Page 2 of
2 The
riddle of the Scarborough Shoals By Peter Lee
The Philippine government
has called for UN mediation of the dispute
according to the Law of the Sea Treaty; the
Chinese government has obdurately refused.
Does the Chinese government have a
coherent strategy for resolving the conflicts
brought on by its overbearing claims in the South
China Seas?
Contrary to the superficial
appearance of bilateral futility in the
Scarborough Shoals case, it appears that the
answer is "yes". And China's approach has nothing
to do with cherishing the South China Seas as a
shared resource and everything to do with treating
it as an attractive business opportunity.
As journalist Rossia Robles pointed out in
an in-depth series of
posts, the Philippine
anxiety over the Scarborough Shoal has little to
do with the material value of the fishing grounds
or the psychic gratification of asserting
sovereignty over the atoll. The critical issue for
the Philippines in the South China Sea (or, as it
is inevitably referred to in Manila, the West
Philippine Sea) is energy. [6]
There's gas
in them thar seas.
Maybe not enough gas to
revolutionize the world's balance of petropower;
but enough gas to afford the Philippines financial
breathing space and a heightened measure of
security and national dignity.
The
Philippines currently has one offshore gas
operation, Malampaya, in production under a
less-than-wonderful deal with Shell and Chevron by
which the Philippine government currently gets 18%
of the revenues from the sale of the gas. Even so,
the deal delivers about US$1 billion per year to
the Philippine government.
Part of
Malampaya's revenue is plowed into military
expenditures.
The most recent addition to
the Philippine Navy, the BRP Gregorio del
Pilar - which put in an appearance at the
Scarborough Shoal before discreetly withdrawing -
is the reincarnation of the US Coast Guard cutter
USCGS Hamilton, purchased from the United
States in 2011 for $13.8 million funded by the
Philippine Department of Energy "for the security
of oil platforms and oil exploration activities in
Palawan and Sulu Sea". [8]
Bewilderingly,
the Philippine government named this ship - the
first tangible fruit of Aquino's security tilt
toward the United States - after a hero of the
Philippine-America War who died in combat against
US forces in 1899. During the Japanese occupation
of the Philippines, the puppet government issued
medals commemorating Del Pilar's last battle,
apparently as a celebration of of
anti-Western/anti-colonial defiance. [8]
The Chinese nine-dash line (which exists
only as a line on Chinese government maps and has
never been translated into a surveyed territorial
boundary claim) appears to skirt Malampaya.
China has not made a major issue of
Malampaya. However, the Chinese government has
used its nine-dash line as grounds to challenge
the Philippine government's right to sell licenses
to an even bigger and as yet unexploited nearby
undersea gas field at Reed Bank, known by the
Philippine government as "Recto Bank". [9]
Malampaya will be used up in a decade or
so, if projections hold. Recto Bank could be the
big one, with enough gas to last a century. One
would assume that the Philippine government hopes
to get a better deal than Malampaya, as well as
using cheap natural gas to bootstrap its economic
development.
In contrast to the 50-50 deal
on Malampaya, the concession for Recto Bank-SC
72-is owned 100% by various Philippine resource
companies and their various Hong Kong and Canadian
incarnations.
It would appear that China
does not harbor serious hopes of claiming Recto
Bank for itself. It is, however, interested in
becoming the operating partner that will exploit
Recto Bank's trillion-plus cubic meters of gas on
behalf of the concessionaires.
One might
also speculate that the Chinese government wishes
to forestall the possibility that Manila will use
Recto Bank money to fund further purchases of US
military equipment and establish the Philippines
as a prosperous, independent and credible bulwark
against China, a mini-Japan as it were.
Therefore, even as China and the
Philippines engaged in their war of words over
Scarborough Shoal, Philex - the majority owner of
Recto Bank's SC-72 - was invited to Beijing for
exploratory discussions with the China National
Offshore Oil Corporation (CNOOC) concerning
possible cooperation.
Another strong
indication of China's interest in Recto Bank was
the appearance of China's first deep water oil
rig, CNOOC's semi-submersible 981, north of the
Paracels.
The announcement was a
provocative thumb in the eye to Vietnam, which
claims the area. It was also an advertisement of
China's capabilities in deep-water exploitation
and, perhaps, a veiled threat that China could
send its semi-submersibles lumbering into
contested waters to "drink the Philippines' milk
shake" if Manila continued to be obdurate. [10]
It would appear likely that the
Philippines would prefer to find a suitable
non-Chinese partner for Recto Bank in order to
preserve its political and economic independence
from China.
However, China is playing
hardball.
In addition to slapping aside
Manila's rather feeble attempt to draw the line at
Scarborough Shoal, the Chinese government has made
it clear that any foreign company bidding for
Philippine concessions in the South China Sea is
asking for trouble. [11]
Manila also
compounded its problems by trying to obtain bids
for a parcel near the Paracels, thereby incurring
the wrath of Vietnam and making it extremely
awkward for the United States to show its support.
As the Scarborough Shoal crisis bubbled
on, the Chinese government also took steps to show
the Philippines where its economic interests lie;
Philippine banana exports to China have been
disrupted on the pretext of a bug infestation.
[12]
More significantly, China's National
Tourism Administration issued a travel safety
advisory in response to the Philippine
government's apparently half-hearted attempt to
whip up nationalist sentiment over the Scarborough
Shoal, which culminated in the appearance of a few
hundred demonstrators in front of the Chinese
Embassy - and a policeman stopping a man from
trying to burn a Chinese flag.
In
response, Chinese tour groups canceled their
Philippines bookings, charter flights from China
were cut back, and suffering was inflicted on the
budget tour operators and hoteliers that rely on
Chinese tourists.
China ranks as only the
fourth-largest provider of tourists to the
Philippines, although the number of tourists has
grown by an impressive 78% over the last year.
It is, however, interesting to speculate
that the cutback in tourists was meant to send a
message to an outspoken opponent of Chinese
participation in Recto Bank - Enrique Razon, a
Philippine port and resource tycoon whose Monte
Oro Resources Energy owns a 30% stake in SC-72.
On May 9, Razon criticized Philex's
discussions with CNOOC, while impugning the
patriotism of Philex's president. He insisted that
any CNOOC stake would have to come out of Philex's
share without diluting Monte Oro's, presumably a
deal-breaker for Philex. He told the Philippine
Daily Inquirer:
As the only Filipino-owned company
in SC-72, bringing in the Chinese is a colossal
sign of weakness and poor judgment. Discussing
the possible resources in Recto Bank is an
ill-advised move. [13]
In addition to
owning a big stake in Recto Bank, Razon controls
one of the four groups that have won concessions
to open casinos in Manila. After offshore gas,
casino gambling is the Philippine government's
great hope for economic renewal. Revenue from
games of chance is already the third-largest
contributor to the bottom line of the Philippine
government.
When "Entertainment City" and
its casinos come on stream over the next five
years, the Philippine government is hoping to
surpass Singapore and Las Vegas with annual gaming
revenues of $10 billion. [14]
Razon's
group is making a billion-dollar bet that the
Philippines can attract Asian business - and
siphon off Chinese gamblers from Macau. On
February 8, Razon told the Inquirer: "Maybe we
could get a [huge] share of that market. China is
a big market [for the project]." [15]
If
Razon is interested in Chinese gamblers, maybe he
should not have dumped on China's oil ambitions so
publicly and cuttingly.
The flow of
mainland Chinese gamers to Macau is controlled by
the Chinese government, which recently capped the
number of times government officials who happen to
be gambling addicts could visit the territory to
once every three months.
The precedent of
the Philippine travel advisory could be construed
as a warning that the Chinese government could
also throttle back the flow of future mainland
Chinese gamblers to the Philippines as well, to
the detriment of Razon's casinos - or perhaps,
under the proper circumstances, encourage travel
to Entertainment City even if it detracted from
the immense revenues China siphons off from Macau.
It's all a matter of dollars and cents, in
other words.
The Chinese approach to the
South China Sea may provide a successful paradigm.
If there is enough money to be made by
developing resources in the South China Seas now,
other countries - and corporations - may be
willing to cut deals with China on a bilateral
basis in order to unlock the revenues they crave.
If the tangled issues of the South China
Sea are to be approached from the perspective of
multi-lateralism, mediation and international law,
on the other hand, they may very well prove to be
intractable and a source of contention (and the US
intervention that China resents) for near
eternity.
Gas and greed, not law and
principle, may turn out to be the key to peace in
the South China Sea.
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