China's push for offshore energy resources has implications for Taiwan's national security and energy policy.
As China's energy demand and oil import bill soar and its domestic energy sources decline, it is increasingly casting its eye offshore--to disputed areas in the South and East China seas. This offshore drive for oil and gas is also fueled by growing concerns regarding the security of the Malacca Strait, through which 90 percent of its oil imports pass. Basically China is saying it is willing to jointly develop resources in disputed areas but if others are not interested in doing so, it will proceed unilaterally.
This has implications for Taiwan, which has the same claims to the same disputed areas. Regarding the East China Sea, Shi Hwei-yow, minister of Taiwan's Coast Guard Administration, has vowed to dispatch patrol vessels "to protect the Republic of China's maritime rights in the national economic waters and to avoid practices undermining the country's interests by other countries from taking root." This could be dangerous given that in response to Japan's announced intention to drill there, China dispatched warships to the disputed area and said the squadron was capable of "fighting during wars" and was equipped to "eliminate obstacles at sea."
The East China Sea is thought to contain up to 100 billion barrels of oil as well as 200 billion cubic meters of natural gas in the area of drilling, and it is one of the last unexplored areas with a high potential for hydrocarbon resources located near large markets. Ownership of the area is claimed by China, Japan and Taiwan based in part on their claim to the Diaoyutai Islands.
China's June 22, 2004, proposal to Japan to jointly develop any offshore gas deposits in the East China Sea presents an opportunity to put the sovereignty issue aside and improve relations between the two while harvesting the sea's petroleum resources.
The development of oil and gas in much of the area has been prevented for decades by the boundary dispute. Several companies, including the Japan Petroleum Exploration Co. and Teikoku Oil Co., have been pressing the Japanese government for many years to claim the resources in the area. But the government had until now refused to do so because it could adversely affect relations with China and its negotiations on a boundary line.
But now China is drilling near the midline between its claim and that of Japan, and Japan is concerned that China's well could take some of its resources by pumping from a gas reservoir that extends under the line. Japan has officially protested the drilling and has licensed Teikoku to drill on Japan's side of the midline. This in turn has been protested by China. In the 1970s, Taiwan also leased concessions in the area to major oil companies and Taiwan's China Petroleum Corp. (CPC) apparently still holds blocks there. In June 2005, as tension between Japan and China rose, Japan forcibly expelled Taiwanese fishermen from the area. This action drew heated protests from both Taiwan and China. Although tension in the area continues to increase, there may still be time to make a deal if the conflicting claims can be resolved or put aside.
The Diaoyutai or "Fishing Platform" Islands consist of five uninhabited islets and three barren rocks, located approximately 120 nautical miles northeast of Taiwan, 200 nautical miles east of the Chinese mainland coast, and about 200 nautical miles south west of Okinawa. Japan controls the islands, which it calls the Senkakus. Taiwan, in a bill submitted by the Cabinet to the Legislature, has defined its territory as including the Diaoyutai Islands. China has already incorporated them into its territory under its law on the territorial sea. The total maritime area that might be claimed from the islands is about 20,500 square nautical miles and includes potential oil, gas and seabed mineral deposits.
The dispute over the boundary in the area involves differing interpretations of the 1982 United Nations Convention on the Law of the Sea to which China and Japan are parties, but Taiwan is not. China holds that because the Diaoyutai Islands are small, uninhabited and unable to sustain economic life of their own, they are not entitled to generate a continental shelf or a 200-nautical-mile Exclusive Economic Zone (EEZ), conditions defined in the UN convention. According to a 1984 legal treatise written by Ma Ying-jeou, the new head of the Kuomintang, Taiwan's chief opposition party, Taiwan agrees that "the Diaoyutai Islands themselves are not entitled to have a continental shelf or EEZ, and thus have no significant legal effects on the boundary delimitation in the East China Sea."
To China and Taiwan, this means that the boundary should be at the edge of their continental shelf, which they argue is the axis of the Okinawa Trough, very near to Japanese territory. But Japan maintains that the topographical features are indeed islands and are therefore entitled to have continental shelves and EEZs. Japan therefore uses the islands as base points for its continental shelf and EEZ claims and at the extreme argues that the boundary should be the line equidistant between the Chinese and Taiwanese coasts and the islands. Japan also argues that the Okinawa Trough is a mere indentation in a continuous continental shelf and that if the Senkaku Islands are ignored, the boundary should be a line equidistant between undisputed territory on both sides ("the median line").
More recently, however, China has adopted an approach that emphasizes "equity." This approach involves Taiwan because China can enhance its claim by arguing "geographic proximity" and a greater coastline length on the East China Sea based on its claim to Taiwan. Based on precedent and current practice China's claim to the entire shelf up to the Okinawa Trough is spurious, but so is Japan's claim that the islands should generate a full continental shelf and EEZ or be used as base points for such claims. That is why joint development or agreement on a provisional boundary could be to their mutual advantage.
The basis for the conflicting claims to ownership of the islands can be summarized as follows. China argues that they were part of its territory until April 17, 1895, when they were ceded to Japan after China lost the Sino-Japanese War. The Chinese contend that the islands should have been returned under the terms of the 1951 San Francisco Treaty. Therefore, according to China, whatever happened after April 1895 cannot detract from China's long-standing claims. Taiwan claims sovereignty over the features for most of the same reasons as China. Indeed, China's claim involves Taiwan because China can enhance its claim by arguing "geographic proximity" based on its claim to Taiwan.
Japan contends that the islands did not belong to any country until January 1895, when they were incorporated into Japanese territory by a Cabinet decision. It argues further that since that time, Japan has maintained continuous and effective control of the islands, and therefore whatever happened before January 1895 cannot diminish Japan's sovereignty.
As proposed by China, the sovereignty dispute could be shelved, allowing the governments to jointly develop resources in an agreed area of overlapping maritime claims. Japan has now agreed in principle. But the problem now is to agree on the area to be jointly developed. Perhaps part of it could take the form of their joint fishing zone in the area. Or, as Japan prefers, perhaps there could be agreement on a provisional boundary midway between the two countries' coasts, ignoring the Diaoyutai and focusing joint development on an area straddling the median line. However, in China's view, based on the natural prolongation of its continental margin and its much longer coastline (including Taiwan's) on the East China Sea, joint development should be focused on an area to the east of the median line.
Taiwan and China might then cooperate with Japan in jointly developing the resources on the Japanese side of a provisional boundary line. As part of the deal, Japan might be allowed to purchase gas from China at a reduced rate in return for investment in the project. And Japan might offer technical assistance for the development of alternative energy and pollution control.
China's posture and behavior in the South China Sea is somewhat similar. On November 4, 2002, a Declaration on the Conduct of Parties in the South China Sea was agreed as a guide for the behavior of the claimants in the contested area. The Declaration was signed by all claimants (except Taiwan) in what was hailed as a breakthrough agreement decreasing tension and allaying concerns of both the claimants and foreign maritime powers like Japan and the United States which depend heavily on the safety and security of sealanes adjacent to the disputed area. (See "South China Sea Agreement: Close But No Cigar," Taipei Review, January 2003).
The 40 plus tiny atolls and their attendant ocean space, seabed and resources are claimed in whole or in part by Brunei, China, Malaysia, the Philippines, Taiwan and Vietnam. China, Taiwan and Vietnam base their claims on discovery and historical usage since "time immemorial." But if legalities ever come into play--an unlikely event--International Court of Justice precedents have shown they will favor those who can show the best evidence of continuous, effective occupation, administration and control (collectively known as "effectivities").
History, particularly ancient history, will not be a major factor, unless continuity of control, without protest, can be shown. And this is not possible for any of the claimants, at least from ancient times. Taiwan actually has one of the best legal claims to a feature since it can demonstrate continuous, effective occupation, administration and control of Taiping Island for over 50 years. While others have had troops on some features since the 1970s, Taiwan has had marines and now coastguard personnel on Taiping Island continuously since the early 1950s.
China believes the Spratly area contains considerable petroleum resources. Although the size of any deposits in the Spratlys is and will remain unknown until drilling actually occurs, traces of gas were struck on the Reed Bank in the 1970s.
China had been gearing up to explore for oil in the southern Spratlys. But such plans were strongly protested by the Philippines. So it must have come as a bit of a shock to the Philippines' fellow Association of Southeast Asian Nations (ASEAN) claimants when it was announced on September 8, 2004, that Philippine President Gloria Macapagal Arroyo and Chinese Premier Hu Jintao had reached an agreement to "study" potential oil deposits in the Spratlys. This three-year pre-exploration "study" is to be undertaken by the two nations' state energy firms. To implement the agreement, a memorandum of understanding to collect, process and analyze seismic data was signed by the Philippine National Oil Co. and the China National Offshore Oil Corp.
Politically, that the Philippines would enter such a bilateral arrangement with China is a striking volte-face. For years ASEAN struggled to maintain a united front against China's divide-and-conquer strategy. The Philippines was one of the most frequent and ardent advocates of ASEAN solidarity vis-a-vis China, particularly after China occupied and built structures on Mischief Reef, which is claimed by the Philippines.
Perhaps because of this political contradiction, the Philippines went to great lengths to emphasize to its ASEAN partners that neither drilling nor production is covered by its agreement with China, presumably because such activities could be seen as a violation of the "code of conduct." But even the "research" covered by the agreement could be interpreted as violating the code's solemn undertaking to exercise "self-restraint in the conduct of any activities that could complicate or escalate the disputes." Moreover, the Philippine-Chinese announcement stated that "any definitive agreement for further cooperation between the Philippines and China shall be subject to further discussions." This could mean that if the seismic results identify good petroleum prospects, China and the Philippines may agree to proceed to drilling. As an indication of the intentions of the parties, Philippine speaker of the house Jose de Venecia urged other claimants to revise the Declaration on the Conduct of Parties in the South China Sea to allow oil exploration in the disputed area.
The Philippine-Chinese agreement was of concern to the other claimants for several reasons. First of all, it adds weight to the claims of China and the Philippines to both the islands and the area at the expense of others. In particular, the agreement seems to legitimize China's occupation of Mischief Reef on the Philippines' legal continental shelf and also tacitly implies that both parties recognize the legitimacy of each other's claims to the area to be "researched," as well as to the nearby features.
Naturally, those claimants that were left out protested vehemently. Vietnam claimed the agreement violated the Declaration on the Conduct of Parties in the South China Sea. In response, the Philippines denied that it violated the agreement and announced that the "research" plans would be discussed with the other claimants. This left open the possibility that a multilateral arrangement to explore the area could be reached. Indeed, Vietnam soon agreed to join the joint exploration group, and in late August 2005 it was announced that a Chinese firm would explore an agreed area for the state oil companies of China, the Philippines and Vietnam.
Taiwan has a strong interest in the area. And it is well known that Taiwan has the financial and technical capability to make a significant contribution. Indeed, in the past it has even offered to finance joint development of the resources in the disputed Spratly area. Moreover, Taiwan's state-owned CPC has a standing but apparently inactive joint oil exploration agreement with China National Offshore Oil Corp. for the Taiwan Strait. (See "Oil and Sovereignty," Taipei Review, July 2002). This agreement or one patterned on it could perhaps one day be a vehicle for Taiwan's involvement in the search for oil in the Spratlys as well as the East China Sea. At the very least, Taiwan should keep a close watch on the discussions and activities in both areas, and, if possible, find a way to be included. China's aggressive offshore exploration activities may in a roundabout manner actually provide an opportunity for the involvement of Taiwan.
Mark J. Valencia is a maritime policy analyst based in Hawaii.
Copyright (c) 2006 by Mark J. Valencia.