The South China Sea (40 page)

Which is why so many people come to the Dialogue each year. The public focus may be the big-name speeches but, as a member of the
Canadian delegation confided in the lift, the bilateral meetings are ‘really where the action's at’. Not many people came to the 2012 gathering to hear the Indian Defence Minister discuss the ‘para-diggim’ shift in Asia's strategic thinking or his Cambodian counterpart devote just 60 words to his country's border dispute with Thailand (which had brought the two countries to the point of war the previous year) in a speech on regional stability. No, the point of the Dialogue, as far as most of its attendees are concerned, is what goes on in private.

The game was partly given away at the end of Leon Panetta's address. It was the speech that everyone wanted to hear. The room was packed, over 500 people sat in attentive rows and more stood around the walls as the US Secretary of Defense explained what the US ‘pivot’ to Asia really meant. It would make headlines far and wide. But just before his session concluded, two groups of uniformed men got up and left. The German and Vietnamese delegations had timetabled a bilateral meeting to discuss military cooperation – and that was more important than hearing the last few minutes of Mr Panetta. Off they trooped for their off-the-record chat. It was only the first. In all, according to a member of their delegation, the Vietnamese managed 12 official bilateral meetings during their weekend stay.

The year 2012 was significant for East Asia's militaries. For the first time in recent history, their budgets were larger than the European members of NATO.
²⁶
This was mainly because of cuts in Europe but also because East Asian countries spent 7.8 per cent more on their armed forces than in 2011: a total of $301 billion, according to the Stockholm International Peace and Research Institute. China made up 55 per cent of that total. Japan, South Korea and Taiwan collectively accounted for a further 33 per cent. By comparison, the smaller, poorer economies in Southeast Asia are spending very little on their own defence. The combined military budgets of the five Southeast Asian claimants to the South China Sea – Brunei, Indonesia, Malaysia, the Philippines and Vietnam – make up just 6 per cent of the East Asian total: around $18 billion. That's about the same as Turkey.

The two most sophisticated militaries in the region, Singapore and Thailand, make up almost all the remainder. But spending is growing rapidly. In 2012, Vietnam's rose by 20 per cent, the Philippines’ by 10 per cent, Indonesia's by 16 per cent and Singapore's by 5 per cent. It
fell slightly in Malaysia and Brunei, but only because they had high figures in 2011. These are interesting markets for arms makers looking to recover from the 11 per cent spending cut among European members of NATO since 2006.

After hours at the Shangri-La's many bars, representatives of weapons makers jokingly toast the Chinese leadership for helping them to meet their sales targets. If the US concern for access is firing Chinese concern for security, then the Chinese push for security is stoking everyone else's fears about insecurity.

In late 1992, shortly after China passed its territorial law laying claim to the island groups in the South China Sea and awarded Crestone its oil concession off the Vietnamese coast (see Chapter 5), Indonesia conspicuously purchased one-third of the former East German Navy: a total of 39 ships including frigates, landing ships and minesweepers.
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Those ships are now obsolete, as are the country's six largest warships: 60-year-old former Dutch frigates. Indonesia's navy is becoming less and less capable of defending the country, even as incursions by Chinese ships increase. Its only modern craft of any size are four Dutch-built corvettes and five Korean-built amphibious landing vessels. The rest of its navy comprises around 50 patrol boats and four small missile craft. For a country of 13,000 islands, Indonesia seems to place a relatively low priority on its maritime forces. The country has no airborne early warning systems, no in-flight refuelling to assist long-range patrols over the sea and only rudimentary command and control systems.
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The only reason that it has an ‘Integrated Maritime Surveillance System’ of coastal and ship-based radars is because the United States paid for it, ostensibly to combat ‘piracy, illegal fishing, smuggling, and terrorism’, in the words of the US State Department.
²⁹

The Indonesian military is notoriously corrupt and its weapon purchases don't correlate very well with the likely challenges it might have to face. In August 2013 it agreed to buy eight Apache attack helicopters (from Boeing) at a cost of $500 million. In 2012 it bought 103 surplus main battle tanks from Germany. It's not clear what either of these systems is intended for. They certainly won't help protect maritime claims. Plans to invest in large-scale modern naval hardware have been repeatedly delayed or halted by budget problems. Indonesia had intended to buy new Russian submarines but was forced to buy cheaper Korean ones instead. Three are
under construction at the time of writing and there is talk of buying more. Plans to buy a second-hand Russian destroyer and three offshore patrol vessels from Brunei were cancelled. However, the fears about Chinese ambitions in the sea have finally prodded the Indonesian government into action and it is now starting to purchase some smaller boats and arm them with new anti-ship missiles, including the Exocet (built by EADS), the Russian Yahont and, ironically, the Chinese-designed but locally built C-802.

The Philippines is, once again, talking about modernising its military, as it does every few years only to discover that the money has been squandered. The armed forces of the Philippines are currently in a worse situation than they were in 1995 when the Chairman of the Senate National Defence and Security Committee, Orlando Mercado, told the
Far Eastern Economic Review
, ‘we have an air force that can't fly and a navy that can't go out to sea’.
³⁰
The navy's two largest vessels are former US Coastguard cutters, the next largest date from the Second World War and most of the remainder are small patrol vessels retired from service in the UK or South Korea. Debates about purchasing amphibious ships and new frigates have been going on for years but without resolution at the time of writing. Japan has lent the Philippines $184 million to buy ten new coastguard vessels, but they will be civilian, not military. The air force consists of a few helicopters and transport aircraft; its last jet fighter was retired in 2005. A $415 million plan to buy 12 new FA-50 fighter jets from Korea has been announced but it will be years before pilots will be ready to fly them on combat missions. In May 2014, as a coda to that deal, Korea announced it was donating a small 30-year-old corvette to the Philippines.

Malaysia has been spending money more strategically over a longer period and has built up a fleet of patrol boats for its coastguard and larger ships for its navy. It now possesses two French-built submarines based at Kota Kinabalu on Borneo near its offshore oilfields. In October 2013, seven months after a major Chinese naval exercise near the James Shoal, Malaysia announced plans to create a new marine corps to be based down the coast from the submarines, at Bintulu, the port nearest the shoal. The marines will need an armoury of new equipment, including at least one new amphibious ship, landing vehicles and helicopters. Malaysia faces another potential threat in the region: the lingering territorial claim on Sabah from the descendants of the Sultan of Sulu, who launched a mini-invasion in
early 2013, killing 15 Malaysians, but that doesn't explain why it's buying submarines.

Vietnam spends much less on its military than Malaysia but has concentrated on its own version of the ‘assassin's mace’: cheaper equipment with the potential to inflict damage on a much stronger opponent. In early 2014 Vietnam received the first of six new Russian submarines. It has also bought two batteries of Russian shore-based anti-ship missiles and Israeli-made ballistic missiles with a range of 150 kilometres, and will locally produce the Russian Uran anti-ship missile. If it came to a major shooting war in the disputed areas the Vietnamese are probably in the strongest position, argues Gary Li. ‘There's no way the Chinese Navy can do it. It's far too risky. If they sail a fleet down past the coast of Vietnam it's basically a shooting alley. The Vietnamese have their brand new Bastion missiles, Kilo submarines and their little attack boats. If the Vietnamese sustain damage they just pop back to base. If a Chinese ship is damaged, it's a thousand miles away from home and they don't have a major naval base down there.’
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The relatively small weapon purchases in Southeast Asia don't count as an ‘arms race’. There's no way any of the countries could compete with Chinese military spending. But they are clearly trying to deter unwelcome naval activity by acquiring the kind of weapons that could inflict damage on a stronger fleet. Their ability to resist a concerted Chinese naval operation in the South China Sea is limited but in operations where neither side wants to open fire first, the simple deployment of sufficiently threatening forces might be enough to tip the balance against, for example, a Chinese Coastguard ship attempting to prevent an oil rig drilling in an area within the ‘U-shaped line’. The unknown factor is, of course, how the Chinese Navy would react to a threat to a coastguard ship. It could be the beginning of a rapid escalation towards open conflict.

The United States takes no official position on the territorial disputes. It shares the same view of the islands that British chiefs of Staff had in 1950. ‘The Spratley [sic] Islands are of no appreciable strategic value … Enemy occupation in war would not, so long as we retain control of the South China Sea, be a serious strategic threat.’
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If it ever came to a conflict, the lonely blockhouses would be sitting ducks for guided missiles fired from far away. The issue for the US is for how long it can ‘retain control of the
South China Sea’. At present, despite all the bluster about China's growing capabilities, its position seems secure. In time, however, Chinese capabilities will grow and there may come a time when the Beijing leadership will want to push the imperialist aggressors out of its backyard, just as the US pushed Great Britain out of the Caribbean a century ago.

In the meantime conflict is more likely to emerge from a miscalculation in a confrontation between China and one of the regional claimants. Will the Chinese authorities use military force to physically prevent oil development and fisheries protection off the coasts of Vietnam, Indonesia, Malaysia, Brunei and the Philippines? Will those countries use military force to defend their claims? Will a Chinese government and populace, inculcated since primary school with the belief that the ‘U-shaped line’ is indisputably theirs and locked into a rhetorical commitment to confrontation, decide that they have no choice but to open fire? Will Southeast Asian countries try to draw in the United States? Will the US regard developments as a threat to its ‘freedom of navigation’ and intervene? There are many choices still to be made but the battlefield of the South China Sea is already being shaped.

CHAPTER 9

Cooperation and its Opposites

Resolving the Disputes

T
HE
SARIMANOK
IS
said to grant wishes but it didn't grant many to Eric Palobon during this voyage. On a good trip his boat can bring home 30 tuna with the largest weighing 100 kilos. This time he caught just six and the largest weighed 60 kilos. The mythical bird painted on the whitewashed bow couldn't compensate for the ravages being wrought upon the tuna population out at sea. Eric is a modern heir to the Nusantao way of life and his
banca
is little more than a high-sided canoe with long, thick bamboo outriggers to keep it upright in the rolling waters of the South China Sea. The wheel-house looks just big enough to shelter three people but Eric said he'd had a crew of 12 on board for the past two weeks, living off rice and some of what they'd caught. A central spar overhead supported tarpaulins that could be rolled down like a giant tent to shelter the whole creaking craft from the sun and the rain but pulling into Manila Bay the crew had rolled them back and festooned the rigging with laundry instead.

As they watched the boat glide into the dock, a handful of eager boys back-flipped off the quay into the murky waters in expectation of a tip or two for helping to land the catch. Traders gathered around the doorway to the giant shed in anticipation of some haggling. A rope was thrown ashore and the first of the tuna was lowered onto a raft made from old polystyrene boxes lashed together with netting. Standing astride the huge yellowfin,
one of the boys pulled the precious cargo, hand over hand, towards the cavernous halls of the Navotas fish port; 80 per cent of the fish eaten by the 12 million people living in Metro Manila comes through these buildings. It's by far the biggest fish port in a country that eats a great deal of fish.
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Eric was expecting to get somewhere between 200 and 300 pesos per kilo for each of his 60-kilo tuna: between $1,600 and $2,000 to be shared between 12 people for 14 days’ work – $10 a day each. Not a bad living – about double the national average.

The Philippines is a great place to catch yellowfin tuna. They migrate from the South China Sea into the Sulu Sea from June to August and back again between August and October, passing through a small number of relatively narrow gaps in the island chain. The country provides a quarter of the tuna on American supermarket shelves.
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And that market has tempted in some very big fish indeed. Around the dock from Eric's outrigged
banca
sat a very different kind of tuna enterprise. The
Lake Lozada
was much bigger but less seaworthy. It was possible to tell that the hull had once been blue, though it was now almost entirely rust-coloured. In places, just above the waterline, the rust had eaten great holes through the metal. Judging from the harpoon platform on the prow, the ship had once been a Japanese whaler but it didn't look capable of catching anything now. According to its crew, the
Lake Lozada
’s job had been to sit out at sea, for up to a year at a time, hauling in 300 to 500 tuna per day. On a good day, that number could rise to 2,000. Carrier boats met the ship every other day to transport its catch to the canning plants on shore so there need be no let up in the harvesting process.