The South China Sea (43 page)

These ministries and state organs maintain their power within the Chinese political system through constant lobbying, whether for state funding, the opportunity to make larger profits or local employment. They all have long experience of framing their arguments within the narratives likely to win favour with the central leadership. It's not hard to dovetail their cases with the ‘national imperative’ for China to gain unchallenged access to the resources of the Sea. When CNOOC launched its ultra-deepwater drilling rig, the HS981, in May 2012, the company chairman Wang Yilin declared it to be part of ‘China's mobile national territory and a strategic weapon for promoting the development of the country's offshore oil industry’.
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He didn't mention the amount of state subsidy that had gone into the nearly $840 million cost of the rig or the effect it was likely to have on the firm's profits, though these were probably more important to him. Chinese policy is less likely to be the result
of a considered summation of reasoned arguments than the unpredictable result of an agglomeration of lobbying campaigns. When they work together, the power of these interest groups is immense. One thing they can all agree on, whether for reasons of nationalism, security, profit or jobs, is that China must have access to the resources of the South China Sea. The areas off its own coast have been so thoroughly exploited for both fish and hydrocarbons that domestic lobbies are insisting on looking further afield. Early on, Chinese leaders were realistic enough to understand that this would provoke resentment and opposition. China's ‘offer’ to Southeast Asia has remained the same for a quarter of a century. In the words of Dr Wu, ‘the reasonable, pragmatic way is to go for joint development’.

Chinese policy has been consistent on this point ever since Deng Xiaoping first proposed it to other regional leaders in the 1980s and Li Peng announced it to the world in Singapore on 13 August 1990: ‘China is ready to join efforts with Southeast Asian countries to develop the Nansha islands while putting aside, for the time being, the question of sovereignty’ (see Chapter 5).
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For years, however, the policy remained largely rhetorical. In 2003, for example, Wu Bangguo, then chairman of the National People's Congress, proposed it in the Philippines and in 2005 he offered it in Malaysia. The same year Hu Jintao suggested it in Brunei. In the Philippines, the proposal led to the Joint Marine Seismic Undertaking, which ended in political scandal, killing any chances of development work. None of the other countries took up the offer and the idea languished. But on 6 September 2011, perhaps as a response to international criticism over the various ‘cable-cutting’ incidents of that year, China's State Council Information Office released a ‘White Paper on China's Peaceful Development’, emphasising Deng's guidance on joint development.
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In December 2012 the National Institute of South China Sea Studies helped to give it new impetus with an international conference on the subject. Since then Beijing has been pushing it harder than ever, with a mixture of public diplomacy and hype.

In October 2013, the Chinese media loudly proclaimed that Brunei and Vietnam had agreed to work with China on ‘joint development’ in the Sea and editorials urged ‘other countries’ – presumably the Philippines, Malaysia and Indonesia – to also ‘take up the magic wand’.
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But the trumpeted agreements were much less than they appeared to readers of Chinese
websites. The deal between China and Brunei was actually a commercial joint venture between CNOOC and the Brunei National Petroleum Company to provide services to oilfields. It had nothing to do with sharing the hydrocarbon reserves in disputed areas of the Sea.
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The agreement with Vietnam was even less concrete. It merely set up a working group to study maritime cooperation, yet the Chinese news agency
Xinhua
described it as a ‘breakthrough’.
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The same article quoted Dr Wu: the agreement ‘undoubtedly sends a clear message to other claimants that putting aside bickering on sovereignty and sitting at the table for joint development is a pragmatic choice’.

Joint development does indeed sound reasonable and there are many examples where it has worked, both in Southeast Asia and more widely. But the sticking point in the South China Sea has always been deciding where it should take place. In his conversation with me, Dr Wu emphasised only two areas: ‘The Reed Bank area, which the Philippines claims, and the Vanguard Bank where Vietnamese claim they exercise jurisdiction. So, from China's perspective, the whole Spratly area could be possible for joint development. Some foreign scholars even suggested that the Paracels or the Scarborough Shoal area would be another case for joint development.’ Both Reed Bank and Vanguard Bank have been surveyed recently and both are thought to hold viable oil or gas fields but both are long distances from China and neither the Philippines nor Vietnam appears willing to concede its sovereign rights to their resources. I asked Dr Wu whether joint development might be easier in an area north of the Spratlys that is less contested. ‘I'm not sure whether the northern part of the Spratly area is rich in oil. It is not a political problem, it is a commercial or a technical problem’ was his deadpan reply. While there may be some support for joint development in principle, the problem is that no-one is willing to take up China's offer. It takes two to tango and at present China doesn't yet have any dancing partners.

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Ernie Bower is on first-name terms with most of those who might consider taking up a Chinese offer. Bower directs the Sumitro Chair for Southeast Asian Studies at the Center for Strategic and International
Studies in Washington DC. Government officials regularly consult him on aspects of US policy, as do businesses through his private consultancy BowerGroupAsia. His work has won him honours from the king of Malaysia and the president of the Philippines and plaudits from well-placed people with direct interests in the South China Sea. The advisory board of the Sumitro Chair includes Richard Armitage, former Deputy Secretary of State, now a director of the oil company ConocoPhillips; William Cohen, former US Secretary of Defense and now head of his own defence consultancy; Hashim Djojohadikusomo, the former boss of the Indonesian oil company PT Pertamina; Admiral Timothy Keating, the former head of US Pacific Command; Melody Meyer, President of Chevron Asia-Pacific; Edward Tortorici, Vice-Chairman of First Pacific Corporation, which owns a controlling stake in Forum Energy, the company attempting to develop gas reserves on the Reed Bank; James Blackwell, an Executive Vice-President of Chevron; ‘Skip’ Boyce, President for Southeast Asia at Boeing; and George David, former Chairman of United Technologies Corporation, an aerospace contractor.

Bower talks to so many key figures that his views on resolving the South China Sea disputes probably reflect an emerging consensus in Washington policy-making circles. ‘At the core of the US understanding of what it takes to have a secure Asia-Pacific is the fact that you don't have stability and security unless China feels secure in terms of its energy, water and food,’ he says. ‘We can go around a lot of semantics but in essence there's no way to have a stable, secure Asia unless the Chinese find a way with their neighbours and with the encouragement of the United States to find a way towards joint development in the South China Sea. Eventually, that's what has to happen.’ Remarkably, the US and China find themselves agreeing on a route out of the disputes. But there is a major problem.

In parallel with Dr Wu's efforts in Haikou, Western think-tanks have also been investigating possible ways forward. The John D. and Catherine T. MacArthur Foundation's Asia Security Initiative funded a three-year study by the National Bureau of Asian Research,
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for example, and the Centre for International Law at the National University of Singapore has been exploring potential legal frameworks. All these researchers have generally come to the same conclusion. Joint development will only be possible once there is consensus on the territorial and maritime claims. We
are back at the beginning again. The irony for China is that ‘setting aside claims and pursuing joint development’ will only be possible once it has formalised its claims – the very thing that it does not wish to do because of the internal disputes that this would generate between different parts of the state bureaucracy.

The Indonesian diplomat Hasjim Djalal has lived these arguments for more than a quarter of a century. Quietly and patiently he has tried to help the different sides find common ground. He was one of the negotiators who drew up UNCLOS in the 1970s and 1980s and was also, for a time, ambassador to the United Nations. When he heard about the battle of Johnson Reef in 1988 (see Chapter 3) he understood exactly what the implications could be for Southeast Asia. ‘I felt somewhat uneasy as the South China Sea continued to gain more strategic interest in the eyes of China, the United States, Japan, ASEAN countries and even India and Russia.’
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For Djalal, it was crucial that the region should try to resolve the disputes without the involvement of outside powers. He feared that tensions and rivalry within the region, as countries competed to grab sea resources, would stymie the possibilities of economic growth.

He reached the conclusions that formal negotiations would get nowhere, even in the medium term, and that countries didn't want outsiders to try to broker a solution. Instead he saw an opportunity in UNCLOS, particularly its stipulations that countries around enclosed and semi-enclosed seas were obliged to cooperate. Djalal had been a leading member of the Fisheries Taskforce of the Pacific Economic Cooperation Council, which had succeeded in getting governments in Southeast Asia, the Pacific islands, and Pacific Latin America to work together, where previous official initiatives had failed. Then, while attending a workshop on the joint development of oil reserves in Southeast Asia in early 1989, he met Ian Townsend-Gault, a law professor at the University of British Columbia in Canada. The two men found they had reached the same conclusion: the South China Sea also needed an informal venue to nurture practical cooperation. Townsend-Gault pitched the idea to the Canadian Department of Foreign Affairs, which agreed to fund the initiative for five years.
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Towards the end of 1989 Djalal persuaded the Indonesian Foreign Minister, Ali Alatas, to send him and Townsend-Gault on a tour of embassies and ministries around ASEAN. They concluded that everyone wanted
something to be done, that an informal approach would be best and that ASEAN states should coordinate their positions before engaging others. Djalal and Townsend-Gault set themselves two aims: to manage the potential conflicts by seeking an area in which everyone could cooperate and to develop measures to build trust between the rival claimants. Indonesia had two major cards to play: it didn't claim any features in the contested zone and it had a number of luxurious hotels on tranquil beaches where delegates could dialogue in peace. The first ‘Workshop on Managing Potential Conflicts in the South China Sea’ took place shortly afterwards, in January 1990, in Bali, for delegates from the then six ASEAN countries only. The following year other countries were invited too. Informality allowed many difficult issues to be side-stepped: both China and Taiwan could take part, territorial issues could be on the agenda and policy options considered. According to Djalal, the Chinese were initially reluctant to take part because they didn't want the issues ‘regionalised’ but eventually did so.

The discussions started well. Some of the ideas even filtered directly into the formal realm with the signing of ASEAN's ‘Manila Declaration’ on the South China Sea in 1992 (which was itself a response to China's new Law on the Territorial Sea announced a few months before). That year the informal workshops agreed to form technical working groups to look at specific issues. They eventually included: resources, scientific research, environmental protection, safety of navigation and legal matters. Progress was slow but by 1995 they had approved two scientific research projects: one on sea level change and one on sharing data. Canada approved another five years of funding. But then, according to Djalal, the problems began: ‘China wanted only national institutions to do the implementation’, not regional ones. In 1998, for example, Beijing opposed an Indonesian suggestion to study hydrocarbons, a Thai plan to study fish stocks and even a plan to create a regional database on geoscience.
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In 1993 Djalal had suggested a specific area where a preliminary effort at genuine joint development might take place. The location was kept confidential to prevent negative public reactions. Most countries supported the idea, some had reservations but one ‘did not want to talk about the proposed “zone” at all’. The idea languished until Djalal submitted a revised proposal in 1998. The workshops created a ‘Study Group on Zones of Cooperation’ to try to push the idea forward. The group identified four
problems that needed to be overcome: where the development would be located, which resources would be developed, what kind of organisation would manage the development and which countries would take part. Discussions continued for three more years but nothing concrete could be achieved. Although the discussions were themselves confidence-building measures, in the end the only practical project to come out of the South China Sea Workshops was a joint expedition, in March 2002, to investigate bio-diversity, and even that took place around the undisputed Indonesian island of Anambas. By then the Canadians had decided to end their funding and the workshops slipped into inactivity.

In Djalal's eyes, this was a victory for Beijing, since China ‘seems to feel that the process has gone too far, too fast and has discussed too many topics. Therefore it seems that it would like the Workshop process to slow down.’ Looking back over the ten years of discussions about joint development, Djalal had this to say: ‘It appears that what China means by joint development is that China would like to jointly and bilaterally develop – with the other claimants concerned – the resources of the South China Sea in the area claimed by the other and China.’
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In other words, China is not interested in joint development except in other countries’ claimed EEZs.