US clears the way for stronger South China Sea pushback

The US has explicitly rejected China's maritime claims in the South China Sea for the first time, giving Beijing's southeast Asian rivals an opportunity to push back harder against Chinese attempts to control the region's oil and gas reserves. Whether they choose to take it will be a test of how much China has managed to erode US influence in the region.

Washington will no longer take a neutral stance in disputes between China and its neighbours over offshore reserves. "We are making clear: Beijing's claims to offshore resources across most of the South China Sea are completely unlawful, as is its campaign of bullying to control them," US secretary of state Mike Pompeo said on 14 July.

Formally, the US is aligning its position with a 2016 arbitration ruling under the UN Convention on the Law of the Sea (Unclos) that rejected many of China's expansive claims to the South China Sea. It is not taking sides in territorial disputes over islands, such as the Spratly and Paracel chains, that are claimed by as many as seven countries in the region. Instead, Washington will side against China's maritime claims to resources such as oil and gas in disputed areas.

"We are no longer silent on the maritime aspect," assistant secretary of state David Stilwell said this week. "When a drilling rig is planted in Malaysian, Vietnamese, Philippines waters, we can make a positive statement… pointing out the difference between Chinese claims and the international law enables others to stand up for their own interests and rights."

But it is far from clear that other countries will be prepared to bear the costs of doing so. Beijing's relations with its main rival South China Sea claimants — Vietnam, Malaysia, the Philippines and Indonesia — are complex, but all four count China as their biggest trading partner. Only the Philippines has a formal defense treaty with Washington, while China's rapidly expanding naval strength dwarfs its rivals' combined forces.

And if China's policy is to discourage its rivals from developing hydrocarbon reserves in disputed areas, as Washington claims, it is one that has enjoyed some success in recent years.

Drilling down

Clashes between Vietnamese and Chinese vessels over oil and gas reserves in 2014 and again last year have discouraged investment in Vietnam's offshore sector. Spain's Repsol halted an exploratory drilling programme in disputed areas in 2017 and last month sold off its stakes in the blocks. US offshore contractor Noble this month said a contract to employ a drilling rig in disputed waters off Vietnam has been cancelled.

The pullouts have dealt a blow to energy security in Vietnam, which needs to develop its offshore gas reserves in particular to meet rising demand. Hanoi has made some recent moves to push back against China, including filing diplomatic protest notes to the UN, but its ruling communist party is deeply split over how closely to ally with Beijing.

Risks are also rising for companies operating in Malaysian waters, after Chinese coast guard vessels conducted heavy patrols in Shell's block-308 off Borneo last year. Malaysia has traditionally taken a soft line against China, amid a surge in Chinese investment and political instability.

The political situation is even more complicated in the Philippines, which brought the 2016 Unclos case against China that Washington is citing as the basis for its new stance. The country's unpredictable president Rodrigo Duterte, who came to power just before the judgement was made, has consistently declined to enforce the ruling and has called into question the value of the country's US alliance. Drilling has stalled at the Reed bank in the Spratly islands, in waters also claimed by China, while Manila has even hinted it may invite China's state-run CNOOC to invest in the area.

Asean stands back

The lack of a united front against China's claims has also been reflected in the region's main multilateral group, the Association of Southeast Asian Nations (Asean), which has been engaged in lengthy and inconclusive talks with Beijing over a code of conduct for the South China Sea. There have been signs of a stronger stance emerging this year under Vietnam's chairmanship, with Asean for the first time committing to Unclos as the basis for determining maritime rights — undercutting China's insistence on a negotiated deal. A move by Malaysia to assert the limits of its continental shelf late last year sparked a flurry of diplomatic correspondence, with Vietnam and the Philippines rejecting China's position.

But the diplomatic moves, and the tougher US rhetoric, run up against the facts China has created on the ground through its creation of military facilities on artificial islands in the sea and its success in deterring exploration in the waters.

This week's US statement "violates and distorts international law, deliberately stokes territorial and maritime disputes, and undermines regional peace and stability," China's foreign ministry says. How China will react remains unclear. Should it face tougher pushback, Beijing could employ the same pressure on trade that it has used previously with countries including Australia and Japan — potentially threatening exports of Indonesian coal, Malaysian LNG and nickel ore from the Philippines, among other products.

Long-term plan

Rather than a major change of policy, the new US position is an opening gambit in a potentially significant, long-term effort to impose costs on China and rally support for Washington's partners, according to US think-tank the Center for Strategic and International Studies.

"The next time a China Coast Guard ship plays chicken with an oil rig off Vietnam or a flotilla of Chinese fishing boats appears in Indonesian waters, the US will likely speak up more forcefully to decry the illegal action," according to Gregory Poling, director of the CSIS' Asia Maritime Transparency Initiative.

"Where I sit in the diplomatic world, words are powerful," the state department's Stilwell says. What is unclear is whether they will be powerful enough to force a rethink in Beijing. The rise in tensions comes as the typhoon season takes hold in the South China Sea, scaling back drilling activity and reducing the risk of any clashes in the coming months.

That may give all sides some time to consider their next move. But the combination of an increasingly assertive China under president Xi Jinping, doubts over the US commitment to Asia under the ‘America First' policies of President Donald Trump, and divisions among southeast Asian countries that are increasingly reliant on Chinese demand to offset a global economic slump, suggests choppy waters lie ahead.

By Kevin Foster