China's Oil Rig Gambit: South China Sea Game-Changer?
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China's Oil Rig Gambit: South China Sea Game-Changer?

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China’s placement of the giant state-owned oil rig HD-981 in Block 143 inside Vietnam’s Exclusive Economic Zone (EEZ) on May 2 was unexpected, provocative and illegal.

This incident marks the first time China has placed one of its oil rigs in the EEZ of another state without prior permission. This was an unexpected move because China-Vietnam relations have been on an upward trajectory since the visit to Hanoi by Premier Li Keqiang in October. At that time, both sides indicated they had reached agreement to carry forward discussions on maritime issues. China’s move was also unexpected because Vietnam has not undertaken any discernible provocative action that would justify China’s unprecedented actions.

China’s deployment of the rig was provocative because the oil rig was accompanied by as many as 80 ships, including seven People’s Liberation Army Navy warships. When Vietnam dispatched Coast Guard vessels to defend its sovereign jurisdiction, China responded by ordering its ships to use water cannons and to deliberately ram the Vietnamese vessels. These actions were not only highly dangerous, but caused injuries to the Vietnamese crew.

China’s actions are illegal under international law. Chinese Foreign Ministry spokesperson Hua Chunying justified China’s actions by claiming the rig’s operations were in Chinese “territorial waters” and had nothing to do with Vietnam. In other words, China has adopted a position similar to Japan with regard to the Senkaku Islands by declaring there is no dispute with Vietnam.

China has placed itself in an inconsistent position. China has been provocative in using paramilitary ships and aircraft to challenge Japan’s assertion of administrative control over the Senkakus. China seeks to get Tokyo to admit that the Senkaku Islands are disputed. Yet Beijing has adopted Japan’s stance with respect to Block 143 by refusing to acknowledge that there is a legal dispute between China and Vietnam.

Chinese spokesperson  Hua Chunying only presented a general statement, not a detailed legal argument in support of China’s actions. Her claim that the oil rig is in Chinese “territorial waters” lacks any foundation because there is no Chinese land feature within twelve nautical miles of Block 143 on which to base this assertion. Chinese statements refer to the Paracel Islands – and not Hainan Island – as the basis for its claim.

China’s lack of clarity has led academic specialists and regional analysts to speculate about the possible legal basis of China’s claim. In 1996 China issued baselines around the Paracel Islands, including Triton Island. Specialists argue that China’s claim could be based on the proximity of Triton, and its entitlement to a continental shelf and EEZ.

Other specialists point out that the 1996 baselines do not conform to Article 8 of the United Nations Convention on the Law of the Sea and cannot be used to advance a legal claim over Block 143.

If the former line of argument is accepted, China’s hypothetical EEZ would overlap with the EEZ promulgated by Vietnam. This would constitute a legal dispute. International law requires the two parties to enter into provisional arrangement, refrain from the use of force or the threat of force, and take no action to upset the status quo. Clearly China’s placement of the oil rig and its 80 escorts in Block 143 constitutes a violation of international law.

Analysts are divided on the motivations and objectives of China’s current bout of aggressiveness. Three main interpretations have been put forth.

The first interpretation views the placement of the HD-981 rig in Block 143 as the inevitable response by China to Vietnam’s promulgation of the Law of the Sea in mid-2012. Prior to the adoption of this law by Vietnam’s National Assembly, China unsuccessfully brought intense diplomatic pressure on Hanoi not to proceed. Immediately after the law was adopted, the China National Offshore Oil Company (CNOOC) issued a tender for blocks in the South China Sea that overlapped with blocks issued by Vietnam within its EEZ.

According to this interpretation, the current controversy is the result of a decision by CNOOC to follow through and begin exploring these blocks. In CNOOC’s view, Block 143 fell within Chinese jurisdiction. In China’s view, commercial exploration activities in Block 143 would undercut Vietnam’s claims to sovereign jurisdiction.

The first interpretation is questionable given the sheer size and composition of the fleet of 80 ships and vessels that accompanied the oil rig. This was clearly no ordinary commercial venture but a pre-emptive move to prevent Vietnam from defending its EEZ.

Diplomatic sources in Beijing also report that CNOOC officials revealed they were ordered to place the rig in Block 143 despite their misgivings on commercial grounds. CNOOC officials pointed to the costs of keeping the rig on station until mid-August when oil exploration is scheduled to cease. Other observers point out that the prospects of finding commercial reserves of oil and gas in this area are quite low.

A second interpretation posits that China’s actions were in response to the operations by ExxonMobil in nearby blocks..

This interpretation seems unlikely. ExxonMobil has been operating in Block 119 from 2011. While China protested the award of an oil exploration contract to ExxonMobil, China has not stepped up its objections in recent months. It is also unclear how the placement of a Chinese oil rig in Block 143 would deter ExxonMobil from operating elsewhere.

Finally, China’s actions appear to be disproportional and very likely counterproductive. Block 143 does not directly affect U.S. interests. Chinese interference with ExxonMobil would be a direct challenge to the Obama administration’s statement that U.S. national interests included “unimpeded lawful commerce.”

The third interpretation, first publicized by The Nelson Report (May 6, 2014), argues that China’s actions were pre-planned in response to President Barack Obama’s recent visit to Japan, South Korea, Malaysia and the Philippines. During his visit, President Obama publicly opposed the settlement of territorial disputes by intimidation and coercion.

China was angered by the Obama administration’s prior criticism of China’s nine-dash line claim to the South China Sea and U.S. support for the Philippines’ decision to request international arbitration to settle its territorial dispute with China. In addition, China was outraged by President Obama’s public declaration of support of Japan and its administration of the Senkaku islands as well as President Obama’s declaration that U.S. alliance commitment to the Philippines were ironclad.

In sum, the third interpretation argues that China chose to directly confront the main premises of the Obama administration’s rebalance to Asia. China chose to expose the gap between Obama’s rhetoric and U.S. capability to respond to China’s assertion of its sovereignty claims.

Some analysts who support the third interpretation argue that China has taken heart from President Obama’s inability to respond effectively to the crises in Syria and the Ukraine. Therefore China manufactured the oil rig crisis to demonstrate to regional states that the United States is a “paper tiger.”

The third interpretation has plausibility. But it begs the question of why Vietnam was the focus for this crisis. Also, China’s actions could prove counter-productive, coming on the eve of a summit meeting in Myanmar of the heads of government of the ten states comprising the Association of Southeast Asian Nations (ASEAN).

On March 18, China and ASEAN held the tenth joint working group meeting on the Implementation of the Declaration on Conduct of Parties in the South China Sea (DOC) in Singapore. This was followed up by the seventh ASEAN-China Senior Officials’ Meeting on the Implementation of the DOC in Pattaya, Thailand on April 21. While progress has been slow, there were some encouraging signs that confidence building projects under the DOC might be developed. As one ASEAN diplomat put it to the author, “the journey [consultations with China] is more important than the destination [achieving a binding COC].”

China’s deployment of the oil rig and accompanying fleet ensured that the South China Sea would be a hot button issue at the ASEAN Summit. ASEAN Foreign Ministers issued a stand alone statement on May 10 expressing “their serious concerns over the on-gong developments in the South China Sea, which increased tensions in the area.” It is significant that a separate statement was issued on the South China Sea. This statement implicitly expresses support for Vietnam and lays the foundation for a similar statement by ASEAN heads of government/state.

The Foreign Ministers’ statement did not specifically mention China by name but it reiterated ASEAN standard policy on the South China Sea. The statement urged the parties concerned to act in accord with international law, including the United Nations Convention on the Law of the Sea, to exercise self-restraint, avoid actions that could undermine peace and stability, and to resolve disputes by peaceful means without resorting to the threat or use of force.

The ASEAN Foreign Ministers’ Statement called on all parties to fully and effectively implement the DOC. The Statement also called for the need for “expeditiously working towards an early conclusion of the Code of Conduct in the South China Sea.”

The ASEAN Foreign Ministers’ Statement did not mention China by name in deference to Beijing. But the Statement may be read as a shift in the views by individual members of ASEAN that territorial disputes involving the Paracel Islands and its surrounding waters are a bilateral matter between China and Vietnam.

An endorsement of the Statement by the Foreign Ministers on the South China Sea by the ASEAN Summit will provide political and diplomatic cover for the United States and other maritime nations to express their concern.

Japan’s Prime Minister Shinzo Abe has already come out in public in support of Vietnam. The U.S. State Department issued a statement characterizing Chinese actions “provocative.” More importantly, Assistant Secretary of State Danny Russel just visited Vietnam on a scheduled trip. He will be able to take his first-hand assessment back to Washington to shape the Obama Administration’s response.

Beneath the ASEAN diplomatic surface, however, China’s actions are likely to stoke anxieties already held by the Philippines, Vietnam, Malaysia, Singapore, and Indonesia. These states will seek to shore up their own maritime capabilities and to seek reassurance of support from the United States and other maritime powers such as Japan, Australia, and India.

Vietnam has reiterated its determination to respond to Chinese tactics of ramming its vessels. The current stand-off between Chinese and Vietnamese vessels in the waters around the CNOOC oil rig therefore holds the potential for an accident, a miscalculation, or the use of deadly force.

It is more likely that China and Vietnam will manage this affair by preventing matters from escalating to the extent that armed force is used. As of May 2, China and Vietnam have held six face-to-face diplomatic meetings in Beijing and three meetings in Hanoi between the Ministry of Foreign Affairs and Chinese Embassy officials.

Vietnam has requested that China receive a high-level special envoy. Diplomatic rumor has it that the special envoy will be a member of the Vietnam Communist Party (VCP) Politburo. Vietnam has resorted to sending special envoys to Beijing on two occasions in recent years and both visits resulted in a lowering of tension.

On May 8, the VCP Central Committee opened a long-planned executive session. This will provide Vietnam’s leaders with an opportunity to review the current crisis and to work out an effective political and diplomatic strategy to deal with China. Consensus on this issue will give the special envoy authority to speak on behalf of the Hanoi leadership.

When China first announced the deployment of its oil rig, it stated that its operations would terminate on August 15. This provides plenty of time for both sides to orchestrate and manage the confrontation in Block 143 and provide a face saving means for ending the confrontation.

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