeast of
Natuna Island.53 Jakarta contracted the gas field to the Exxon
Corporation for exploitation. In early 1994, Indonesia questioned China’s
redrawn maps that purported to ring the entire South China Sea as its
territory.54 Initially, China justified its claim to the area as a historic
“inheritance from past dynasties.”55 Indonesia, however, countered that,
without continuous occupation of the disputed territory, such claims had
no validity in international law. Beijing, nevertheless, insisted that only
bilateral negotiations could address conflicting claims, thus implicitly
omitting the possibility of international arbitration. Jakarta responded
that no bilateral settlement was possible as three or more nations have
always been party to the conflict over this area.

Although Indonesia achieved incremental gains through quiet
diplomacy, a final resolution to the conflict has yet to emerge. Beijing has
since made no claim to Natuna Island itself, however. In January 1990,
Indonesia sponsored an annual “Workshop on Managing Potential
Conflicts in the South China Sea” where China could join other
claimants to address non-sovereignty issues informally and privately.56
The agenda focused on cooperative studies of various problems, including
biodiversity, sea level and tide monitoring, resources assessment, and
safety of navigation and shipping. Jakarta hoped that this forum would
advance preventive diplomacy through confidence-building measures to
bring about a reduction in confrontation over competing claims. China
however opposed the multilateral approach to what it believed were
bilateral issues.57 In September 1996 Indonesia, after a hiatus of five years,
held its first major military exercises around Natuna Island. One
observer describes these exercises as the largest Jakarta ever conducted in
the South China Sea.58

Sino-Philippines Relations

China and the Philippines also have a dispute over the ownership of the
Spratly Islands. The Philippines’ Malampaya and Camago natural gas
and condensate fields are located in the waters of the South China Sea,
which are claimed by Beijing. Yet the Philippine government licensed the
Shell Philippine Exploration to build a 500-kilometer undersea pipeline to
ship gas from the Camago-Malampaya fields to the main island of
Luzon.59 Despite its territorial claims, China did not raise objections to
the development of these fields. In a dramatic turn of events, however,
China forcibly occupied Mischief Reef, a circular reef within 200 miles of
the Philippine island of Palawan, and within the area claimed by the
Philippine government as its EEZ.60 China had first covertly established
its presence in these waters and in an area claimed by the Philippines
within its EEZ. The Mischief Reef, which the Philippines calls the
Panganiban Reef, is 150 miles west of Palawan, the Philippines’s nearest
land mass, and 620 miles southeast of China.61 The Philippines
immediately protested China’s advance on Mischief Reef. In March, 1995,
the Philippine Navy removed Chinese markers on several reefs and atolls
and detained Chinese fishing vessels in the area.62 In August 1995, the two
nations were finally able to reach an agreement to resolve the dispute through diplomatic means and vowed to observe the United Nations
Convention on the Law of the Sea (UNCLOS).

Sino-Vietnamese Relations

Of all disputants, China has been most actively engaged with Vietnam to
resolve their respective overlapping claims to undeveloped blocks off the
Vietnamese coast. A block referred to by the Chinese as Wan Bei-21
(WAB-21) west of the Spratly Islands, is claimed by the Vietnamese in
their blocks 133, 134, and 135.63 Sino-Vietnamese inability to resolve these
disputes has kept Conoco and Petro Vietnam from undertaking the
exploration work in these blocks as planned. In addition, Vietnam’s Dai
Hung (Big Bear) oil field is on the boundary of waters claimed by the
Chinese. In 1974, China invaded and seized the Paracel Islands from
Vietnam. In 1987, it set up an observation station in the Spratlys and five
years after passed a law declaring sovereignty over the entire China Sea.64
In 1988, another confrontation occurred between the Chinese and
Vietnamese over the occupation of the Fiery Cross Reef (Yung Shu Jiao).
Chinese forces sank three Vietnamese vessels, killing 72 people. These
military engagements, however, pushed the two countries to resolve their
disputes through talks. On December 25, 2000, Vietnamese leader Tran
Duc Luong and Chinese President Jiang Zemin signed two agreements in
Beijing to settle a long-standing territorial dispute over resources in the
Gulf of Tonkin. The two pacts demarcated territorial waters and
exclusive economic zones, and outlined fishery cooperation in the Gulf of
Tonkin, known as the Beibu Bya in China.65 Beijing has since kept
military bases in Hainan and the Paracels. In November 1991, it
normalized relations with Hanoi after Vietnam withdrew from
Cambodia. By the end of 1994, there were three rounds of talks between
Beijing and Hanoi on disputes over their 1,130-kilometer-long land border.
There have since been sporadic conflicts involving the Philippines, China
and Vietnam over control of these islands. In March 2005, however, the
three countries peacefully resolved the conflict by agreeing to jointly
search for natural resources, i.e., oil and gas, in the disputed area.66

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