Category: natural resources

Overlapping Claims and Major Powers

Yesterday, the head of PetroVietnam, Vietnam’s state-owned oil company, gave a briefing in response to CNOOC’s announcement of new blocks in the South China Sea.

The briefing included a map, shown below, which indicates the extent to which China’s blocks overlap with Vietnam’s.  It also shows which foreign oil companies are targeted by CNOOC’s announcement — Gazprom, ONGC, and ExxonMobil.

In other words, China is challenging three major powers with interests in the region — Russia, India and the United States.

China wants to avoid internationalizing the dispute, but CNOOC’s act is sure to achieve the opposite result by clearly engaging the interests of other powers.

The South China Sea Oil Card

Over the weekend, the China National Offshore Oil Company (CNOOC) quietly announced that nine new blocks in the South China Sea were now open to foreign oil companies for exploration and development.  This move reflects one of the starkest efforts by China to assert its maritime rights in these disputed waters – and constitutes a direct challenge to Vietnam’s own claims.

Unlike the blocks that CNOOC offered in2010 and 2011, the new ones are located entirely within disputed waters in the South China Sea.  As this map shows, the new blocks lie off Vietnam’s central coast and comprise of more than 160,000 square kilometers. The western edge of some blocks appear to be less than 80 nautical miles from Vietnam’s coast, well within that country’s Exclusive Economic Zone. All the blocks overlap at least partially with PetroVietnam’s, including potentially ones where foreign oil companies have ongoing exploration activities.

Foreign companies may be unlikely to cooperate with CNOOC to pursue investments in disputed blocks. Nevertheless, CNOOC’s action is significant for several reasons.  To start, the announcement of these blocks reflects another step in China’s effort to strengthen its jurisdiction over these waters. Just last week, for example, China raised the administrative status of the Paracel and Spratly Islands from county- to prefectural-level within Hainan Province.

The delineation of exploration blocks by a Chinese state-owned oil company not only enhances China’s claimed jurisdiction but also strengthens the legal basis of China’s ongoing opposition to Vietnam’s activities in these waters. In the past, China’s Foreign Affairs Ministry challenged the legality of Vietnam’s exploration and development activities by noting that they were in Chinese waters. Now, China can assert that such actions violate domestic laws related to resource development.

In addition, CNOOC’s announcement raises continued questions about coordination within China among maritime-related actors. When the blocks were announced, Vice Minister of Foreign Affairs Cheng Guoping was in Hanoi holding talks with ASEAN on implementing the 2002 declaration on a code of conduct. Needless to say, CNOOC’s announcement undercuts efforts since last summer to pursue a more moderate approach toward managing its claims in the South China Sea. In addition, it raises doubts about Beijing’s efforts to downplay maritime disputes and improve bilateral relations with Vietnam along with the status ofthe October 2011 agreement on basic principles for resolving for maritime issues.

Also, the location of the blocks implies that China (or at least CNOOC) may interpret the nine-dashed line on Chinese maps as reflecting China’s “historic rights” in the South China Sea. Such a claim would be inconsistent with the U.N. Convention on the Law of the Sea (UNCLOS), in which maritime rights can be claimed only from land features. China has pledged repeatedly in a variety of agreements and statements to abide by UNCLOS in the dispute.

The timing of the announcement is curious.  On the one hand, China may be reacting to what it sees as renewed challenges from its principal opponents in the South China Sea disputes. The Philippines has contested vigorously China’s claim over Scarborough Shoal since April, while Vietnam just passed a new maritime law that codifies its own claims to the Paracels and Spratlys as well as maritime rights. On the other hand, CNOOC’s announcement occurs just two weeks before the annual meeting of the ASEAN Regional Forum, increasing the region’s attention on disputes that China would prefer to handle bilaterally.

Unless foreign companies sign producing-sharing contracts with CNOOC and begin exploration activities in these blocs, CNNOC’s announcement remains more symbolic than substantive. Nevertheless, it’s likely to increase tensions and complicate efforts by all states to manage claims in the region.

[This originally appeared in The Diplomat]

China’s Quest for Natural Resources

The U.S.-China Economic and Security Review Commission, a body which Congress created in 2000, has started a new round of hearings.

Typically, each hearing examines a particular dimension of China’s international activity and any security implications for the United States.

The most recent hearing, held yesterday, explores China’s thirst for natural resources.  In particular, the hearing focused on water, hydrocarbons and minerals, and fishing featured a number of prominent exports, including Elizabeth Economy from the Council on Foreign Relations, Mikkal Herberg from the National Bureau of Asian Research, and Lyle Goldstein from the Naval War College.

The written testimonies can be downloaded here.