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How Foreign Oil Drillers Are Helping Consolidate China’s Claims in Disputed Asian Sea

FILE - In this July 13, 2018, photo, a globe shows the islands on the South China Sea with nine-dash line claims under Chinese territory on display at a bookstore in Beijing.

Foreign oil and gas drillers invited by Asian countries with rival maritime sovereignty claims are helping advance China’s position as the region’s most powerful disputant, experts on the region say.

Oil drillers from Canada, Italy, Russia, Spain, the U.K. and the United States have all contracted with Asian countries to explore for fossil fuels under the South China Sea floor over the past 50 years. They come at the invitation of Asian gas and oil companies, which want outside partners' technical experience and help in absorbing any business losses, experts have told VOA.

Beijing is using such foreign oil contracts to shore up its dominant position in the South China Sea, where five other governments dispute its territorial claims, by hiring some foreign contractors while pressuring others to break off deals with its rivals.

Brunei, Malaysia, the Philippines, Taiwan and Vietnam dispute all or parts of China’s claims to about 90% of the 3.5 million-square-kilometer sea. Indonesia wrests with China over a tract of the sea’s southern boundary.

"If you can actually get a foreign company to bid for one of these oil and gas blocks that you put up for auction, then it legitimates your claim, because it suggests that foreign actors see your claim as secure enough that they’re willing to put money behind it,” said Gregory Poling, director of the Asia Maritime Transparency Initiative under the Washington-based Center for Strategic and International Studies.

China recently pressured Indonesia to stop energy projects in waters that Beijing contests, possibly affecting exploration by Russian commercial partner Zarubezhneft, according to media reports this month.

Bids for foreign contractors

The Chinese government-backed China National Offshore Oil Corp. has issued bids for foreign help as recently as 2019. That year, China hired Subsea7, a Luxembourg-domiciled engineering and construction company, for offshore energy work. In another recent case, CNOOC inked a deal in 2016 to bring on Canadian contractor Husky Energy for exploration in two tracts of sea.

Presence of a foreign oil or gas contractor effectively bolsters a hiring country’s maritime sovereignty claim by spotlighting and prioritizing its energy interests over those of rivals, said Stephen Nagy, senior associate professor of politics and international studies at International Christian University in Tokyo.

“They call this lawfare,” Nagy said. “You use different kinds of tactics to erode away the legal claims of another state, and China has been at least proactive at doing that.”

China uses lawfare as well by changing place names on maps, banning fish hauls in parts of the sea for part of each year and updating its Maritime Traffic Safety Law in April, analysts have said.

China’s petrochemical companies have enough experience to look for undersea gas and oil on their own, Poling said. In June, for example, Beijing’s state-run China Daily news website announced the launch of its 40-story Deep Sea No. 1 submersible oil production platform that “made China one of the few nations able to extract oil and gas with only domestically made equipment.”

The U.S. Energy Information Administration estimates that there are 11 billion barrels' worth of oil under the South China Sea and 190 trillion cubic feet of natural gas. Much of that lies under the continental shelves of the Southeast Asian maritime claimants and has not been tapped.

Running off competition

China has the world’s third-strongest armed forces and the largest in Asia, and doesn’t mind using the suggestion of action to enforce its maritime claims.

In 2018, Chinese survey ships pressured Vietnam to abandon a 2018 project with the Spanish driller Repsol at the South China Sea coral reef called Vanguard Bank.

China has also sent survey ships near Vietnam’s gas and oil projects. Beijing says some of the projects violate its maritime claim. [[]].

"The Chinese side's operations in the South China Sea waters under China's jurisdiction are lawful and there is nothing wrong with them," Chinese foreign ministry spokesman Geng Shuang was quoted saying in 2019 after Vietnam protested.

These acts, often paired with warnings from China that the contractors will face curbs on any future business in China, effectively push the foreign firms out, said Oh Ei Sun, senior fellow at the Singapore Institute of International Affairs.

“Of course, [the Chinese] are displeased,” he said. “They will say, ‘These foreign contractors or operators operate at their own risk,’ number one, and number two, ‘China may not welcome you to do business in China or do some joint ventures in China.’ ”

The number of foreign energy contractors in the South China Sea is declining as they prefer to avoid the risks brought by China’s interference, Poling said. China has protested non-Chinese drilling since the 1970s but over the past 20 years expanded its objections from key islands to the whole sea, he said.

“If that business had business relations with China, my assumption is they would get penalized in some way by the Chinese side,” Nagy said.