Television pictures of rioting Chinese citizens are a startling demonstration of the seemingly spontaneous civic anger over Japan’s territorial claims to five uninhabited islands and three rocks known to Japanese as the Senkaku Islands and to the Chinese as the Diaoyu Islands.
At stake in the East China Sea (and in a separate row in the South China Sea) are not the barren rocks themselves but the oil and gas that might be found under surrounding waters. Oil majors contemplating investment need a primer in international law as well as an appreciation of the historical and political background before they venture into this region.
The Spratly Archipelago and Paracel Islands in the South China Sea
The South China Sea dispute, faintly grumbling along for some thirty years, appeared to mainstream media to suddenly rise in tempo for political and economic reasons in 2009. In fact, it grew noisier for a very concrete legal reason: 13 May 2009 was the deadline for States to make claims to extend the stretch of their rights to exploit seabed for hydrocarbons under article 76(8) of the 1982 UN Convention of the Law of the Sea (“UNCLOS”).
In very broad brush terms, what needs to be understood about the UNCLOS regime to appreciate the background to these events is as follows:-
1) Standard issue for coastal states is 12 nautical miles (“nm”) of territorial water projecting from their low tide baselines, stretching out to 200 nm of an Exclusive Economic Zone (EEZ) in which they must permit some international activities – such as laying submarine cables, maritime passage and over-flight – but can bag the hydrocarbon and mineral wealth, as well as fisheries.
2) If you can lay claim to an island (naturally-formed and above water at high tide ), you get twelve miles around that and, if it can sustain habitation, you get the 200 nm EEZ around it, too (Article 121 UNCLOS).
3) If you can persuade the UN’s Commission on the Limits of the Continental Shelf (CLCS) that your continental shelf goes out beyond 200 nm into undisputed seabed, you could get some extra EEZ. If there is a dispute between states, the Commission lacks jurisdiction, and nor can it rule on Article 121 issues.
4) If States do not like what they see in submissions to the CLCS and want to beef about it, they put in to the UN Secretary General a document known by the somewhat oxymoronic French title “Note Verbale.”
5) States can opt out of binding UNCLOS dispute resolution, and China did.
6) If it is a sovereignty dispute over land, then UNCLOS is the wrong set of rules anyway; one is into customary international law and the heavy hand of history.
The UNCLOS template significantly favours Japan’s archipelagic geography over China’s continental coastline – because more islands generate more EEZs. Also UNCLOS requires states to be noisy in asserting their claims in a way that sits ill with Deng Xiaoping’s famous approach “Keep a cool head and maintain a low profile. Never take the lead – but aim to do something big.”
The states with a dog in the fight over a cluster of a hundred-odd geographic features scattered over 400,000 plus sq km of the central South China Sea are Vietnam, the Philippines, Malaysia, Brunei, China and Taiwan.
When Malaysia and Vietnam put in their continental shelf submissions in 2009, what particularly exercised world opinion as evidencing expansionist territorial ambitions of China in the resulting flurry of exchanges of Notes Verbales (which continued into 2011), was what has become known as China’s nine dash (or dot as some prefer) map, appended to one Note Verbale.
This was taken by some as implying that China (encompassing Taiwan) may claim sovereignty of the whole of the South China Seas. China has managed to maintain a suitably inscrutable ambiguity (sometimes by resort to Latin maxims) in clarifying/obfuscating what the nine dots or dashes should be taken to mean in legal Morse Code.
The Senkaku or Diaoyu Islands in the East China Sea
Japan formally annexed the islands in 1895. After the Second World War, they were administered by the US until 1972, when they were returned to Japan. Around this time oil was discovered in the region and China advanced its claim to the islands. It deployed historical arguments going back to the 15th century and used Taiwan’s separate claim to the territory by subsuming it into the ‘One China’ argument.
A striking contrast between the South China Sea and the East China Sea disputes is that the former (in which the potential for hydrocarbon producton is believed to be much greater) has not generated the political heat sparked by the latter.
The North East Asian dispute is laced with the lingering resentment of South Korea and China towards Japan as their former coloniser and wartime master.
The recent re-engagement of the USA with East Asia after a decade of obsession with the Middle East somewhat brings to mind the couple who nearly had their colour TV stolen while they were upstairs watching the jewellery.
What underlies America’s reawakening to the region is a growing concern with the massively increased economic gravitational pull of China, which has played a canny diplomatic game in ASEAN while Japan has tended to default to isolationist arrogance.
The worry then becomes whether China’s growing confidence and economic power, with the west hobbled by the depredations of its Great Recession, may lead it to greater aggression. The hope must be that Deng Xiaoping’s axiom that what China needs is stability at home and peace in the world will not be destabilised by some combination of US tub-thumping and miscalculation and resurgent Japanese militarism.
A 2010 survey by the Pew Research Centre placed China top (at 91 per cent) in a satisfaction survey of 22 diverse nations polled on their governments’ handling of the economy. Ranked bottom (at 15 per cent) was the notoriously-obedient Japanese citizenry’s satisfaction with their democratically-elected government.
One front-runner in Japanese politics, as elections loom, is Nobu Ishihara. His father Shintaro Ishihara (described in the Economist as a “crusty China-baiting nationalist”) led a campaign for the Tokyo metropolitan government to purchase the Senkakus from their private Japanese owners. The national government has intervened and disclosed that it is itself close to buying them.
A second emerging force is the populist mayor of Osaka, Toru Hashimoto, who is reinvigorating Japanese politics with the launch of the Japan Restoration Party (JRP) and wants to rewrite Japan’s pacifist constitution.
While China’s president Hu Jintao and prime minister Wen Jiabao (and their anticipated successors Xi Jinping and Li Keqiang) are not subject to any type of Western-style democracy, they do need the acclamation of their population for what pre-communist dynasties saw as the Mandate of Heaven.
Being sensitive to their people’s enduring wish to redeem the shame of Japanese domination may be equivalent in the perception of China’s leaders to the impulse to grandstand to American voters, which causes Mitt Romney and his running mate to bray about what they will do to punish China as a currency manipulator if they get elected.
The right response from Washington
A sage US president would do well to bear in mind three things.
First, do not underestimate the importance and legitimacy that China accords to history and the unity of the Han Chinese civilisation. This is why the sovereignty of Taiwan and return of Hong Kong were always non-negotiable, and why Beijing cleaves to historical arguments to support territorial claims based on ancient dominion rather than following formal laws.
Secondly, recognise the high degree of pragmatism which has allowed China to take the one country, two systems approach in Hong Kong and makes it keen to adopt the joint development approach without prejudice to territorial and sovereignty claims that can be parked indefinitely if a workable solution can be found.
Thirdly, appreciate that the Confucian argument that rejects binding dispute resolution as a disharmonious way to go is virtually bound to win in these cases, where there is no compulsory dispute resolution mechanism and the question of whose legal arguments are right is theoretical.
Faced with reasonable pragmatic alternatives, which US leader in his right mind would risk testing his military muscle as the ultimate disharmonious form of practical dispute resolution? Hopefully, neither Barack Obama nor Mitt Romney.
What business should do
On the other hand the astute chief executive of an oil and gas major should get his legal department to seek some creative advice on how to structure investments through special purpose vehicles able to take advantage of Bilateral Investment Treaties engaged by China and Japan that may give some leverage to seek compensation from an international arbitration tribunal if investments become expropriated through state action contrary to international law.
Tim Taylor
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