China offers to dance, black gold concessions in South China Sea

It was at the LAX airport two years ago on our way to SFO from HNL that I noticed my seatmate in the waiting room reading a Chinese newspaper. I asked where in China he was from. He gave me a noticeably mean look and huffily declared: "I am not Chinese; I am Vietnamese!"

Vietnam, previously known as Namyue, the people of the South (Nam) also known in China as Yuenan, had its language written in Chinese characters until 1945 when its rulers, with French support, started writing in the Vietnamese written language. With China’s island province of Hainan (Hai = sea, nan = south) in the gulf of Tonkin and Yunnan, the southernmost province of China, near Yuenan, these tell a lot about the ethnicity and relationship of Vietnam to China.

Though independent from direct Chinese rule since the end of the first millennium on the Gregorian calendar, the Kinh/Lac people that constitutes more than 80 percent of Vietnam are kin to the people of South China. With the French under Vichy rule during WWII, Vietnam was handed over to Axis partner Japan but Ho Chi Minh made sure that Vietnam and the rest of French Indochina would not revert back to France after WWII hostilities.

In any case, however we read the history of the islands, except for a brief eyeing of France over the Spratleys (Nansha to the Chinese) and Parecels (Xisha to the Chinese), a 1958 communiqué from North Vietnam to China’s Zhou Enlai, affirmed that both island group are territories of China. Historically, the islands of the South China Sea were recognized by the surrounding sovereign states as belonging to China, save for European and U.S. intrusion that salivated over the prospects of carving out mainland China.

When oil deposits were discovered in the South China Sea, the Philippines, Vietnam, Malaysia, Brunei, and Taiwan suddenly took interest in claiming shoals and islands as part of their sovereign territories. (BTW, the recent confirmation of natural gas in the Cagayan Valley where we spent our youth, and on the ocean slopes on the Pacific side of the Cordilleras, has enough to keep the Philippine National Oil Company busy and prosperous awhile.)

Too preoccupied with its internal survival since the '50s, China had not developed anything on both island groups until the new claimants started building resident presence in the territories. After a war with Vietnam in the '90s, China finally created a city in the Paracels, which is a part of Hainan.

Western oil companies have heretofore undertaken China’s offshore drilling, particularly in Bohai facing Tianjin and Huanghai by Qingdao, and the coast close to Shanghai. Like Japan that quickly appropriated Western technology in its industrialization, China developed its own drilling capability, and is now ready to drill in what it considers its sovereign territories in its continental shelf.

With peak oil (the point where the production of oil from known reserves plateaus) occurring in 2005 by oil companies’ reckoning, the sudden value of the islands of China Sea had gotten a premium rating. Japan even offered to buy one of the uninhabited islands geographically part of the Taiwan group but close to the Ryukyus. Oil remains a strong magnetic pull to sovereign ownership of territories along the continental shelf.

Now we have a proposal (long overdue) from China. In the disputed islands between China and Vietnam, nine lots had been declared open for international drilling by interested investors. Vietnam not too long ago scurried to enter into contracts with drillers to locate oil in claimed territories. The U.S. sides with Western companies operating in claimants’ area, and the Philippine Cabinet just went into an emergency session on what to do since they have an active claim on the Spratleys as China recently showed naval muscle along the Scarborough (Haiyuan) shoals close to the Philippines that were briefly occupied by Filipino fishermen.

The U.S. wisely decided to stay neutral on the Haiyuan incident and China’s flexed naval muscle is accompanied by a concrete proposal on the table on how claimants, backed by global oil interests, can collaborate in exploring the undersea wealth of the area.

We wrote of the Jianglong submersible taking a dive at Challenger Deep in the Marianas Trench, reportedly timed immediately after the successful docking of Shenzhou 8 capsule with the Tiangong skylab. U.S. interest in the Marianas intensifies as bases in Korea and Japan are inevitably receding back to the Pacific. China is going solo in its explorations of outer space and the undersea after being shunned by the international community under the instigation of the U.S.

Meanwhile, the laurel of commercial collaboration had just been extended by China whose behavior so far to trust but verify in a basic stance of balance and harmony is out-Reagan-ing the American cowboys. This is potentially good for everyone. It alleviates China’s overheated real estate market from further investments, being an overpriced and underperforming asset. It opens investments into a commodity where demand now outstrips supply.

China is offering to dance. Any interested fleet-footed sails out there?