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Home - Top News
July 24, 2011 12:00 PM

Clinton Calls for Global Response to Rising S. China Sea Risks

July 25 (Bloomberg) -- U.S. Secretary of State Hillary Clinton said 'the rest of the world needs to weigh in' on resolving disputes over the South China Sea, where confrontation threatens to disrupt one of the world's busiest shipping lanes.

There has been an increase in 'intimidations, the ramming, the cuttings of cables -- the kinds of things that will raise the cost of business for everyone,' Clinton said yesterday in Bali. 'At least 50 percent of all global trade goes through the South China Sea every year and it's important for us to support freedom of navigation, unimpeded commerce.'

Her comments come at the end of a regional security forum on the Indonesian island, where China and the 10-member Association of Southeast Asian Nations agreed a set of guidelines to prevent conflict in the oil-rich waters around the disputed Spratly Islands. Philippine Foreign Secretary Albert F. del Rosario signaled in a July 23 interview that the guidelines won't be enough to stop tensions continuing to rise.

Hydrocarbon resources 'well within' Philippine sovereignty are essential to the country's energy strategy, del Rosario said at the end of the Bali forum. 'The need for us to develop them is greater than China's. China can afford to wait forever. We don't have that luxury. We've got to move ahead.'

The Philippines' push to secure energy resources against the wishes of Asia's biggest economy and military spender risks clashes that may ensnare the U.S., a treaty ally. Clinton left Indonesia for Hong Kong and the neighboring city of Shenzhen, where she is due to meet State Councilor Dai Bingguo today.

'Nine-Dash Map'

Clinton's call to internationalize the South China Sea issue may irk China, which maintains that disputes are a bilateral affair. China lays claim to most of the sea based on a 'nine-dash map' that it drew up and says any attempt to challenge this is a violation of its sovereignty.

The non-binding guidelines for operating in the sea 'will go a long way to maintaining peace and stability and good neighborliness,' Chinese Foreign Minister Yang Jiechi told reporters on July 22. Asean members Philippines, Vietnam, Malaysia and Brunei have competing claims in the sea.

The Philippines 'went along with the family' in signing the agreement though expressed misgivings because it is non- binding and fails to define a specific area, del Rosario said. That aids China because it maintains the status quo, he said.

'Risk of Clashes'

'If China is not challenged on this nine-dash map, which effectively gives them sovereignty over the South China Sea, at some point in time there may be potential threats to freedom of navigation for' other countries, he said. 'I don't know how those guidelines will actually work. The risk of clashes remains.'

Chinese vessels in May sliced cables of a survey ship doing work for Vietnam, the second such incident in a month. In March, Chinese ships chased away a survey ship working for U.K.-based Forum Energy Plc off the Philippines.

Clinton said the increase in conflicts meant China and Asean should move quickly to establish a code of conduct based on international law.

'The declaration is a first step, nobody claims it is more than that,' she said. 'What we want to see is a resolution process that will be aided by the code of conduct that Asean is working toward.'

China's map includes oil and gas fields more than three times further from its coast than they are from Vietnam. That includes two of 15 exploration blocks the Philippines put out for tender last month.

Oil Roadshow

More than 100 energy companies including Chevron Corp. and Total SA attended a June 11 roadshow in Singapore to meet Philippine energy officials and get more information on the blocks, according to the Department of Energy. Three weeks later, Energy Secretary Rene Almendras said the government may offer more exploration contracts in Chinese-claimed waters because it is 'staking claims to these areas.'

The Philippines, with an economy about 1/30th the size of China's, plans to boost hydrocarbon reserves by 40 percent in the next two decades to reduce its almost total reliance on imports, according to a department of energy plan. Vietnam's domestic gas demand is set to triple by 2025, World Bank estimates show.

Chinese studies suggest the waters sit atop more than 14 times estimates of its oil reserves and 10 times those for gas.

Moves by private oil and gas companies are necessary to spur action on the blocks 'because no politician wants to make tough decisions,' said Randall C. Thompson, whose former company Crestone Energy Corp. was awarded rights by state-owned Cnooc Ltd., China's largest offshore energy producer, to explore an area also claimed by Vietnam. Any discoveries will hasten joint development agreements, he said.

Crestone is now owned by Houston-based Harvest Natural Resources Inc., which holds Chinese rights to the same block Vietnam has awarded to Calgary-based Talisman Energy Inc.

'By taking no risk, you get no rewards,' said Thompson, who now owns Denver, Colorado-based Global Resource Holdings. 'Somebody needs to just go in and drill, and then they'll sit down and figure it out.'

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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