Prospective joint offshore exploration in the Taiwan Strait by state-
owned oil companies in Taiwan and China constitutes a major
breakthrough in cross-Strait cooperation. The case will be even
more significant if it leads to similar cooperation in the East China
Sea, where sovereignty issues among China, Taiwan, and Japan
have so far blocked development of a potentially oil-rich area.
Taiwan's state-owned Chinese Petroleum Corp. (CPC) has entered into an unprecedented joint oil-exploration venture with China's National Offshore Oil Corp. (CNOOC) in the Taiwan Strait. Representatives of the two companies signed an agreement in Taipei in mid-May. If the project goes smoothly, it could open the way to bigger and broader cooperation involving China and Taiwan--and perhaps Japan--in the East China Sea.
The initial target area of the Taiwan Strait exploration will cover 15,400 square kilometers or nearly 6,000 square miles on both sides of the center line between China and Taiwan. The area is west of the Tainan Basin off of southern Taiwan and east of Chazhou and Shantou in the mainland's Guangdong Province. Geophysical studies carried out there from 1998 to 2000 revealed good potential for the presence of oil reserves--an estimated 300 million barrels of crude oil. CPC and CNOOC plan to establish their fifty-fifty joint venture in a third territory, the British Virgin Islands, to avoid complications arising from the unsettled political relationship between their two governments. CPC will enter into the contract through its subsidiary, the Overseas Petroleum and Investment Corp. (OPIC). Under the contract, OPIC and CNOOC will each contribute US$12.5 million to the project.
But compared to the Taiwan Strait, there are bigger and better prospects in the East China Sea. Indeed, the East China Sea is thought to contain up to 100 billion barrels of oil, and is one of the last unexplored high-potential hydrocarbon resource areas located near large markets. Ownership of the area is in dispute, however, claimed by China, Taiwan , and Japan. This territory encompasses parts of at least three major possible oil-bearing sub-basins, with the best prospects in the southwestern corner. China has already discovered eight oil and gas fields in that area, known as the Xihu basin, and has high expectations for the potential in the rest of the East China Sea.
All three parties, moreover, claim the Diaoyu Islands--also known as the Diaoyutai or "Fishing Platform"--consisting of five uninhabited islets and three barren rocks, located approximately 120 nautical miles northeast of Taiwan, 200 nautical miles east of the Chinese mainland coast, and about 200 nautical miles southwest of Okinawa. Japan controls the islands, which it calls the Senkakus. The total maritime area that might be claimed from the islands is about 20,500 square nautical miles and includes potential oil, gas, and mineral deposits.
The dispute over sovereignty involves differing interpretations of the 1982 United Nations Convention on the Law of the Sea. China holds that because the Diaoyu Islands are small, uninhabited, and unable to sustain economic life of their own, they are therefore not entitled to generate a continental shelf or consequently a 200-nautical-mile Exclusive Economic Zone (EEZ). According to a 1984 legal treatise written by Ma Ying-jeou, now the mayor of Taipei, Taiwan agrees that "the Diaoyutai Islands themselves are not entitled to have a continental shelf or EEZ, and thus have no significant legal effects on the boundary delimitation in the East China Sea." But Japan maintains that the topographical features are indeed islands and are therefore entitled to have continental shelves and EEZs. Japan therefore uses them as base points for its continental shelf and EEZ claims in the East China Sea.
The United States is involved in the dispute whether it likes it or not. Japan argues that the United States handed back Okinawa--including the Senkakus--to full Japanese sovereignty under the 1972 Okinawa Reversion Treaty. There is no doubt that the United States considered that it was administering the Senkakus as part of Japan in the postwar period. For instance, in a proclamation in 1953, the United States specifically identified the Senkakus as falling under its control. In 1968, American authorities and the Okinawan government started patrolling the islands to prevent illegal entry. In October 1996, China even warned the United States not to intervene in its dispute with Japan over the islands. Then-Foreign Ministry spokesman Shen Guofang told a briefing: "This is an issue between China and Japan, and no third party may intervene in this matter." Indeed, China claims the features because they are "appertaining to Taiwan," thus injecting the Taiwan issue into the fray.
In November 1996, Reuters reported acting US Deputy Assistant Secretary of Defense Kurt Campbell as saying that the features fall under the terms of the 1960 US-Japan Security Treaty. "The 1972 US-Japan agreement on the return of Okinawa to Japan clarifies that the Senkaku Islands fall under Japanese administration. This was clearly specified by the United States for security purposes," Campbell told the news agency. Although Campbell made it clear that the United States was not taking sides on the question of the islands' sovereignty, he concluded by stating: "The security situation is clear. America made a solemn promise in the US-Japan Security Treaty to defend Japan's territory and areas under its administration in time of emergency. We will keep this promise." Recent revelations that this security agreement includes Japanese assistance to be provided to the United States in case of an emergency in the Taiwan Strait, the Korean Peninsula, or the Spratly Islands does not sit well with China.
A development that might further exacerbate the situation is the possibility that the US military may soon be forced to reduce its presence on Okinawa. The options raised in a recent RAND report include moving troops and aircraft to Guam, the Philippines, or the southern Ryukyu Islands. If the United States were to base troops in the southern Ryukyu Islands, considerably closer to Taiwan than is Okinawa, that could well alarm China and reignite the smoldering sovereignty dispute over the Diaoyu/Senkaku Islands. Indeed the suggested prime site--Shimojishima--is only 250 nautical miles from Taipei and quite near the long-disputed islands in the East China Sea.
The bases for the conflicting claims to ownership of the islands can be summarized as follows. China argues that the Diaoyu Islands were part of its territory until April 17, 1895, when they were ceded to Japan after China lost the Sino-Japanese War. The Chinese contend that the islands should have been returned under the terms of Article 2 of the San Francisco Treaty of 1951. Therefore, according to China, whatever happened after April 1895 cannot detract from China's long-standing claim. Taiwan claims sovereignty over the features for most of the same reasons as China.
Japan's case is based on the contention that the islands did not belong to any country until January 1895, when they were incorporated into Japanese territory by a cabinet decision. It argues further that since that time, Japan has maintained continuous and effective control of the islands, and therefore whatever happened before January 1895 cannot diminish Japan's sovereignty.
In June 1996, China and Taiwan protested Japan's declaration of a 200-nautical-mile EEZ around the Senkaku Islands. The Diaoyutai/Senkaku issue came to a boil in September and October 1996 when a right-wing Japanese group erected a lighthouse on one of the islands. Anti-Japanese demonstrations broke out in Hong Kong and Taiwan, and activists from Hong Kong and Taiwan eluded Japanese coast guard vessels to plant the flags of China and Taiwan on one of the islets. Japan and China both sought to keep the issue from escalating into a confrontation between the two Asian giants.
But Chinese Premier Li Peng then demanded that Japan back off from its claim to the area lest bilateral relations deteriorate further. In response, Japanese nationalists, including a legislator, again staged a landing on one of the islets in June 1997. On May 1, 1998, the Japanese coast guard said a Chinese survey vessel defied warnings and sailed into waters claimed by Japan near the Diaoyutai/Senkakus. In protest, on September 5, 1999, three members of the Japan Youth League, a Japanese nationalist group, landed on one of the disputed rocks. After the 1998 incident, continuing frequent Chinese "incursions" by both research and naval vessels became a serious domestic political issue in Japan and adversely affected relations between Tokyo and Beijing. After several protests, followed by talks between the Japanese and Chinese foreign ministers on February 13, 2001, the two sides agreed on a mutual prior notification system. The agreement cleverly navigated around the issue of conflicting claims and boundaries by stating that each must inform the other before entering waters near the other country if it is an area in which that country "takes interest." In April 2001, after giving proper notification, China resumed its surveys for potential oil and gas in the disputed area.
Oil exploration, especially if it results in major finds or progresses to the drilling stage, is a possible catalyst for conflict. Even if no major oil deposits are confirmed, the mere act of drilling could trigger conflict, since such activity on behalf of one claimant could be seen as a direct challenge to another claimant's sovereignty. China in particular would probably view unilateral drilling operations as a direct challenge as well as a rejection of its willingness to jointly exploit East China Sea resources--a matter that has been discussed off and on with Taiwan since the early 1990s. And discovery of major oil deposits could also increase the incentive for claimants to more zealously guard and enforce their respective claims. More dangerously, it might increase the willingness of some parties to risk triggering conflict by unilaterally attempting to extract oil in the disputed areas.
Other actions that could trigger broader conflict include the seizure of fishing boats or other vessels of rival claimants within claimed boundaries. For example, in May 2001, a Taiwan fishing boat was detained by a Chinese patrol vessel 32 nautical miles northeast of the small Taiwan-held island of Pengchiayu, and Taiwan dispatched coast guard vessels and a warship to lend assistance. Such confrontations between military ships patrolling in disputed areas or accompanying commercial ships could easily evolve into an exchange of gunfire, with the risk of further escalation. As an indication of China's frame of mind, in July 1997 it demonstrated the power of its East Sea fleet, holding the nation's largest war games at sea in more than thirty years. The fleet has the responsibility of defending China's eastern seaboard and would be in the front line of any conflict with Japan.
Clearly, the conflicting claims over the territory are fueled not only by the perceived petroleum potential but also by resurgent nationalism in both countries. Indeed, resource issues are not the fundamental barrier to achieving a resolution of these disputes. Rather, the differences are primarily about unassuaged historical grievances and the politics of national identity. As an indication of the primacy of nationalism in this connection, if either side were prepared to concede sovereignty over the islands, there is little doubt that the other would be generous in granting a share of any resources as compensation.
Moreover, these disputes are being exacerbated by domestic politics, a factor that makes them much more dangerous than they should be. Somewhat paradoxically, democratization in Taiwan has made the sovereignty dispute more difficult to resolve. Strong governments unconstrained by domestic constituencies can make deals more easily than those that must heed domestic political concerns. It is no accident that authoritarian China, which can and does control domestic protest, responded in a more measured way to the Diaoyu/Senkaku incidents in 1996 than did Taiwan. Democratic governments are by definition susceptible to domestic political pressures, while weak democratic governments facing elections--as Japan's was at the time of the 1996 flare-ups--are most susceptible to domestic pressure.
Indeed, the sovereignty dispute over the Diaoyu Islands has been exploited for domestic political ends that have little to do with the territory in question. Taiwan's New Party used the fishing disagreements and the emplacement of the lighthouse by Japanese rightists to attack President Lee Teng-hui for being too "soft" on Japan. The timing of the incident also made it difficult for the then-prime minister of Japan, Ryutaro Hashimoto, to be conciliatory. An election was looming in Japan, and Hashimoto, himself a nationalist who had caused considerable controversy by visiting the Yasukuni war shrine, could not afford to be seen as soft on such a sensitive sovereignty issue.
China also has its own domestic reasons for pursuing its claims. Although these are perhaps best exemplified by its actions in the Spratly/South China Sea disputes, they are applicable to the Diaoyu dispute as well. Beijing seems to want to demonstrate to its increasingly assertive provinces, as well as to the democracy movements in China and Hong Kong and the independence movement in Taiwan, that it is firmly in control of national policy. China's actions seem to be the result of a rising tide of nationalism that is replacing socialism as the preferred societal glue. In this view, the economic reforms pushed by Deng Xiaoping put China's conservatives on the defensive, and they are using nationalistic issues, such as sovereignty over the Spratlys (Nansha) and the Diaoyutai, to reassert themselves.
Although the potential for conflict is looming larger, cooperation is still possible. On March 2, 1993, China and Japan agreed to work out effective measures to cooperate in safeguarding the high seas of the East China Sea. A second round of talks in November-December 1993 in Tokyo produced a four-point agreement including regular consultations on combating piracy in the East China Sea. In November 1997, then-Premier Li Peng of the PRC and then-Prime Minister Hashimoto of Japan signed a fisheries agreement ending their dispute over fishing rights in the area. The agreement stipulates that each country will manage its fisheries within 52 nautical miles of its coasts, that both countries can fish in the area between 270 N and 300 40' N, and that the area south of 270 N--including the area around the disputed islands--will remain unregulated high seas.
Fortunately, there are factors at work besides agreements on fisheries and scientific research that could encourage an amelioration of the disputes by an agreed modus operandi, if not their resolution. The first is that the very real danger that domestic politics will cause these disputes to escalate is now clear to policymakers. These disputes could disrupt, sour, or destabilize relations in this volatile region. Such a development would serve no country's long-term interests, including those of the United States--an ally of both South Korea and Japan that also wants good relations with China. The realization that these relationships are simply too important to allow them to be disrupted by these disputes may be the catalyst necessary for wise leaders to forge at least a temporary solution when the time is right.
While international law will probably not drive the form or substance of an interim solution, there are precedents for agreements between states in similar situations, where a separation has been made between jurisdictional questions and functional issues. For example, one possibility is the "enclaving" of the features--establishing a narrow band of territorial waters, or a safety zone, around them. The sovereignty dispute could thus be shelved, allowing governments to move forward to jointly develop resources in an area of overlapping maritime claims. Taiwan and China could then jointly develop the resources on the Chinese side of a provisional boundary line. At the very least, all involved should be able to agree on a code of conduct, particularly regarding naval and fisheries activities in the disputed area. Such an arrangement, if successful, could build confidence and defuse a dangerous situation.
Mark J. Valencia is a senior fellow at the East-West Center in Honolulu, Hawaii.
Copyright (c) 2002 by Mark J. Valencia.