Pouring Oil on the East China Sea China vs. Japan
by Mark J. Valencia
International Herald Tribune 2/24/2005
URL: http://www.rigzone.com/news/article.asp?a_id=20614
Japan has begun planning for the worst. A conflict with China over rich gas deposits in the East China Sea has escalated since late January when two Chinese destroyers entered the area, which has been in dispute for decades. Japan warned China that it would defend its resources there. But conflict is not inevitable. China's June 2004 proposal to jointly develop a large gas field that straddles a boundary claimed by Japan is an opportunity to cap rising tension, and at long last harvest the resources in the disputed area.
The East China Sea is thought to contain up to 100 billion barrels of oil it is one of the last unexplored high-potential resource areas located near large markets. The development of oil and gas in much of the area has been prevented for decades by the boundary dispute. The Japanese government has refused to let companies explore and develop the resources in the area because it says that it could adversely affect relations and negotiations with China on the boundary.
But now China is drilling near the boundary claimed by Japan. Tokyo has officially protested the drilling and is now considering allowing some companies to drill on Japan's side of its claimed boundary. Just the possibility has been protested by Beijing. The current controversy has its origins in August 2003, when China agreed with four Chinese and Western oil firms on the development of gas fields in the East China Sea, and subsequently started constructing facilities to implement the agreements. Part of the dispute arises from conflicting claims to islands in the southern East China Sea. Japan, China and Taiwan all claim the Senkaku/ Diaoyu Islands. Japan controls the islands. But Taiwan has defined its territory as including the Diaoyu Islands and China has already incorporated them into its territory under its law on the territorial sea. The maritime area that might be claimed from the Islands includes potential oil, gas and mineral deposits.
The Senkaku/Diaoyu issue came to a boil in late 1996 when a Japanese group erected a lighthouse on one of the islands. Anti- Japanese demonstrations broke out in Hong Kong and Taiwan, and activists from Hong Kong and Taiwan eluded Japanese coast guard vessels to plant the flags of China and Taiwan on one of the islets. Japan and China struggled to keep the issue from escalating. But incidents continued.
Frequent Chinese "incursions" by both research and naval vessels became a serious domestic political issue in Japan and hurt relations between Tokyo and Beijing. In February 2001, the two sides agreed on a mutual prior notification system. The agreement cleverly navigated around the issue of conflicting claims and boundaries by stating that each must inform the other before entering waters near the other country if it is an area in which that country "takes interest." In April 2002, after giving proper notification, China resumed its surveys for potential oil and gas in the disputed area. However, Japan protested anew when it discovered that China had marked out concessions in three areas that are on Japan's side of what it claims should be the boundary.
China needs the oil to fuel its rapid economic growth, particularly in Shanghai and its vicinity. But so does Japan to reduce its dependence on oil from the unstable Middle East. But the conflicting claims over the territory are fueled not only by the perceived petroleum potential but also by resurgent nationalism in both countries. Indeed, the fundamental barrier to achieving a resolution of these disputes is not oil but unassuaged historical grievances and the politics of national identity. Fortunately, there are factors at work that could ameliorate this dispute. The realization that a positive China-Japan relationship is simply too important to be thwarted by these disputes may be the catalyst necessary for wise leaders to forge at least a temporary solution. And despite chilly diplomatic relations, Japanese-Chinese trade and investment increase every year. Finally, there is growing pressure in both China and Japan to proceed with development of oil and gas in the area and therefore increased motivation to reach a compromise. 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. Taiwan and China might then jointly develop the resources on the Chinese 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 in development of alternative energy and in pollution control. At the very least, all involved should be able to agree on a code of conduct, particularly regarding naval and exploration activities in the disputed area. Such an agreement, if successful, could build confidence and defuse a dangerous situation. ***
Mark Valencia was for 26 years with the East-West Center in Hawaii, where he focused on maritime policy and international relations in Asia.
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