Drivers And Risks Of China’s Pressure On Vietnam – Analysis

A concoction of regional and domestic factors is driving China’s
increased pressure on Vietnam in the South China Sea, but this strategy
entails serious risks for Beijing and, if overplayed, may backfire.
While Hanoi’s options to respond are currently limited, they may gain
potency as Beijing’s intimidation tactics galvanize support among ASEAN
and the international community.

China has been stepping up its efforts to interfere in the legitimate
and lawful maritime economic activities of neighboring coastal states,
as well as applying pressure on foreign companies to cease upstream
activities not only within its egregious and legally invalidated
nine-dash line claim, but even in adjacent waters. While in the past
Beijing could only muster objections, a more capable navy, coast guard,
and maritime militia, along with a greater military footprint in the
contested sea, now allows it to act on its displeasure.

China has upped the ante on smaller claimants and particularly on
Vietnam. This can be attributed to several factors. For one, discussions
for a proposed joint development deal between the Philippines and
China, despite remaining contentious for the former, enjoy top level
support and appear to be gaining traction. The Philippines and Vietnam
are two of the most forward leaning frontline claimants opposing China’s
excessive claims in the semi-enclosed sea—progress on a possible deal
with one surely frees up Beijing to focus on the other.

Second, Texas-based ExxonMobil, which is presently involved in the
massive Blue Whale (Ca Voi Xanh) project off central Vietnam, is nearing
a decision on whether to proceed with the investment. For a fast
growing economy with mounting energy requirements, Blue Whale is
critical and perhaps even transformational for the Southeast Asian
country. The energy that can be tapped from this project can power Hanoi
for 20 years, deliver $20 billion in revenue
to the government, create thousands of local jobs, and spur downstream
energy infrastructure development. That the company has recently been
consolidating its portfolio and disposing of assets from Norway to the
Gulf of Mexico may have emboldened Beijing to encourage a similar
divestment from Vietnam. Absent strong state support, China’s reaction
may weigh heavily on ExxonMobil’s evaluation, as it did for Repsol.
At a time of growing U.S.-China tensions, ExxonMobil’s nationality puts
it as risk, but it may also make the cushion of U.S. government backing
more likely to materialize.

Third, the pressure could also be timed to influence the expected
trip by Vietnam’s Communist Party chief and president Nguyen Phu Trong
to Washington later this year. Considering its potential contribution to
the country’s energy security, national economy, and continued exercise
of maritime economic rights on its continental shelf, the Blue Whale
project will likely be on the agenda. It has also been said that
officials from state-owned PetroVietnam, ExxonMobil’s local partner in
the project, will join the delegation.

Fourth, Vietnam will assume the rotating ASEAN chairmanship next year
and Hanoi would likely use this opportunity to shepherd a firmer
regional consensus to push back against China’s assertive actions in the
South China Sea. The early conclusion of a code of conduct, presently
under negotiations, could shut out opportunities for claimants to
drastically enhance their present position in the South China Sea lest
they be seen as violating the regional understanding.

Furthermore, the centenary of the Communist Party of China in 2021 is
drawing near and Beijing may want to demonstrate gains in the party’s
resolve to protect the country’s expanded conception of territory,
maritime rights, and national security. China may also be calculating
that Vietnam will not allow a repeat of the 2014 riots that followed
Beijing’s deployment of a deep-water drilling rig in contested waters as
it may scare away investors at a time when the country is getting a
windfall, especially from companies fleeing the U.S.-China trade war.

China’s decision to send survey ships into the waters of neighboring
littoral states such as Vietnam represents a willingness to bear greater
risks. However, overplaying this approach may backfire in several ways.
It could further heighten Hanoi’s resolve to protect its maritime
economic interests; push the U.S. government to back ExxonMobil to
thwart Chinese pressure thus complicating things for Beijing; and
galvanize ASEAN pushback against Chinese attempts to exclude other
foreign companies from investing in their offshore energy projects.

While Hanoi’s options to respond are limited, China’s weak legal
basis for its claims remains a vulnerability that Vietnam could choose
to exploit by taking its case to an international body, as the
Philippines did in 2013. That arbitral ruling invalidated China’s
infamous nine-dash line and the historic rights it claims within it,
forcing China to come up with a new narrative to justify its maritime
claims based on sovereignty over four distinct island groups in the
South China Sea (including the Spratly Islands) known as the “Four Sha.”
However, given that the arbitration award maintained that none of the
features in the Spratlys qualifies as an island capable of generating
extended maritime entitlements (exclusive economic zone and continental
shelf), and that such entitlements must be based on individual features
not on an island group as a whole, using the Four Sha as the basis for
claiming waters and resources will also be untenable.

Meanwhile, claimant states and ASEAN should continue to persuade
Beijing that the pressure tactics it has adopted in the disputed sea are
inimical not only to its own interests, but also to regional desire for
peace and stability. While China may be genuinely concerned about
maritime commercial ventures (oil and gas projects) or military
engagements (exercises between ASEAN countries and other powers)
providing bases for other powers to harm its interests in its near seas,
it should also realize that ASEAN maintains an equal or greater level
of concern about losing its autonomy and being overly exposed to one
major power. Southeast Asian littoral states should reassure China that
their commercial and security engagement with other countries or major
powers are not directed against Beijing.

China’s openness toward joint exploration and development as well as
other practical measures in the South China Sea may represent an
opportunity to foster cooperation and release tension. These prospects
are especially appealing because such arrangements could be pursued in a
way that does not prejudice the sovereignty, sovereign rights, and
jurisdiction of participants. But Beijing should let its neighbors play
an equal role in formulating mutually beneficial deals and not restrict
their options through intimidation or pressure. Joint development can
exist side by side with existing projects involving other foreign energy
players. China may buy the stakes of foreign companies divesting from
the South China Sea but such offers and divestment decisions should not
be made under duress.

While it may appear that Beijing can intimidate its neighbors in the South China Sea with impunity, in reality there are clear risks to continuing its pressure campaign against Vietnam. Absent some level of de-escalation and genuine proposal for cooperation on the part of Beijing, attitudes within and without the region will likely harden against China and make it easier for Hanoi to orchestrate opposition from both ASEAN and the international community.

This article was published by Asia Maritime Transparency Initiative

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