(John Kemp is a Reuters market analyst. The views expressed are
By John Kemp
LONDON, June 6 Territorial disputes over tiny
islands and reefs in the South China Sea are poisoning relations
between China and its neighbours in Southeast Asia.
"In recent months, China has undertaken destabilising,
unilateral actions asserting its claims in the South China Sea,"
U.S. Defense Secretary Chuck Hagel told an audience in Singapore
"(China) has restricted access to Scarborough Reef, put
pressure on the long-standing Philippine presence at the Second
Thomas Shoal, begun land reclamation activities at multiple
locations, and moved an oil rig into disputed waters near the
Paracel Islands," Hagel complained at the Shangri-La Dialogue.
The defense secretary's speech drew an angry response from
China, which rebuked him for making "harsh, provocative"
comments - signalling a further deterioration in the already
strained relationship between the two countries.
According to Hagel, the United States takes no position on
territorial disputes in the South China Sea that pit China
against Vietnam, the Philippines, Malaysia and Brunei.
But Washington will oppose any attempt to use "intimidation,
coercion or the threat of force to assert those claims". It will
also oppose any attempt to restrict overflight and freedom of
Washington says it wants to uphold a "rules-based order" in
which disputes are settled through diplomacy, well-established
norms and international law.
However, all that is threatened by long-standing disputes
over the ownership of two hundred or so tiny islands, islets,
shoals and cays, reefs and rocks scattered across the area.
The various outcrops cover just a few square kilometres in
total. Many are only just above the waterline even at low tide.
But with them come claims to regulate navigation, fish, and
drill for oil and gas over much more extensive areas.
In 1974, China and South Vietnam fought a short war over one
island group. In recent years, there have been frequent and
worsening low-level clashes in the South China Sea, severely
straining relations between China and the other littoral states.
The area is strategically vital. Hagel called the South
China Sea "the beating heart of Asia-Pacific and a crossroads of
the global economy".
The South China Sea contains the world's most important
shipping lanes and sits astride supply routes essential to South
Korea and Japan as well as China.
More than half of the world's merchant shipping tonnage
passes through the Straits of Malacca, Sunda and Lombok each
year with nearly all of it continuing on through the South China
Almost a third of the world's crude oil trade and half of
its liquefied natural gas pass through the sea en route to
China, Japan and South Korea.
The South China Sea contains rich fishing grounds that have
been customarily exploited by all the coastal states.
The area is also thought to contain oil and gas deposits.
There are several large sedimentary basins, though estimates of
the amount of recoverable oil and gas they contain vary widely.
The U.S. Energy Information Administration puts proven and
probable reserves in the area at 11 billion barrels of oil and
190 trillion cubic feet of natural gas, which is small but
significant ("South China Sea", February 2013).
However, there could be another 5-22 billion barrels of oil
and 70-290 trillion cubic feet of gas waiting to be discovered,
according to the U.S. Geological Survey ("Assessment of
undiscovered oil and gas resources of Southeast Asia", 2010).
China's oil companies and government agencies have published
even higher estimates of the oil and gas likely to be found in
NINE DASH LINE
China claims sovereignty over all the islands, rocks and
reefs in the four main groups, while Vietnam, the Philippines,
Malaysia and Brunei each claim some of them.
Much of the dispute revolves around the "Nine Dash Line",
which appears on China's official maps and encompasses almost
the entire South China Sea.
The Nine Dash Line made its first appearance in official
atlases issued in 1948, though the territorial claims on which
it rests go back much further. It has been subject to only minor
modifications since then.
The number of dashes - which roughly indicate the boundary -
has varied between nine and 11 at various times and currently
stands at 10 after a new dash was added east of Taiwan in 2013.
China has included the Nine Dash Line on illustrative maps
used in disputes with the other coastal states, and it is now
used in passports issued by the People's Republic. But the exact
status of the line remains "ambiguous", according to Euan Graham
at Britain's Royal United Services Institute ("China's new map:
just another dash?" September 2013).
The latest edition of the official atlas designates the line
as a national boundary and uses identical shading to the lines
on China's land borders. Exactly what China is claiming,
however, remains somewhat mysterious, even to experts.
According to one leading Chinese maritime expert, the line
indicates the island groups over which China claims sovereignty,
rather than laying claim to the sea area itself. It is a sort of
envelope around the islands China considers to be part of its
Gao Zhiguo, China's judge on the International Tribunal for
the Law of the Sea, explains that the Nine Dash Line "has become
synonymous with a claim of sovereignty over the island groups
that always belonged to China and with an additional Chinese
claim of historical rights of fishing, navigation, and other
maritime activities (including the exploration and exploitation
of resources, mineral or otherwise) on the islands and in the
Writing in the American Journal of International Law, Gao
suggests the line may have "a residual function as potential
maritime delimitation boundaries". It was, Gao suggests, an
early attempt to define China's continental shelf ("The Nine
Dash Line in the South China Sea: History, Status and
Nonetheless, China accepts that any rights to fishing, oil
and gas extraction, exclusive economic zones, and power to
restrict navigation in the neighbouring sea stemming from
ownership of the islands are governed by the United Nations
Convention on the Law of the Sea (UNCLOS).
LAW OF THE SEA
The convention, which was opened for signature in 1982 and
entered into force in 1994, sets out detailed rules defining
territorial seas, navigation rights, exclusive economic zones,
the extent of the continental shelf and delimiting maritime
boundaries. It also contains a range of binding procedures for
China and all the states around the shores of the South
China Sea have signed UNCLOS and are bound by its provisions.
Some commentators have expressed hope that UNCLOS could be used
to settle disputes between China and its neighbours peaceably.
"Many hope that international law will impose a resolution,"
according to Elizabeth Economy and Michael Levi at the U.S.
Council on Foreign Relations. "This would, however, be a strong
departure from historical precedent," they note sceptically ("By
all means necessary: how China's resource quest is changing the
In 2009, Vietnam and Malaysia submitted a joint claim to the
continental shelf under UNCLOS. In 2013, the Philippines
requested binding arbitration in its territorial dispute with
China at the Permanent Court of Arbitration in The Hague. China
has refused to accept arbitration.
There are several problems with trying to rely on UNCLOS.
First, the dispute settlement provisions of UNCLOS may not apply
in this case.
On signing the convention, as well as on ratification, and
afterwards, countries can opt out of the binding dispute
settlement processes relating to certain sea boundary disputes
(Article 298). China exercised that opt-out in relation to
maritime boundaries in 2006.
More controversially, on ratifying the treaty in 1996, China
declared that it "reaffirms its sovereignty over all its
archipelagos and islands as listed in article 2 of the Law of
the People's Republic of China on the territorial sea and the
Second, UNCLOS deals with issues of maritime law and rights
in the seas around the islands. It cannot settle disputes about
who owns the islands themselves.
Third, unlike the later Agreement Establishing the World
Trade Organization, signed in 1994, UNCLOS lacks an effective
Finally, it is hard to see how attempts to resolve the
disputes purely through commercial and legal means can succeed
if they do not recognise the broader strategic realities, as
Economy and Levi point out.
The solution must be political and diplomatic, a position
all sides seem to recognise.
"Attempts to resolve tensions that focus purely on commerce
and law and ignore broader strategic realities may not result in
stable outcomes," according to Economy and Levi.
China's Gao reaches a similar conclusion: "China relies
heavily on its long and overwhelming history to justify its
title to territorial sovereignty and maritime jurisdiction in
the South China Sea, other claimant states repeatedly stress the
imperative of their rights under UNCLOS. Nonetheless the
solution perhaps lies somewhere in the middle."
The compromise solution is shared exploitation of the
resources. "Pending a solution acceptable to the littoral states
concerned, the parties would do well to shelve the disputes and
work toward a temporary solution involving joint development,"
UNCLOS itself encourages the use of practical, provisional
arrangements in the case of disputes.
There are precedents for shared development of resources. In
2008, China and Japan agreed to develop jointly the Chunxiao gas
fields in a disputed area of the East China Sea, though that
pact has since been derailed by the rising tensions between the
A more hopeful example is the archipelago of
Svalbard/Spitsbergen in the Arctic.
The 1920 Spitsbergen Treaty recognised Norway's sovereignty,
but granted all signatories equal access to hunting and fishing
rights on the islands and in their territorial waters, as well
as the exploitation of minerals found on the islands.
Something similar would be desirable in the South China Sea.
Sovereignty over the islands could be split or put to one side,
while the coastal states agree to joint development of fishing,
oil and gas resources.
If the solution is fairly clear, the harder question is how
to get there. In that respect, the U.S. position and Hagel's
speech have done more harm than good.
The U.S. position (no stance on sovereignty, but an
insistence on legal processes to resolve the dispute) is
particularly unhelpful since there is no real legal answer.
The defense secretary was speaking to a domestic audience
and regional allies, trying to reassure them that Washington
will stand up to what some see as bullying by China. But
singling out China for blame was unhelpful if the United States
wants to play a constructive role in resolving the dispute.
In the end, Washington will have to use its influence with
all the regional states, including its allies, to push them
towards a diplomatic and political compromise.
Coastal states must set aside the ownership question and
focus on how jointly to exploit the resources and regulate
shipping in the area peaceably, in accordance with their other
(Editing by Dale Hudson)