Energy Security in the South China Sea & China’s Growing Ownership

Energy Security in the South China Sea and China’s Growing Ownership Disputes over the Oil/Gas-Rich Islands

The countries sharing coastlines with the South China Sea (SCS) have been engaged in disputes over the ownership of many small islands, particularly the Spratly and Paracel Islands for decades. The availability of oil and gas resources especially offshore ones in the islands’ proximity has been the main reason for such territorial disputes among China, Brunei, Malaysia, Taiwan, the Philippines and Vietnam.  This reality in a region with a growing energy consumption, limited indigenous resources and thus energy security concerns has pitted the mentioned countries against each other. Hence, their competition over the ownership of those islands is not something new. However, China’s disputes with Vietnam and the Philippines in 2011 taking a military/confrontational form cannot be explained only as the continuation of the unresolved ownership disputes. Rather, they are the manifestation of a new reality linked to China’s growing self-confidence as a rising superpower seeking energy security in a multi-polar world characterized with many uncertainties.

Context

China engaged itself in a low-level use of its naval assets with the Philippines and Vietnam in the vicinity of the disputed territories in the first half of 2011. On 25 February, for example, a Chinese warship fired three shots at the Filipino fishermen in a disputed region of the SCS.  China also demonstrated its resolution by sending one of its largest patrol ships to the SCS amid heightened tension over the disputed waters on 16 June. A day after, this show of force prompted a reaction in kind by the Philippines as it announced sending its biggest warship to a disputed part of the SCS.  Yet, China’s flexing of its muscles was more clearly evident in its dealing with Vietnam.  On 26 May, for example, three Chinese patrol boats halted a seismic survey being conducted by a Vietnamese ship in the Spratly waters claimed by Vietnam as part of its exclusive economic zones. Reportedly, the Chinese boats cut the ship’s cables used for the mentioned purpose. The development triggered Hanoi’s angry reaction as, on 13 June, Vietnam’s navy held live-firing exercises in an area about 40 km off central Quang Nam Province after warning other vessels to steer clear.

To this date (January 2012), China’s flexing of its muscles in the SCS have not escalated to naval battles to secure China’s control over the disputed areas. Rather, the Chinese objective seems to have been confined to deterring the regional countries from their plans to explore and eventually extract the oil and gas resources of the offshore fields to which they have laid claims unrecognized by China. The American government’s taking sides with Vietnam and the Philippines and describing its intervention in this regional matter as a priority for its foreign policy has not changed these objectives although they have provoked Beijing’s angry reactions.

Factors involved

Added to China’s historical territorial disputes with its SCS neighbours, certain factors have contributed to its mentioned military showdown.  First and foremost, China’s energy requirements are huge (2432.2 million tons of oil equivalent [mtoe] in 2010) and growing whose bulk is fossil energy despite efforts to increase the share of renewables and nuclear energy of its energy mix (7.8% in 2010).  Notwithstanding its significant domestic oil, gas and coal production (respectively, 203.0 million tons, 87.1 mtoe and 1800.4 mtoe in 2010), its consumption (respectively, 428.6 million tons, 98.1 mtoe and 1713.5 mtoe) has been growing rapidly to make it heavily dependent on imports, particularly on oil and gas. Although its coal production is larger than its consumption, China is increasingly becoming dependent on coal imports due to the low quality of some its mined coal (164.83 million tons in 2010).   The rapid depletion of China’s domestic resources while its consumption is growing will surely further increase China’s heavy dependency on fossil energy imports with political, economic, financial and military/security implications for the country.

China has therefore sought to maximise its domestic production of such energy. Developing the SCS oil/gas resources will certainly decrease its dependency on imported oil and gas while improving its energy security by expanding the share of domestically-produced oil and gas of its energy mix.  This factor is especially important given Beijing’s following concerns, which could undermine its energy security.

One is the availability concern (whether enough oil/gas will be available for China). Hence, China is concerned about the availability of Arab oil/gas (LNG) supplies given the prevailing political instability (Algeria and Egypt) and war (Iraq, Libya and Yemen) in the Arab oil/gas exporters of mainly North Africa and a fear of expansion of such situation to the major Arab oil/gas exporters of the Persian Gulf (Saudi Arabia, Kuwait, Qatar, Oman and the UAE). The on-going “Arab Spring” has made China especially concerned about its long-term secure access to the latter’s oil and LNG supplies.

China is also concerned about the availability of African oil supplies owing to the July 2011 independence of Sudan’s southern part containing about 90% of the country’s oil reserves and Nigeria’s civil war and lawlessness.

Moreover, China is concerned about the availability of Iranian oil/gas (LNG) supplies due to the expanding UN, US and EU-approved and/or unilateral sanctions on Iran, having the world’s second largest oil and gas reserves.

Finally, China is also concerned about a Western effort to control  physically the major oil/gas exporting countries taking advantage of the current situation (e.g., Libya). This development could end or limit China’s access to such suppliers.

Affordability is another Chinese concern, i.e., the unavailability of imported oil, gas and coal at affordable prices in a sustainable manner. Since the last decade, the cost of acquiring fossil energy has been rising steadily thanks to various factors, including the mentioned concerns, and instability or its potential in other energy-producing regions (e.g., Latin America), added to the growing global demand for fossil energy. It is especially evident in significant increases in oil and coal prices (e.g., oil prices per barrel jumped from $98.23 in July 2010 to $117.24 in July 2011). Briefly, all projections based on the current verifiable trends suggest that high fossil energy prices and, particularly, oil ones will last in the foreseeable future because of high demands and political uncertainties in many oil-producing countries.

China’s concerns also include the environmental one.  Accordingly, it is necessary to mitigate global warming requiring a reduction in fossil energy consumption globally, which is not happening at the needed scale despite impressive efforts in the major Asian economies (e.g., China, India, Japan and South Korea). Consequently, China will have to continue its heavy reliance on imported oil, a reality increasing its concerns about the availability and affordability of fossil fuels.

Consequences

Contributing to territorial disputes, regional competition in the SCS over access to its untapped energy resources is not surprising. Access to these resources is especially important for China given its lacking naval capabilities for securing its oil/gas supply routes to ensure the availability of imported supplies under all conceivable scenarios, particularly in the case of conflicts with the USA or as a result of the latter’s conflicts with third parties. This reality has encouraged China to seek more oil/gas imports via land routes from the exporting countries in its proximity. Such suppliers could not be easily controlled by the powers with naval assets capable of projecting their power and securing their overseas interests, especially USA and its allies, given their geographical location, China’s land-based military advantageous and the suppliers’ stake in continuing exports to China, among other factors. This factor has prompted a growing competition over the Iranian, Central Asian, Russian and Burmese oil/gas resources with political and possibly military implications for all the concerned parties.

This reality explains why China is seeking to expand its own resources by extending control over certain offshore oil/gas fields in its proximity. Thus, the SCS resources are now more attractive than they used to be. If fully controlled and developed by China, they will help this Asian power reduce its reliance on imported oil and gas. Briefly, all the mentioned factors have contributed to the stated China’s military behaviour in the SCS.

Nevertheless, another contributing factor needs to be stressed, namely China’s growing confidence as a rising superpower. Undoubtedly, its recent military showdown clearly indicated its change of attitude towards international relations and its role in global affairs, a clear shift from its conflict-aversive policy in the 1980s, 1990s and most of the previous decade.

Today, China has gained confidence as the world’s second largest economy seeking to translate its economic power into political and military ones and thus asserting itself. Consequently, the mentioned military developments in the SCS indicate that China is no longer willing to accept a subservient role in world politics. This is also quite evident in its dealings with the USA, the EU, India, Japan and Russia. Within this context, China views Asia, at least the Asia Pacific region, as its own backyard in which it feels strong enough and unchallenged to flex its muscles without a fear of intolerable reactions on the part of the regional and non-regional powers.