Oil and Water in the South China Sea

By Daniel McGroarty

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As Washington swelters and wildfires rage across the U.S. West, strategic planners and global investors are focused on a thin band of blue water thousands of miles to the east: The Strait of Hormuz - strategic choke point through which 35 percent of the world's sea-borne oil transits via vulnerable mega-tankers. Recent days have spotlighted the Strait's role in this brewing conflict, as Iran's threats about shutting Hormuz - aided by test-firings of the regime's medium-range missiles - have spiked the spot price of oil 12 percent nearly overnight. Once again in the Middle East, the dangerous interplay of national security, economics and resource access is on display.

Meanwhile, in another body of water half a world away, a longer-fused confrontation is building, but in three dimensions. The South China Sea, through which one-third of all ocean-going trade vessels pass, fuses traditional concerns about "control of the sea lanes" with the quest to control the seabed. At issue is not just surface transit and fishing rights, but seabed claims to rich oil and gas reserves. This conflict is coming to a head, as China has just announced plans to take bids from major oil and gas multinationals for nine seabed blocs, some of which are already claimed and committed by the Government of Vietnam.

Longer-term, the South China Sea scramble is not just about oil and gas. Malaysian research documents trace metals in seabed sediment ranging from manganese, iron, aluminum and copper to zinc, cadmium, chromium and lead.

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As technology evolves, expect more metals to join the list. Witness the flurry of stories about Japan's discovery of deep-sea Rare Earths and India's plans to launch deep-sea exploration for a range of rare metals: Reports that play these developments as an answer to China's current stranglehold on the critical rare earths market have it wrong; deep seabed mining is not a near-term solution to metals shortages. But in China's long game, evidence that nations are preparing to prospect for metals and stake claims for deep-water mining collides with China's own voracious hunt for resource supplies.

The South China Sea is ringside for 10 countries with competing claims for surface rights and the seabed below - Indonesia, Taiwan, Thailand, Cambodia, Singapore, Malaysia, Brunei, Vietnam, the Philippines - and of course China, which claims sovereignty over 90 percent of the South China Sea area, based on a 1947 Kuomintang map, likely the only vestige of Nationalist control the People's Republic of China is ready to recognize.

Then comes the country that makes it Oceans 11: The United States, since the demise of the Soviet Union, the only true global sea power, with formal and de facto security pacts with the Philippines and Taiwan, and an expanding web of trade relations with the eight ASEAN nations who border the South China Sea.

With so many players, the permutations of conflict are geometric. China has already warned India to abandon its plans to drill for oil off Vietnam, even as China itself pursues plans to mine in the central Indian Ocean. Vietnam has now warned China not to entertain bids for oil rights Vietnam has already committed to Exxon and Gazprom. These blocks, 100 nautical miles off the Vietnamese coast and therefore well within its 200-mile Exclusive Economic Zone (EEZ), are claimed by China. The fact that both nations, as signatories to the Law of the Sea Treaty, are bound to respect the sovereign status of the EEZ has done nothing to calm this dispute.

Small-nation anxieties about Chinese dominance are a constant undercurrent. As part of its Asia pivot, the U.S. is engaging in new discussions with the Philippines, Vietnam and Thailand - all of whom worry about Chinese influence and see the U.S. as a counterweight - on expanded ports-of-call and joint training exercises, to permanent basing rights. This week's announcement that Secretary of State Hillary Clinton will visit Vietnam is the foreign policy complement to this national security effort.

Don't look for any international mediation here, or for the International Seabed Authority to deploy an ocean fleet of sea-peacekeepers from their headquarters in Kingsport, Jamaica. This conflict will be brute blue-water strength, played out in coming years based on decisions made today over the funding and development of new U.S. Navy platforms, on the pace of China's naval spending and the regional rise of new players like the continent-nation of Australia, well attuned to the role resources play in national strength and security.

For now, as day traders and Pentagon planners have their eyes glued on the Strait of Hormuz, the Resource Wars are merely a metaphor. That could change, as the battle for control of the seas, and the riches that lie buried beneath them, emerges as the conflict that will define the wealth of nations in the 21st Century.

Daniel McGroarty, principal of Carmot Strategic Group, an issues management firm in Washington, D.C., served in senior positions in the White House and at the Department of Defense.

(AP Photo)

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