War of Words With China Intensifies Over South China Sea

 | Aug 07, 2017 | 9:00 AM EDT
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The South China Sea is the top-rated rankle among the ranks of Southeast Asian nations. So what those countries say about the heated territorial disputes in the sea, with its $5 trillion in oil and gas reserves, is worth watching. 

Southeast Asian leaders called for the countries involved to avoid militarization and exercise self-restraint over disputes, in an announcement handed down late on Sunday. No real surprise there.

But the statement also, and controversially, "took note of the concerns expressed" by Southeast Asian leaders "on the land reclamations and activities in the area, which have eroded trust and confidence, increased tensions and may undermine peace, security and stability in the region." 

Sunday's announcement stepped up the intensity of the language in a communiqué from ASEAN, the Association of South East Asian nations, which celebrates the 50th anniversary of its founding this year. Its leaders met this weekend in Manila.

China's increasing belligerence over the sea is the subtext beneath the ASEAN statement. Beijing has sought to suppress mention by ASEAN of its island-building. China's allies in the association succeeded in watering down the language in ASEAN's resolutions when the leaders last met, in Laos last year.

China has carved out seven islands in the South China Sea from former reefs through land reclamation, churning up coral to create concrete as a base for construction. Three of the reefs now have missile batteries, radar installations and runways for planes.

Vietnam has been the main thorn in China's side within ASEAN on the topic. It has pushed for ASEAN to bring in a "legally binding" set of rules governing the sea, with a dispute-resolution mechanism rather than on-the-fly negotiations. ASEAN on Sunday stepped short of that.

ASEAN is working, incredibly slowly, toward an effective Code of Conduct over the South China Sea. "Senior officials" from ASEAN will attempt to justify their lucrative jobs by working on that now. No word when they'll ever get that done, though.

The Philippines, another loud voice on the topic, also hopes to see a "substantive and effective" code on the sea, according to Robespierre Bolivar, the wonderfully-named spokesman for the Philippines foreign-affairs department. The Philippines has also advocated making the code legally binding.

Vietnam and the Philippines both have territorial disputes with China over the South China Sea, as do Brunei, Malaysia and Taiwan. China, based on its examination of the historical use of the sea by Chinese fishermen, claims almost all of the sea, right up to the coast of the other countries.

Sunday's statement "warmly welcomed the improving cooperation between ASEAN and China," which has sought to tighten ties with Southeast Asia. Its proposed trade pact with ASEAN gained weight this year, when the United States withdrew from the Trans-Pacific Partnership, which does not include China but does include Brunei, Malaysia, Singapore and Vietnam.

Any code of conduct would build on the 15-year-old Declaration on the Conduct of Parties in the South China Sea, which ASEAN's members signed in 2002. That already stated that signing nations are "refraining from action of inhabiting" the uninhabited islands, reefs, shoals and cays in the sea.

China signed that agreement alongside the 10 ASEAN members, so it's already broken its word there by building islands. It also pledged at that time, like its peers, not to resort to "threat or use of force" and to solve disputes through "friendly consultations and negotiations." Sending soldiers, seamen and military air crews onto its islands certainly looks like a threat of force;it isn't too friendly, either.

China insists that any disputes over the South China Sea should be solved one-on-one, by the countries directly involved. That would play into China's hands, since it allows it to get each ASEAN member into a locked room to beat some sense into them.

Few leaders have the guts to stand up against China in public. But ASEAN, as a bloc of 639 million people, does have that clout. I've always discounted ASEAN, which rarely makes a decision of any significance. Its members seemed permanently in commercial and political disarray. But there's no doubt that its economic importance only grows and grows. Regional stability is at a peak.

ASEAN is 25% bigger than the European Union by headcount. What's more, its members include some of the fastest-growing economies in the world, and thanks to Indonesia's emergence in particular are piquing the interest of investors. Singapore remains the financial capital of the region, as well as India to its west.

As a group the ASEAN nations, then, have the power to bring China to the negotiating table. And they have international law on their side -- a decision this time last year in the Hague ruled entirely in favor of the Philippines in its claims against China. Beijing doesn't recognize that verdict, but it lost standing internationally.

I suspect that the oil and gas beneath the sea will eventually be exploited through joint venture deals. Chinese companies such as Sinopec (SHI) and China Petroleum & Chemical  (SNP) have the international expertise and capital to do that, but may have to strike deals with the local players such as the Philippine National Oil Co.

Or will companies go it alone? State-owned China National Offshore Oil Corp., better known as CNOOC (CEO) , in 2014 sailed its own oil rig unannounced into contested waters, prompting violent anti-China protests in Hanoi.

Peaceful negotiation, forced corporate intercession, or warlike aggression. They're all potential destinations. Where will Southeast Asia and China turn next?

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