As the result of China’s participation in world trade and its consequent growing demand for overseas energy and raw materials, the South China Sea has become an increasingly important resource for Beijing. China’s demand for imported energy resources is predicted to rise to 500 million tons of oil imports and over 100 billion cubic meters of natural gas by 2020. For comparison, in 2009 China imported 204 million tons of oil and just about 5 billion cubic meters of natural gas.  Because of its rapidly increasing energy consumption, China will be more actively involved in oil and gas exploration in its adjacent sea areas and in securing the oil supply routes at sea. Other claimants, of course, value this resource for the same reasons and, just as in China’s case, have seen nationalism and geostrategic interests enter their policy equations. Therefore, the South China Sea has been host to territorial disputes that are among the most contentious and volatile in the Asia-Pacific theater. Amid the intense competitions for its vast natural resources, the South China Sea’s role in regional security and stability has never been more important.

At the heart of these disputes lie the Spratly Islands–a collection of coral reefs, atolls, islets, islands, and sand bars scattered over a sea zone of some 410,000 square kilometers. This area is claimed, in whole or in part, by China, Taiwan, Vietnam, Malaysia, Brunei, and the Philippines. Although the total area of the islands does not exceed ten square kilometres, the Spratly Islands’ geostrategic and economic significance are invaluable. Linking the Pacific and Indian Oceans, the South China Sea sees passage of nearly 50 percent of global merchant traffic and 80 percent of crude oil transports en route to Japan, South Korea, and Taiwan. Securing sovereignty over the Spratly Islands equates to direct control over some of the world’s most important sea-lanes. Furthermore, the islands are set amid some of the world’s most productive fishing grounds and may prove to be rich in undersea oil and gas resources. The exact size of the deposits is not yet known, but according to a frequently cited estimate by China’s Geology and Mineral Resources Ministry, the region around the Spratly Islands holds oil and natural gas reserves of approximately 17.7 billion tons. If this figure is correct, the area would form the fourth largest reserve bed in the world. While most of the reserves are currently not exploitable due to their position beneath the oceanic crust in sedimentary beds, few doubt that the necessary technology will be available in the near future. 

The dispute is symptomatic for regional security and order in two ways. First, the Chinese ‘win-win’ rhetoric, which emphasizes the mutual benefit of Beijing’s economic and political relations with other states, is mere window dressing when its core national interests are at stake. Second, the sovereignty conflict shows the fallacy of multilateralism rhetoric in China-Southeast Asia relations. Contrary to a commonly held view, attempts by the ASEAN (Association of Southeast Asian Nations) to provide an effective multilateral framework for conflict management have not resulted in a de-escalation of tensions or indeed moved the dispute closer to a sustainable solution. 

Following the oil crisis in the early 1970s, discovery of crude oil in the Spratly Islands soon transformed the area into one of the hotly contested among its claimants. When German merchants first mapped and surveyed the Spratly Islands in the early twentieth century, they found no signs of human habitation. Today, military forces from Vietnam, China, Taiwan, Malaysia, and the Philippines occupy about 45 of the islands. Brunei has claimed an Exclusive Economic Zone in the south-eastern part of the region without maintaining a military presence. The dispute is inevitably linked to China’s rise and its military ambitions in the Asia-Pacific region. In recent years, the Chinese navy has intensified its patrols throughout the area and has shown an increasing readiness and willingness to confront other nations for control within the contested island chains. 

The dispute has its roots in the early twentieth century when Chinese authorities began to assert Chinese sovereignty over the Paracel Islands in the South China Sea. This triggered protest by the Vietnamese court at Hue, which had established its control over the islands well before the French conquests of Vietnam. In the 1930s, while China began to publish maps declaring its territorial claims in the South China Sea, French authorities in Indochina also began to set up weather stations on and send garrisons to the Paracel and Spratly Islands.

The dispute gained prominence in 1978, when the Philippines set out its EEZ (Exclusive Economic Zone), formally including the island Kalayaan in the Spratlys. An EEZ extends to a distance of 200 nautical miles (370 km) beyond a coastal state’s 12-mile territorial sea, and grants sovereign rights over the natural resources and exploitation in the zone, while preserving the freedom of navigation. Several coastal states had claimed EEZs since the 1940s, but it was not until 1982 that the third UNCLOS (United Nations Convention on the Law of the Sea) codified the EEZ.

The controversy over the Spratly Islands remained relatively dormant until 1988, when China and Vietnam clashed at the Johnson Reef; several Vietnamese boats sank and over 70 sailors died. Since then, hostilities in the South China Sea have regularly erupted, most prominently between China and the Philippines. The Philippines considers China’s occupation of the Mischief Reef in 1995 and its repeated incursions into Scarborough Reef since 1997 as direct assaults on Philippine territory. Conflicts arose as a result. In 1996, Chinese ships engaged in a naval battle with a Philippine gunboat near the Campones Island. In 1998, the Philippine navy arrested Chinese fishermen off the Scarborough Shoal, and Vietnamese soldiers fired on a Philippine fishing boat near the Tennent (Pigeon) Reef. Since then, actors in the region have taken action to avoid military confrontation, but provocations still occur regularly. For example, in February 2011, Vietnam protested over a Chinese military drill near the Spratly Islands, claiming that the exercise was a violation of its sovereignty over the archipelago. Despite the many conflicts in the region, it is unlikely that any of the Southeast Asian claimants would be in a position to challenge China militarily if Beijing decides to use force in defence of its claim. Therefore, it can be said that the relative peace in the South China Sea is largely the result of deterrence of action from the Chinese side.

The essential problem is simple: the claimants disagree about the distribution of the Spratly Islands. While Beijing has repeatedly stated that China owns sovereignty and jurisdiction over the island and adjacent waters, other nations involved in the dispute contradict this claim, basing their responses on historical or legal arguments. At the core of the sovereignty dispute lies the so-called “nine-dash line”, as defined by nine dashes on Chinese maps. This U-shaped line indicates China’s claims to over 80 percent of the South China Sea. The original line, which was denoted by 11 dots, was first introduced by the Kuomintang government in 1947, and it included regions in the Gulf of Tonkin off of Vietnam’s northern coast. China later altered it by deleting two dashes in the Gulf of Tonkin. However, it was only in May 2009 that China issued an official note concerning the nine-dash line, formally bringing the nine-dash line map to global attention. Beijing’s declaration of the international significance of this line was a response to Malaysia and Vietnam’s joint submission to the United Nations that manifests their own claims in the South China Sea. In early 2010, Chinese officials appeared to have considered the idea of elevating China’s claims in the South China Sea to a “core” national interest, which would put it on par with Tibet and Taiwan. Beijing has never publicly confirmed this. Neither, however, has it made a formal denial despite the apprehension aroused in the region. In April 2011, the Philippines filed a formal protest in the United Nations over China’s nine-dash line. According to the contested map, the Chinese-claimed waters include several oil, natural gas, and condensate fields of the Philippines (Malampaya and Camago), Malaysia (fields offshore Sarawak), Indonesia (Natuna Islands) and Vietnam (several blocks off the Vietnamese coast).

Almost all involved governments have invoked both history and international law to justify their respective sovereignty claims. The most important provision in this regard is the 1982 UNCLOS, which came into force in 1994. It created several guidelines concerning the status of islands, the continental shelf, enclosed seas, and territorial limits; and it is most important for the legal recognition of the 200 nautical miles Exclusive Economic Zone. This area can extend to a maximum of 350 nautical miles if the natural conditions related to the continental shelf satisfy certain criteria. However, the convention also states that “rocks that cannot sustain human habitation or economic life of their own shall have no exclusive economic zone or continental shelf”. It is partly for this reason that some claimants have built permanent structures on their islands and are occupying them to the greatest extent possible. In 1999, China completed a five-story building on Mischief Reef, and the Philippines consequently viewed this as evidence of Beijing’s intentions to establish military facilities in the region. Manila, for its part, is in the process of installing radar equipment on nine of the Spratly Islands that it claims. There are also plans to upgrade an airstrip on one of the islands into a full-scale air base. Taiwan maintains a small military presence on Itu Aba, the largest of the Spratly Islands (489,600 square meters), and it built a long runway there in 2009. Both China and Vietnam have recently been building more structures, including armed bunkers, on some of the islands they occupy. Because of excellent conditions for scuba diving in the Spratly Islands, Malaysia has developed one atoll by bringing soil from the mainland and constructing a hotel and an airstrip to fly in tourists.

The application of UNCLOS is not straightforward in the case of the Spratly Islands, however, because most of the declared EEZs overlap and the Convention’s legal provisions clash with the “historical evidence” that all parties in the disputes have put forward. In 2004, for example, Vietnam issued a White Paper claiming Vietnam’s exclusive rights to sovereignty over the region in question. Vietnam has followed the Chinese example of using archaeological evidence to strengthen sovereignty claims. While UNCLOS represents an internationally recognized framework for establishing oceanic boundaries, it is not in itself a conflict resolution mechanism. The International Tribunal for the Law of the Sea in Hamburg and the International Court of Justice in Hague are the main international bodies that deal with law of the sea cases. However, the claimants are under no obligation to employ the courts. So far they have looked for alternative means of dispute management to avoid the risk of losing a judgment that would be final and binding. Outcomes are unpredictable given that all claimants have at least some convincing arguments on their side without being able to make a watertight case overall. This is particularly true for China’s claim to the Spratly Island which has no legal basis in UNCLOS. Yet Beijing holds the key to a resolution of the dispute which will either be decided through Chinese power projection or a negotiated settlement on the Chinese terms. The latter seems more likely than the former.  

To solve the disputes, the ASEAN claimants and especially China have been calling for peaceful resolution. In April 2011, Chinese President Hu Jintao called on other Asian nations to forge better cooperation regarding security matters involving territorial claims over the Spratly Islands to avoid disagreements. The Taiwanese government echoed this statement with similar remarks. Foreign Ministry spokesperson James Chang said all the countries involved should “first shelve their disputes and then seek to solve the issue peacefully.” The idea of a cooperative approach to resolving the territorial dispute is not new and has been floating for some two decades. Including all Southeast Asian states with the exception of Timor Leste, ASEAN has been at the forefront of diplomatic initiatives to approach the dispute from a multilateral angle. The ASEAN DOC (Declaration on the Conduct of Parties in the South China Sea) of 1992, signed by China in 2002, is often praised as a first step toward a peaceful settlement. On paper, the DOC commits the signatories to resolve their territorial and jurisdictional disputes by peaceful means and in accordance with universally recognized principles of international law, including UNCLOS. Although the DOC is not binding and dependent upon the goodwill of signatory states, government officials and scholarly observers alike hope that the agreement will nevertheless oblige the Southeast Asian claimants and China to avoid any activity that would damage or complicate their relations. In an optimistic scenario, the declaration constructively contributes to the avoidance of armed clashes among the parties over their conflicting claims on the sovereignty of the Spratly Islands.

One has to remain skeptical, however, that ASEAN’s multilateral approach, which is based on consensus building and voluntary commitment to the principle of non-use of force, will provide a sustained institutional framework for security management. The DOC lacks any specific provisions on how to resolve the conflict. As a group, ASEAN has neither the institutional means nor the political leverage against China to enforce peace in the South China Sea if Beijing decides to use military force to defend its territorial claims. This is not to suggest that a military escalation of the dispute is looming; on the contrary, even though all claimants use every opportunity to reinforce their claims, relations among them have been relatively peaceful and stable for many years. However, this is not mainly the result of ASEAN’s diplomatic initiatives.

Observers of Sino-Southeast Asian relations are easily blinded by political rhetoric. ASEAN has not succeeded in engaging China in a multilateral framework of regional cooperation, but Beijing has significantly strengthened its position in the region by developing a tightening network of bilateral relations with individual ASEAN members. The current strategy of maintaining peace and order in the South China Sea is based on bilateral negotiations initiated and facilitated by China. Just as in the cases of Pax Britannica and Pax Americana, the (re-)emerging Pax Sinica is characterized by the creation and enforcement of rules that favor the dominant state at the centre of the regional order. Most importantly, Vietnam signed a land border treaty with China in 1999, and another treaty on the demarcation of the Gulf of Tonkin in 2000. The Gulf of Tonkin treaty came into effect in June 2004, after more than three years of negotiations on implementation of the agreement. These treaties have narrowed the scope of territorial disputes at least between these two countries relating to the Paracel and Spratly archipelagos. In September 2004, the Philippines jumped on the Chinese bandwagon with the signing of an agreement for joint marine seismic exploration in the South China Sea for possible undersea oil. Vietnam joined the agreement in March 2005, when PetroVietnam (Vietnam Petroleum Corporation) , the PNOC (Philippines National Oil Company), and the CNOOC (China National Offshore Oil Corporation) finalized a tripartite agreement in Manila to jointly exploit oil and gas resources in the South China Sea. The agreement highlighted a new strategic setting, under which the Southeast Asian claimants compete for the most favorable bilateral or multilateral agreements with China.

China is strengthening its naval power, partly because it is concerned that any disruption to energy shipments through the major sea lanes of communication would act as a brake on the nation’s economic development. In April 2006, the Chinese navy began its first-ever patrols with a foreign ally by sending ships to patrol with Vietnamese warships in the Gulf of Tonkin. According to the Chinese Ministry of National Defense, the joint patrols were intended to strengthen cooperation and maintain security of fishing fleets and oil exploration.  Furthermore, in the wake of an apparent pirate attack on a Chinese fishing vessel in the Spratly region in 2006, China, the Philippines, and Vietnam announced plans to upgrade security cooperation in the region to address the issues of piracy, smuggling, and transnational crimes. This diplomacy takes place outside the ASEAN framework and, is a visible indication of a joint effort to stable the region and minimize conflicts. In April 2010, the South China Morning Post quoted a “veteran regional diplomat” as saying, “China has very cleverly got every ASEAN country thinking first of its own relationship with Beijing”. The same article reported that Beijing had stressed “both publicly and privately that disputes should be solved bilaterally between China and individual claimant countries rather than through ‘arguments’ at the Association of Southeast Asian Nations— a move that ... effectively strengthened Beijing's position given its emerging economic and military power”. As the 2010 chair of ASEAN, Vietnam tried fruitlessly to make the conflicts in the South China Sea the central agenda item of ASEAN meetings. Although they had issued a declared objective of reaching a legally binding code of conduct between ASEAN and China on the South China Sea, the approach has not gone beyond rhetoric. According to a high-ranking Vietnamese representative, meetings by ASEAN always yield great optimism about the Spratly Islands conflict. However, ASEAN proceedings with China are often left with China directing discussion and setting the tone. With no effective, unified ASEAN position towards the role of China in the Spratly conflict, China is in the driver’s seat directing the way, and it has based its approach on strategic positioning and bargaining. By controlling ASEAN discussions, China has succeeded in prohibiting bilateral discussions with the other claimants.

However, the dynamics of China-ASEAN interactions changed, when in 2010 the US administration declared for the first time an interest in the dispute and took up the side of the ASEAN. In July, the US Secretary of State Hillary Clinton and Chinese Foreign Minister Yang Jiechi attended the ARF (ASEAN Regional Forum), which is a security-focused dialogue mechanism of 27 member states. China allegedly exerted pressure to try to keep the South China Sea off the agenda, but Clinton addressed the matter at the urging of the host Vietnam and other ASEAN members. She declared the United States’ national interest in seeing a resolution of the rival claims and its support for a collaborative diplomatic process by all claimants for resolving the various territorial disputes without coercion. Beijing was outraged by Clinton’s remarks as it is strategically opposed to a “collaborative” settlement with ASEAN members. Yang went so far as to call Clinton's remarks “an attack on China”. In January 2011, US State Department Assistant Secretary for Asia and Pacific Affairs Kurt M. Campbell confirmed the United States’ “strategic interest” in the South China Sea and also reemphasised the key role of ASEAN in resolving the dispute. The Obama Administration also clarified that, while it was not taking sides on the claims to sovereignty over the islands in the South China Sea, it did have concerns about claims to “territorial waters” or any maritime zones that were not consistent with the Law of the Sea Convention.  

The Southeast Asian claimants have welcomed the US involvement in multilateral deliberations on the Spratly Island dispute, as it increased the international visibility of the issue and seemingly strengthened ASEAN’s position toward China. The overall structural setting of the dispute, however, remains unchanged. As a conflict over resources and geostrategic influence, the dispute over the Spratly Islands is essentially a zero sum game that does not provide much scope for collaborative solutions and win-win scenarios. As Stein Tønnesson, who is an eminent expert on Asian security, has correctly put it, “why should we expect China, Malaysia, Vietnam or the Philippines to become better friends if they ‘jointly’ discover an oilfield that one of them, with good basis in UNCLOS, considers to be part of its continental shelf? The opposite seems more likely.” At the same time, none of the parties is interested in military confrontation as any such action could easily escalate and result in a major disruption of international trade and commerce, drawing other powers into such a conflict. The most likely scenario is a continuation of the status quo: the parties to the dispute implicitly accept the existence of conflicting claims and, to satisfy domestic audiences without provoking escalation, occasionally present their respective cases in justification of these claims in a low level and non-threatening manner. While hiding behind the diplomatic façade of ASEAN, the Southeast Asian claimants de facto recognize Chinese leadership and Beijing’s quasi-hegemonic position in the South China Sea in return for bilateral deals that allow them to participate in resource exploration and get a share in the heated race for energy supplies.