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Closer China Ties Seen Pressuring Brunei on Sensitive Maritime Claims

The flags of member nations of the Association of Southeast Asian Nations (ASEAN) are pictured in Bandar Seri Begawan, April 24, 2013.
The flags of member nations of the Association of Southeast Asian Nations (ASEAN) are pictured in Bandar Seri Begawan, April 24, 2013.

Closer business ties with Beijing could lead tiny, economically strapped Brunei to open a potentially oil-rich tract of sea to Chinese exploration despite competing sovereignty claims, experts say.

The two countries contest rights to a rectangular tract of the South China Sea extending northwest from the island of Borneo. But ties have improved while the Bruneian economy slips because of declining world oil prices and diminishing supplies. Oil and gas make up 60 percent of Brunei’s economy.

China is propping up that economy now with investments that will make it easier to tap, process and transport fossil fuels, experts say. Economic concerns will take "priority" over political issues including sovereignty, said Jonathan Spangler, director of the South China Sea Think Tank in Taipei.

"I think that China has not so much been using like an aggressive approach with Brunei, but just using economic incentives," Spangler said. "I don’t know if it will even need to tell Brunei what to do about its maritime claims."

As recent signs of closer ties, Chinese contractors built a 2,680-meter-long sea bridge that’s due to open this month. China’s Hengyi Petrochemicals Co. offered $79 million worth of bonds last month on a Chinese stock exchange to fund a petrochemical plant in Brunei.

Chinese pressure

Heads of state from Brunei and China said in September the Southeast Asian country would get more play on Beijing’s Belt and Road, a $900 billion initiative calling for new Chinese-funded infrastructure and stronger trade routes in 65 Eurasian countries.

China has invested roughly $4.1 billion altogether in Brunei. Still, the Bruneian economy sank 2.5% in 2016 and the International Monetary Fund forecast it would fall again last year on global fuel prices that have gone weaker since 2015.

Growing economic dependence on China could compel Brunei to soften its maritime claim, said Alan Chong, associate professor at the S. Rajaratnam School of International Studies in Singapore.

"Every one of the claimants on the Belt and Road admits some concessions," Chong said.

For China to push Brunei away from its claim, he said, "at the end of the day they have to sell the Bruneians something so significant that the Bruneians will be prepared to do so.”

Joint oil drilling

China may someday propose joint oil and gas exploration with Brunei in waters they both claim, experts forecast. China is talking now with the Philippines, another eager recipient of Chinese investment, about similar projects despite their own maritime sovereignty dispute.

A Chinese joint venture led by the company that floated bonds last month announced in March 2017 it would work toward a $3.445 billion oil refinery in Brunei, Beijing’s state-run China Daily news website said.

Investment officials in Brunei declined to give information for this report about Chinese projects in the well-off country of about 430,000 people.

Brunei might use its claim to the resource-rich Louisa Reef in its contested maritime tract to to keep Chinese investment coming, said Fabrizio Bozzato, a Taiwan Strategy Research Association fellow specializing in East Asia. Access to the Bruneian claim would be something like a bargaining chip with Beijing, he said.

Part of Brunei’s steady supply of offshore oil over the past 80 years comes from around Louisa Reef, which is claimed also by China and Vietnam.

Brunei has 1.5 billion barrels of crude oil reserves and 15 trillion cubic feet of natural gas beneath the seabed, according to the U.S. Energy Information Administration.

"So, China keeps the investment tap open," Bozzato said. "For these reasons it will be severely counterproductive for Brunei to renounce its claim, because doing so would equate to nullify its leverage vis a vis China, so what Brunei is likely to do is keeping quiet, bend over backwards, keep its claim heavily sedated, side openly with China."

Quiet claimant

Brunei is now the quietest of six governments that compete for sovereignty over parts of the South China Sea, Bozzato added. It’s the only one of six South China Sea claimants without a military presence in the disputed waters.

Malaysia, the Philippines, Taiwan and Vietnam also vie for sovereignty over the 3.5 million-square-kilometer South China Sea. China, Malaysia, the Philippines and Vietnam have all explored before for undersea gas and oil.

China, backed by Asia’s strongest armed forces, has upset the others by building up small islets for military use and passing coast guard ships through disputed waters.

Beijing may later use its ties with Brunei to win favor with the 10-member Association of Southeast Asian Nations, Spangler said. That bloc includes Brunei as well as members such as Vietnam that resent Beijing’s maritime expansion. China has tapped Cambodia, Laos and the Philippines for similar support before.

"If you can control one of those members from the outside, then you can control the entire group," he said.