By All Means Necessary (22 page)

The strategic questions related to China's resource quest facing established powers such as the United States, and regional powers such as Japan, are, however, much broader than those the United States shares with Canada and Australia. As the world's sole superpower, the United States is invariably drawn into international relationships and security challenges around the world. China's neighbors are also inevitably facing strategic challenges. As we will see in the next two chapters, China's resource quest is already altering that landscape, both close to China and further from its shores.

IN THE MIDDLE OF THE
2000s, a new security threat appeared to emerge. With resource prices rising rapidly, and shortages seemingly imminent, scholars and pundits began to warn of “resource wars.” China featured prominently in those warnings: Beijing, people suggested, was far less committed to markets than the United States and would be much more willing to use force as it battled others for the remaining scraps of an ever smaller resource pie.
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Indeed, one camp of analysts now argues that, with global resources insufficient to meet growing world demand, countries may be destined to go to war over control of available supplies.
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An opposing camp, however, insists that the prospect of resource wars is largely if not entirely nonsense.
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They argue that modern history shows few instances of war over resources. Moreover, they note, since most resources are now traded on world markets, ownership is far less important than one might assume. Countries can secure resources simply by paying the market price, leaving no need for them to go to war in order to acquire them.

The market-based critique of the resource wars warning is powerful. So long as resource prices do not rise astronomically (and few analysts foresee such a development), it will be far cheaper to acquire resources by paying market rates than by engaging in armed conflict. And even strong price rises compared to what prevailed a decade ago leave resource costs relatively modest relative to the overall size of big economies, including those of the United States and China.
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To the extent that China is afraid prices will rise intolerably, it can hedge
its exposure by buying access to deposits on commercial terms, precisely the approach many Chinese companies have taken in recent years. Unless the world changes radically, it will not pay to invade foreign lands in order to win their natural resources.

At least as important is the fact that there are only a few resource-rich territories China could control militarily assuming it wanted to. We will see in the next chapter that Chinese capabilities to project power well away from its borders are primitive. For the foreseeable future, the country will not even have the option of trying to take resources in the Middle East, Africa, or Latin America militarily. This makes wars involving China over much of the world's resources implausible at the current time.

But this does not mean growing Chinese demand for natural resources will not have wide-ranging consequences for international relations and security; we shall see in this and the following chapter that it certainly will. Resource wars, though, are far down the worry list. And the most likely flashpoints for militarized conflict will not arise far abroad in the Middle East or Africa; they will be found much closer to home. Indeed, the biggest consequences of Chinese resource demand, for the traditional worlds of international relations and international security, are being felt in China's backyard.

The South and East China Seas play a special role in Chinese thinking about oil and gas. This is in part because some in China believe they hold large petroleum deposits. To understand what is happening in the South and East China Seas, it is essential to disentangle the multiple motives drawing China and its neighbors to focus on the area: beyond natural resources, sea lane security, national defense, and basic nationalism all drive Chinese actions.

Most of the petroleum deposits in these areas lie in places claimed by both China and neighboring states. Thus, they present diplomatic and security challenges that resources within recognized Chinese territory do not. But their locations near China—and, in particular, in areas that do not require transport through the Straits
of Hormuz or Malacca to reach Chinese consumers—make them particularly appealing for domestic strategists who are worried about physical security of supplies. Issues in the South and East China Seas are also complicated by the fact that China (or others) could plausibly use military or other coercive means to gain control over the resources there.

There is considerable debate over the actual potential of the petroleum resources in the South and East China Seas. Any estimate inevitably carries a high degree of uncertainty, given the paucity of seismic study and exploratory drilling in the regions. An oft-cited U.S. Geological Survey (USGS) estimate from the early 1990s claimed that there were 28 billion barrels of oil in discovered reserves and undiscovered resources in the South China Sea.
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(Discovered reserves include oil and gas that companies have identified and that can be extracted at prevailing prices; undiscovered resources are oil and gas that are generally known to be extractable with current technology but that have not been firmly established by producers.) More recently, a 2010 USGS assessment of undiscovered resources in areas in the South China Sea arrived at an estimate of 11 billion barrels of oil and 145 trillion cubic feet of natural gas.
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These are sizable but not massive figures; by comparison, probable but undiscovered North American conventional resources have been estimated at 63 billion barrels of oil and more than 400 trillion cubic feet of natural gas—figures that do not include recent developments in shale gas and tight oil.
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Chinese estimates are typically much higher than Western ones, so much so that CNOOC has called the region the “Maritime Daqing, ” after the massive onshore oilfield that once powered the Chinese economy and still produces much of its domestic oil.
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The U.S. Energy Information Administration (U.S. EIA) reported in 2008 that “one Chinese estimate suggests potential oil resources as high as 213 billion barrels of oil” along with natural gas resources of 2, 000 billion (two quadrillion) cubic feet; another, it said, claims
225 billion barrels of oil equivalent solely in the area of the Spratly Islands.
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Wang Yilin, then the head of CNOOC, reportedly stated in late 2012 that the South China Sea “could hold 17 [billion] tonnes [125 billion barrels] of oil and 498 [trillion] cubic feet of natural gas.”
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The most bullish numbers appear to come from the Chinese Ministry of Land and Resources, whose high-end estimates reportedly exceed 400 billion barrels of oil and 700 trillion cubic feet of gas.
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This would make the South China Sea the biggest pool of undiscovered oil in the world, well ahead of the former Soviet Union, the Arctic, or the Middle East. If Chinese and other regional leaders genuinely believe such estimates, it is easy to understand why they are so interested in claiming the resources.

East China Sea resources are similarly speculative; indeed they are perhaps even more poorly understood than South China Sea oil and gas. CNOOC's 2011 annual report claimed proven reserves of 68.4 million barrels of oil equivalents in the area.
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Similarly, in 2012 the U.S. EIA estimated there were even odds that the East China Sea contained at least 60 to 100 million barrels of well-understood and economically recoverable oil, along with 1–2 trillion cubic feet of natural gas.
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Chinese estimates of “undiscovered” resources are much higher, clocking in at between 70 and 160 billion barrels of oil for the East China Sea, rivaling Chinese estimates of oil and gas in the South China Sea.
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Once again, though highly speculative, it is not surprising that these sorts of estimates draw policy makers' interest.

China has made claims to the vast majority of the South China Sea tracts that contain most of the area's oil and gas fields.
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These claims overlap with ones by Taiwan, the Philippines, Malaysia, Brunei, and Vietnam. Some areas are contested only by China and one other nation; others are claimed by as many as four nations. The broadest disputes are between China and Vietnam, both of which claim the entire sea (excluding others' coastal areas) for themselves.
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The East China Sea is superficially simpler—it lies between China and Japan
and is primarily contested by those two countries and Taiwan (with marginal involvement from South Korea)—but because it brings two major powers into conflict, it may be more consequential.
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The focus of conflict between China and Japan in the East China Sea has been a set of islands referred to as Senkaku in Japan and Diaoyu in China. The islands are uninhabited and administratively under the control of Japan, which has regarded them as part of its territory since 1895. (Between World War II and 1972, however, they were under the control of the United States.) China, for its part, argues that records from envoys dating back at least to the Qing dynasty demonstrate the islands are within the “border that separates Chinese and foreign lands.”
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In 2008, in a move that appeared to defuse territorial tensions, China and Japan agreed to the joint development of the Chunxiao/Shirabaka gas field in a disputed area of the East China Sea.
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The decision, however, never led to development, and tensions have escalated since then.

They reached a new high in September 2010 when a Chinese fishing boat, piloted by a drunken captain, collided with two Japanese patrol crafts. Japan arrested the fishing boat captain and held him for two and a half weeks before releasing him.
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The Chinese response in the intervening time was sharp, and widely seen as excessive given the nature of the underlying infraction. The Foreign Ministry postponed the gas field development negotiations with Japan, calling the arrests and detentions “absurd, illegal, and invalid.”
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Chinese tourists canceled trips to Japan en masse, and there were protests outside Japanese schools and diplomatic missions in China.
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The central government in Beijing suspended all exchanges or interactions between Chinese officials and their Japanese counterparts, and the foreign minister said in a statement that Japan had “seriously damaged Sino-Japan bilateral relations.”
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Premier Wen Jiabao, in New York for the United Nations General Assembly, called on Japan to release the fishing captain “immediately and unconditionally.”
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Shortly thereafter China blocked rare earth exports to Japan.
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Finally, on September 24, 2010, the Japanese government announced it would release the fishing captain, who was brought home to China on a government-chartered
plane.
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However, tensions remained high, as China continued to block Japan's rare earth shipments. The shipment restrictions continued for seven weeks before being lifted in mid-November 2010.
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Escalation has continued on both sides. In September 2012, the Japanese government announced it had purchased three of the Diaoyu/Senkaku islands from their private (Japanese) owner, which was completed in order “to maintain the Senkakus peacefully and stably, ” according to a statement by the chief cabinet secretary.
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The
PLA Daily
characterized Japan's purchase as “the most blatant challenge to China's sovereignty since the end of the second world war.”
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Shortly thereafter, the Ministry of Foreign Affairs issued a White Paper that strongly asserted China's unequivocal sovereignty over the islands:

[The purchase] severely infringed upon China's sovereignty and ran counter to the understanding and consensus reached between the older generation of leaders of the two countries. It has not only seriously damaged China-Japan relations, but also rejected and challenged the outcomes of the victory of the World Anti-Fascist War [World War II].
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Tensions in the East China Sea intensified in the following months. In February 2013, Japan accused China of having locked radar “capable of aiding weapon strikes” on a Japanese ship and helicopter near the islands, charges China denied.
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The U.S. position on the dispute reflects both U.S. commitments to Japan, under the 1960 Treaty of Mutual Cooperation and Security, and concern about the balance of power in East Asia. Washington's official position is that the islands are covered by the defense treaty but is ambiguous beyond that.
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As a U.S. State Department spokesperson stated, “We don't take a position on the islands, but we do assert that they are covered under the treaty.”
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A spray of islets and atolls claimed by multiple coastal parties is also the focus of tensions in the South China Sea. The sites are contentious because sovereignty over land features and islands provides the claimant country with the basis to claim surrounding
expanses of water and seabed.
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Two areas have drawn the most concern: the Paracel Islands, which are occupied by China and claimed by Vietnam; and the Spratly Islands, which are claimed in their entirety by China, Taiwan, and Vietnam, in part by Brunei, Malaysia, and the Philippines, and occupied in part by all claimants except Brunei.
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China's claim to the Spratly and Paracel islands rests on “historical usage, ” “first discovery, ” and “effective exercise of sovereignty.”
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Other countries present a variety of arguments.