Spratly Islands - What Is China Really Up To?

The past several weeks have been a very interesting for countries with claims on the Spratly Islands and China. First there were the markers, harassment of Vietnamese and Philippine oil exploration ships then the intrusion fighter jets into Philippine air space coinciding with the visit of the Chinese Defense Minister to Manila. And finally, the patrols by the its largest maritime vessel to the Spratly Islands.

Map of Spratly Islands (Photo from www.cia.gov)

We've all read the news about Chinese incursions into Vietnamese and Philippine-claimed areas in the Spratlys and as of today, all three countries plus Malaysia are sending armed vessels to protect their own pieces of real estate in those islands. These actions are raising tensions in the part of the world even drawing statements from senior US officials who raised concerns on the possibility of armed confrontations if the matter isn't resolved peacefully.

We all know all the rival claimants wants to get their piece of the (supposed) oil and gas action in those islands but it is only China that has been very aggressive and acting quite smug lately about their intentions in the area with PROC's Ambassador Liu Jinchao to the Philippines telling everyone not to explore for oil in the area without their permission. This is not the action and statement one would expect from a cosignatory of the 2002 Code of Conduct governing on how rival claimants should behave to prevent any violence. 

What's the rush?

This begs us the question then, why is China suddenly very interested and raising their naval activity in the Spratlys at this time?  Why the rush? Why rock the boat when most countries who have claims over the area are abiding by the 2002 Code of conduct? 

One big clue to answer these questions was provided recently by the Chinese news agency Xinhua in a news report dated May 23, where it reported the delivery of a 3,000-meter deepwater jumbo oil drilling platform to the China National Offshore Oil Corp. (CNOOC), China's largest offshore oil producer as it's latest step to seek more energy from the ocean.

According to the report and I quote:

CNOCC 981 Offshore Oil Rig (photo from Xinhua.com)

It took 6 billion yuan (923 million U.S. dollars) of investment and more than three years for China State Shipbuilding Corp. (CSSC), the contractor, to build the CNOOC 981 rig for the offshore oil giant.

"It will also help achieve the goal set by our national strategic plan," said Zhang, former head of China's National Energy Administration.

China relies on imports for more than half of its oil consumption, so it's eager to diversify its energy sources on land and through deepwater drilling to fuel its robust economic growth.

According to CNOOC, the rig will be installed in waters of the South China Sea and begin oil and gas prospecting in July.

The South China Sea is one of the most important natural gas and oil production bases for CNOOC, which produced more than 50 million tonnes of oil equivalent in China's marine areas last year.

CNOOC plans to invest 200 billion yuan and drill 800 deepwater wells and raise its deepwater oil and gas output to 500 million oil equivalent by 2020.

China imported 84.96 million tonnes of crude oil in the first four months this year, up 11.5 percent from a year earlier, while imports of refined oil products rose 18.6 percent year-on-year to 14.25 million tonnes in the period, according to government statistics."

So there it is. It seems the PROC is hell bent on extracting oil from the South China Sea (with 800 more wells to build!) to strengthen its energy security given its economy's insatiable appetite for oil and other energy sources. So far, the only place in the South China Sea (or the West Philippines Sea according to Manila) with real potential for energy reserves is in...you guessed it, the Spratly Islands. 

Not that we blame them. Of course, any county with needs like China should do what it can to keep its economic machines running and well-lubricated.

Political and military needs

It is not all economics too. There are political hence, military considerations as well. Even if we assume that China can get all the cheap oil (quite unlikely) it needs from its usual sources, namely the Middle East, such an arrangement is inconvenient, to say the least, for an preeminent economic powerhouse. 

China knows that it cannot forever stay dependent on Arab oil as the it will put them on a position to be always dependent on the U.S. Navy to keep the sea lanes in the Persian Gulf, where most of its oil supplies flow from, to its own shores open and safe. To rely on a potential rival to keep the flow of your economic liefblood is doesn't make strategic sense, quite too humiliating and simply not in the interest of a rising superpower.

US Navy aircraft carrier USS Enterprise patrolling the Persian Gulf

You can imagine if some kind of armed conflict suddenly flares up between the U.S. and China, all the U.S. Navy has to do is to clamp up the flow of energy supplies from the Persian Gulf  (where China doesn't have a naval presence) and you grind to halt the second largest economy in the world. That situation is unacceptable to the party bosses of the PROC.

No shooting war unless...

Energy security is the reason for urgency on the part of China to go full steam and exploit resources in an area that they can easily defend & exert large influence and that area is the South China Sea, most notably the Spratly Islands.

Sounds reasonable to you, doesn't it? 

However, there's just one small problem. In order to secure and exploit the needed oil and gas reserves in the Spratly and nearby Paracele Islands, China has to take control of the entire region and that means dealing early on with other claimant countries to these territories.

At the end of the day, I think what China is really after --- is oil and other energy resources to ensure the expansion of its economy. The use of naval warships and intrusion by fighter jets are part of the game to secure great leverage for China when she sits down with the other claimants and get into a join-venture that gives her the lion's share of the profits and decision-making.


By flexing its military might (yes, bullying) early on, Beijing is sending a signal to the rest of the claimants that peaceful means (meaning: our terms of the deal) is way better than taking them on in the field of armed conflict. It is essentially saying, better do business with us or we do it the rough way.

Now if the claimants don't want to do business according to China's terms then things can get quite nasty unless the UN steps in.

What do you think? Please leave a comment.