The Japan-China Oil Slick

When China and Japan began negotiations months ago over billions of dollars' worth of oil and gas fields along their disputed sea border, it seemed a positive step for Asia's two biggest economies. On the agenda were plans to settle ownership of the fields and discuss joint energy development. But the talks stalled in early October. Instead, a new chapter in the increasingly ugly rivalry between Japan and China could start soon.

At the center of the dispute is the boundary between Japan and China, an imaginary line that runs through the narrow East China Sea. The two countries have haggled over the exact shape of the line dividing them for years. Four oil and gas fields were discovered and first mapped in the late 1980s. Japanese geologists think the fields may hold some 7 trillion cubic feet of natural gas and close to 100 billion barrels of oil. Today, in an energy-starved age, that's a huge prize, especially for Japan, which has no oil of its own, and for China, which has based much of its recent diplomacy on the quest for secure energy. According to Central Intelligence Agency stats, if the estimates are correct, the fields hold more oil than either Japan or China would consume in 50 years, and more gas than Japan could use in 80 years and China in 240.

Line in the Water

With so much at stake, negotiations had deadlocked over the two sides' differing views of where to draw the boundary and which country should own the energy reserves. Then, as both nations prepared to resume discussions in Beijing in late October, the Chinese backed out. The apparent reason was Prime Minister Junichiro Koizumi's visit to Tokyo's Yasukuni Shrine, which honors 2.5 million Japanese war dead -- including soldiers who had committed atrocities in China.

Koizumi's action was obviously provocative, and a backlash was to be expected. But the Chinese also want to show they can play tough when it comes to the vital question of who will control the oil and gas fields. Already, there's evidence that China is test-drilling on its own at the field known as Chunxiao in Chinese and Shirakaba in Japanese. China has said it has begun exploration, and has made clear that it will never accept Japan's proposal to draw a median line between the coasts of Japan and China. The Chinese platform is technically on its own side, to the west of where that line would lie. But Japan says it fears gas reserves on its side will be tapped by China's drilling since surveys show the deposits might straddle the line.

Now the Japanese want to riposte. For nearly four decades, Tokyo had shelved requests from companies for drilling rights along the sea border for fear of rousing China's ire. But Japan has now approved the first such license, for Teikoku Oil, prompting Beijing to accuse Tokyo of "provocation." China has since flexed its military muscle. Tokyo has reported the presence of Chinese warships near China's oil and gas platform twice in the past seven weeks. The Japanese have also detected Chinese intelligence-gathering aircraft and naval submarines near the fields, which the Chinese have called routine exercises of a reserve naval squadron patrolling the East China Sea. "China brandishes its military because it knows Japan and the U.S. are watching," says Kentaro Serita, a professor of international maritime law at Aichi Gakuin University. "It can easily get Japan's attention."

Safe to Drill?

Skeptical that China is willing to share the undersea resources, Japanese lawmakers now seem to be girding for a showdown. The ruling Liberal Democratic Party is drawing up legislation to let the Coast Guard protect civilian workers of Teikoku Oil, which says it won't start test drilling until after the government offers specific security assurances. "It's hard to predict what China might do. It might send its military in a show of gunboat diplomacy...leading to a conflict," says Keizo Takemi, a veteran LDP lawmaker who has argued in favor of new legislation. An all-out war is highly unlikely. But even an accidental exchange of fire would trigger an extended crisis in Sino-Japanese relations.

Some in Japan wonder whether the fight over the fields is really worth the trouble. Transporting the gas back to Japan presents a tricky technical issue, and the risk of a clash on the high seas might scare off any Japanese energy companies interested in bidding for the business. Finally, the fields are 250-300 miles north of another potential flashpoint, Taiwan. Risky business indeed. But Tokyo, in its newfound boldness, seems ready to undertake it.

By Kenji Hall, with Hiroko Tashiro, in Tokyo, and with Dexter Roberts in Beijing

Edited by Rose Brady

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