China’s Truman-Style Resource Quest Tests UN Law and Neighbors

When President Harry Truman’s push for oil in 1945 prompted him to claim all resources on the U.S. continental shelf, he unleashed a global race for the seas that led the United Nations to create rules for asserting territory.

Seven decades later, China is making a broader claim in its drive for resources in the South China Sea, a move that would reinterpret the UN Convention on the Law of the Sea. Last month the Philippines sought UN arbitration over China’s nine-dash map that asserts sovereignty of waters almost 800 miles away.

An unfavorable ruling for China would provide insight into whether it will heed diplomatic pressure as it pushes to keep foreign militaries from its shores and gain access to the area’s oil, gas and fish. The Philippines and Vietnam, whose combined defense budgets amount to about 4 percent of Chinese outlays, reject the nine-dash line as a basis for joint oil exploration.

“This has a much larger repercussion, which is about how will China in the coming years address disputes with neighboring countries?” said Ralf Emmers, an associate professor at Nanyang Technological University in Singapore. “That’s a very important question if you sit in Hanoi, Manila and also Tokyo.”

China has until tomorrow to appoint a member of the dispute resolution body after the Philippines selected Rudiger Wolfrum, one of 21 members of the UN-backed International Tribunal for the Law of the Sea. China’s ambassador met with Philippine officials and told them it “does not accept such a notice and has returned it,” Foreign Ministry spokesman Hong Lei told reporters in Beijing yesterday.

‘Unfounded Accusations’

“The Philippines’ act is against the consensus regarding the South China Sea reached between Asean and China,” Hong said, referring to the 10-member Association of Southeast Asian Nations. “It not only contained many legal and historical errors, but it also contained many unfounded accusations against China.”

If China doesn’t appoint someone, the Philippines can ask the tribunal’s president to pick the remaining four arbiters. Rulings are valid even if one party doesn’t cooperate.

The Philippines is “committed” to arbitration and a “friendly, peaceful and durable form of dispute settlement,” the country’s foreign affairs department said in an e-mailed statement late yesterday, adding that the five-member panel will be formed with or without China’s participation.

‘International Outlaw’

In the seven law of the sea cases that have gone for arbitration, all countries have respected the outcome even if they disagreed with the decision, said Paul S. Reichler, a lawyer with Foley Hoag LLP who has been retained by the Philippines.

“You’d have to assume that they think even in the case of an adverse judgment, their core interests are better served by compliance than becoming an international outlaw,” Reichler said. “The examples of non-compliance or non-appearance are extremely few and far between.”

China’s map, first published in the 1940s, extends hundreds of miles south to the equatorial waters off the coast of Borneo. It claims “indisputable sovereignty” over more than 100 islets, atolls and reefs that form the Paracel and Spratly Islands, and jurisdiction over the seabed and subsoil.

The Philippines and Vietnam have led opposition to the map. Under the 1982 Law of the Sea, which China ratified in 1996, a country can exploit oil, gas and other “non-living resources” on its continental shelf or an area stretching 200 nautical miles from land known as an exclusive economic zone.

‘Learning Process’

China has focused on joint development with the Philippines and Vietnam in part to avoid legal questions over which country can exploit the resources, according to Hong Nong, a deputy director at the National Institute for South China Sea Studies in Haikou, China. Beijing’s leaders are torn between ceding control to a third party and appearing afraid to defend its claims in international arbitration, she said.

“It’s a learning process, and during the learning process we might give the wrong impression to our neighboring countries because we are very big in size,” Hong said. “China wants to be a responsible stakeholder.”

China National Offshore Oil Corp. estimates the area may hold about five times more undiscovered natural gas than the country’s current proved reserves, according to the U.S. Energy Information Administration. China surpassed the U.S. as the world’s largest energy user in 2010.

Cable Cutting

China has cut the cables of survey ships working for Vietnam, chased away an exploration vessel operating off the Philippine coastline and sent its first deep-water drilling rig to the region. In June, Cnooc invited foreign oil firms to bid in areas that Vietnam already awarded to companies including Exxon Mobil Corp. and OAO Gazprom.

When state-run Vietnam Oil and Gas Group condemned the move, ministry spokesman Hong called on Vietnam to stop actions “that infringe upon China’s rights.”

The location of Cnooc’s oil blocks indicate China is relying on historic rights to back the claim rather than an exclusive economic zone or continental shelf, according to Mark Valencia, an Hawaii-based associate at the Nautilus Institute for Security and Sustainability. That would be unprecedented, much like Truman’s claim.

“That was a completely new concept in international law and many countries followed,” Valencia said. “It’s not inconceivable that China may try to declare a precedent regarding its claim to seabed resources in the South China Sea.”

Resource Rights

China exempted itself in 2006 from disputes that involve sea boundaries, historic bays, military activities or initiatives of the UN Security Council. To get around that, the Philippines argues that negotiations starting in 1995 have failed and the case involves rights to resources, freedom of navigation and whether China can declare an exclusive economic zone around certain land features.

China has made a more detailed continental shelf claim in the East China Sea, where it has sparred with Japan over disputed islands. The tension has damaged trade ties and raised concern in the U.S., which has a defense treaty with Japan.

The world’s biggest economies sparred in 2009 over the interpretation of the UN maritime law after Chinese vessels harassed a U.S. naval ship 75 miles south of Hainan Island. China said military vessels aren’t allowed in the area without permission, whereas the U.S. says ships are allowed anywhere except for territorial seas 12 nautical miles from shore.

“It’s a defining moment in terms of determining what international system we are going to have,” said Henry Bensurto, who works on maritime issues at the Philippines’ foreign affairs department. “At the very least you have now an opportunity China will have to clarify what its nine-dash line is. For a long time the world has been guessing.”

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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