China’s placement of an oil exploration rig in disputed waters with Vietnam looks a classic effort to test the limits of its nine-dashed line policy.
Vietnam would be foolish to acquiesce. If it does, more rigs will start popping up elsewhere.
Instead, Vietnam should follow the Philippines and file a claim with UNCLOS. Just as China created a bargaining chip out of its oil rig, Vietnam needs to match the ante with an UNCLOS claim.
The Chinese rig and the Vietnamese UNCLOS claim can then be used as bargaining chips.
Neither China nor Vietnam is likely to get all it wants.
For its part, China wants precedents for its ambit claims. Vietnam, naturally, is too small to stand up to China. But what Vietnam can do, however, is widen and broaden the issue.
China’s placement of the rig looks calibrated for maximum strategic ambiguity.
The ocean area it’s ‘exploring’ hasn’t been cited by either the International Energy Agency or the US Energy Information Administration as having a high likelihood of large oil or gas supplies.
The rig is also just far enough at sea that Vietnam and other Southeast Asian nations might look the other way. But if they do, China will cite it later as a precedent for locating other ‘temporary’ rigs.
China is big and relatively rich. Vietnam is small and very poor. China needs energy and a regional ‘social license.’ Vietnam needs money and security.
Considering what both sides need, agreeing to a Joint Development Area in the area around the rig seems the most probable solution. If it works, it can provide a welcome template for other JDAs elsewhere in the South China Sea. These would benefit everyone.
JDAs have been around a long time. JDAs allow claimants to disputed waters to postpone resolution of the territorial issue indefinitely while they cooperate to develop the resources. Down the track, when the resources have been exploited, the territory is less worth fighting over and the countries involved have a history of working together.
This looks like a good outcome for the South China Sea, not just for the area off Vietnam, but for the area off southern China, off the Philippines and in the deeper water regions in the South China Sea’s center.
Territorial uncertainty is preventing exploration and development throughout the South China Sea. Most drilling to date has taken place only close to shore where territorial issues are less ambiguous. Settling territorial issues could unlock new energy sources, not just oil and gas but wind, ocean thermal and potentially methane hydrates.
In addition to agreeing to Joint Development Areas with its neighbors, China’s proposed $50 billion Asian Infrastructure Investment Bank could then build infrastructure to serve the JDAs.
This infrastructure could include pipelines and fiber optics, potentially later joined by long-distance power lines.
All of this would deepen market integration and connectivity, both of which are stated goals China has for this year’s APEC meeting.
Vietnam could provide the template for solving a lot of the South China Sea’s territorial issues. Vietnam already has agreed with China to jointly explore for oil and gas in a small region of the Tonkin Gulf.
Indeed, why China didn’t work out something similar in advance for this new area is an interesting question.
Even so, Vietnam would be foolish to look the other way. It should file an UNCLOS claim to match the ante.