China's Territorial Disputes (34 page)

57    
滞
/S-CHI-93-124, 30 June 1993.

58    
Beijing Review,
“China and India Paving Way for Peace,” September 1993, vol.36, no. 38, 20-26.

59    
Beijing Report,
“Agreement between the Government of the Republic of India and the Government of the People’s Republic of China on the Maintenance of Peace and Tranquillity along the Line of Actual Control in the India-China Border Areas,” 1994, vol. 30, no. 1, 101-103.

60    Mira Sinha Battacharjea, “Indian Prime Minister’s Visit to China,”
China Report,

1994, vol. 3, no. 1, 87.

61    Gupta Shekhar, “India Redefines Its Role,”
Adelphi Paper
, 1995, no. 293.

62    Swaran Singh, Research Fellow, IDSA, “Sino-Indian CBMs: Problems and Prospects.”
http://www.idsa-india.org/an-jul-4.html
(accessed 20 January 1999).

63 John W. Garver,
Protracted Contest: Sino-/ndian Rivalry in the Twentieth century
(Seattle and London: University of Washington Press, 2001),77.

64    “China: AFP: Spokesman: ‘No Progress’ in China-India Border Talks,” FB/S-CHI-98-162,11 June 1998.

65    “China: Jiefangjun Bao Interview with Former Envoy to India Cited,” FB/S-CHI-98-147, 27 May 1998.

66    “China: AFP: Spokesman: ‘No Progress’ in China-India Border Talks,” FB/S-CHI-98-162,11 June 1998.

67    Roderick McFarquhar,
The Origins of the Cultural Revolution: The Coming of the Cataclysm 1961—1966
(Oxford: Clarendon Press, 1997), 269-274.

68    John W. Garver, “Asymmetrical Indian and Chinese Threat Perceptions,”
Journal of Strategic Studies
, December 2002, vol. 25, no. 4, 121.

69    Kuttickal, “Brothers in Trade,” 30.

70    Garver,
Protracted Contest,
106-109.

6 Beyond two-level games?

The role of subnational, national and transnational actors in the South China Sea islands dispute

Introduction

What are the implications for two-level games of China’s current territorial disputes over the Spratly, Paracel, and other low-lying coral reefs, atolls, shoals, rocks and islands in the South China Sea? Popular irredentist sentiments, bureaucratic interests, trade direction and intensity, the strategies of negotiators, the different impact of costs and benefits on sectarian interests, institutional constraints, and the possibility of domestic restructuring of state priorities dominate the discussion of the Diaoyutai/Senkaku, Zhenbao/Damansky and McMahon Line/Aksai Chin disputes. These factors will figure prominently in any serious future attempt by disputing countries to resolve their sovereignty claims over the South China Sea islands. The search for regime legitimacy, and government efforts to manage pressure for democratization in Southeast Asian countries, will also be reflected in heightened sensitivity over national security and perceived threats to the state’s territorial integrity. Furthermore, the contest for influence between China’s foreign ministry establishment and its army and navy over foreign policy making and budget allocation should be carefully watched to see how this affects China’s posture in the South China Sea. However, the South China Sea also lies astride sea-lanes of strategic importance, and its sea-bed is potentially rich in hydrocarbons. As such, it is imperative that we take into account the role of transnational actors such as foreign oil companies or multilateral confidence-building institutions, and the activities of subnational actors, in influencing the actions of state leaders or government negotiators in preventing conflicts or settling claims. Indeed, the possible peacemaking role of (“Level III”) transnational actors such as foreign multinationals and non-governmental organizations in dispute situations must be more fully examined in future studies of domestic-international interactions than has been done in the past.

A brief history of territorial claims

The PRC, Taiwan and Vietnam lay claims to all the disputed South China Sea islands; Malaysia and the Philippines claim several but not all of the Spratly

Islands, and Brunei claims one submerged reef. The PRC and Taiwan both assert the same historical claim that the South China Sea islands have been Chinese territory since ancient times, based on archaeological findings of ancient Chinese coins, pottery fragments and cooking utensils most probably left behind by Chinese fishermen to the area.
¹
However, it was only when the French colonial authorities of Vietnam asserted their presence over the islands in 1933 that the first effective administration was established over them.
²
Between 1939 and 1945, the Paracel and Spratly island groups were occupied by Japan and turned into submarine bases. After the Japanese surrender, a naval contingent from the Republic of China inspected the Paracels and the Spratlys and briefly garrisoned the largest island in the Spratly group, called Taiping or Itu Aba, before withdrawing to Taiwan on the heels of the nationalist’s defeat.
³
In any case, since 1947, a U-shaped maritime boundary line partially enclosing the South China Sea has appeared on maps produced in Taiwan and on the Chinese mainland (Figure 6.1). The Philippines’ claim to the Spratlys was based on the discovery of several islands in the archipelago by a Filipino national by the name of Tomas Cloma in 1947, on the basis of which he declared the state of “Kalayaan”
（
“Freedomland”）with himself as government leader.
⁴
Although Cloma transferred his claim to the Philippines government in 1971, already his earlier proclamation of ownership had spurred Taiwan to reoccupy Taiping Island, and the Republic of (South) Vietnam to assert its claim to the Paracels and Spratlys in 1956.
⁵
In September 1973, the South Vietnamese navy occupied several islands in both island groups, but lost the Paracels to the Chinese after a brief naval engagement in January 1974. The government of reunified Vietnam subsequently took over the South Vietnamese claims, but its position was undercut by previous North Vietnamese support for Chinese sovereignty claims in 1956 and 1958, the latter in the form of a letter sent by North Vietnamese premier Pham Van Dong to the Chinese State Council.
⁶
The more recent South China Sea claims of Malaysia in 1979 and Brunei in 2000 are based on the extension of their continental shelf and 200-mile Exclusive Economic Zone (EEZ) respectively. Malaysia’s claim overlaps Brunei’s in its entirety.

Petroleum prospecting and the involvement of multinational oil companies

The PRC’s first assertion of authority over the Spratlys came in March 1988, when its navy sank three Vietnamese transport ships and killed seventy-two Vietnamese soldiers in a brief engagement at Johnson Reef.
⁷
By then, the Spratlys were not only developing into an important fishing ground for China, Vietnam and the Philippines; test drilling on the adjacent sea-bed was yielding vast estimates of petroleum. All of the countries that currently claim ownership over the Spratlys are signatories to the Third United Nations Convention on the Law of the Sea (UNCLOS III), which permits the establishment of an Exclusive Economic Zone of 200 miles around an inhabited island. As such, demonstration of sovereignty over the islands would confer upon the claimants

Figure 6.1
The South China Sea

the legal right to control and develop the area’s energy resources, which they all need to fuel their rapid economic development. There is no question that the technology is available for deep-water drilling, although the size of the reserves and the price of crude oil must be high enough to justify the expense. There is considerable sea-bed within 1,000 meters in the Spratly vicinity; in some parts,

4,000 square miles of sea-bed lies in less than 200 meters of water.
⁸
In the mid-1990s, the Organization of Petroleum Exporting Countries (OPEC) estimated that world oil demand would grow by 6.2 million barrels per day between 1995 and 2000, of which China and the countries of the Association of South East Asian Nations (ASEAN) would account for an increase of 2.3 million barrels per day.
⁹
To regional governments and major oil companies of the world, the South China Sea thus acquired the tantalizing prospect of providing an underwater bonanza. The
China Geological Newspaper
reported in May 1989 that surveys carried out by the Chinese Ministry of Geology and Mineral Resources indicated the presence of some 130 billion barrels (bb) of crude in the vicinity of the Spratlys.
¹⁰
Estimates by foreign oil companies were invariably less optimistic.
¹¹
However, even if only one tenth of the Chinese estimate is confirmed, potential oil reserves in the disputed archipelago will still be greater than the proven reserves of 12bb for the East China Sea alone, or 9bb for the Yellow Sea and Bohai Gulf combined.
¹²
China became a net oil importer in 1993. With no new oil finds, shortfalls are conservatively projected to 938 million barrels a year in 2010.
¹³

Due to financial constraints and technological difficulties associated with oil exploration in the Spratlys, foreign investment from Western companies and joint ventures with them by China and Southeast Asian countries will be necessary for the foreseeable future. However, the participation of multinational oil companies from the United States, Japan and Europe in offshore oil exploration in the South China Sea, usually in the form of consortiums, has had the effect of internationalizing the dispute. Many of these oil companies not only have business dealings with more than one country contesting the islands; they also have close connections with their home governments. These companies would not want to get involved in a regional conflagration, and neither would their home governments, which in the event of a crisis, may be reluctantly pulled in to protect the interests of their nationals. Hence these oil multinationals are likely to establish linkages and communication channels to exert influence on both host and home governments to prevent an outbreak of hostilities, which would damage their interests and the collective interests of the oil industry. In this sense, foreign oil companies can exert a positive influence on China and the other regional claimants to adopt a more cooperative posture in order to ensure a peaceful environment conducive to foreign investment. However, it is also conceivable that they may separately call upon their host governments to back up their oil exploration contracts with force, in the event of intervention by an outside party. As oil multinationals have the influence and resources to be employed toward resolving or exacerbating any territorial dispute, their attitude and behavior toward the claims and claimants obviously matter.

In February 1992, the Chinese government enacted a law on territorial waters which stipulated by name the South China Sea island groups of Pratas, Paracel, Macclesfield Bank and Spratly, which they called Dongsha, Xisha, Zhongsha and Nansha, together with some other islands, as belonging to the PRC. Three months later, the Chinese government entered into a joint-venture agreement with Crestone, an American company, to explore for oil in a block of sea at the westernmost edge of the Spratly group. Over Vietnam’s protest that the drilling would be taking place on its continental shelf, Chinese officials reassured Crestone’s chairman that, if necessary, the Chinese government would deploy its entire navy to back up their contract with him.
¹⁴
The selection of an American company was a shrewd ploy by the Chinese to minimize the chances that Washington would move against Chinese seizure of more islands, in anticipation that its oil companies would be the main beneficiary of any offshore petroleum development projects in the region initiated by China. Also, if Washington did intervene against China, it would undercut the position of, and immeasurably increase the risks for, every American oil company prospecting in China. Involvement of foreign oil companies seems to be the preferred strategy by the Chinese to stake claims to their oil interests and sovereignty in the South China Sea. Between 1979 and 1994, more than US$3 billion in foreign funds has been invested in oil prospecting joint ventures between oil multinationals and companies under the aegis of the PRC’s China National Offshore Oil Corporation (CNOOC) in the South China Sea.
¹⁵
Between 1995 and 1996, CNOOC contracted with Chevron to explore three blocks all located between China’s island province of Hainan and the Paracels.
¹⁶
However, China is not the only country with a strategy to involve foreign oil companies in order to stake territorial claims to the disputed South China Sea islands.