Stirring up the South China Sea (IV): Oil in Troubled Waters

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The South China Sea’s hydrocarbon resources are hotly contested though its reserves are unproven. While their potential economic benefit may be considerable, their foremost significance is political, as their division has implications for sovereignty and fundamental law of the sea principles. Exploration frictions have deepened geopolitical fault lines. Competition once framed by verbal warnings and diplomatic pressure today frequently takes the form of physical confrontation. A key factor is China’s growing capability and accompanying desire to expand its own exploration while preventing other claimants’ activity. In parallel, Beijing has advocated setting aside disputes and developing resources jointly, but as collaboration remains elusive, analysts in China have called for unilateral measures to pressure uncooperative parties. Better would be greater efforts to create mechanisms for preventing competition from becoming conflict, while seeking better understanding of motivations needed for eventual cooperation.

China’s state-owned oil majors, known collectively as the “three buckets of oil”, have grown rapidly in financial strength and technical capability, especially deep-water drilling. Driven by political zeal and internecine competition, their executives have for years pressed the government for policy and financial support to enable exploration farther from the Chinese shore and deeper into disputed waters. Vietnam, for which crude oil is vital for exports, government revenue and GDP, has made development in the South China Sea a national priority. To insulate itself from Chinese pressure, it actively courts foreign partners, some of which baulk due to Beijing’s warnings. The Philippines badly need new sources of domestically produced energy, as they import nearly all their crude oil and petroleum products, and their only natural gas field will soon run dry.
Read more: http://www.crisisgroup.org/en/regions/asia/north-east-asia/china/275-stirring-up-the-south-china-sea-iv-oil-in-troubled-waters.aspx

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