Monday, April 16, 2012

Great game in the South China Sea, Gazprom plunges right in there....

A fly in China's Russian ointment; Great game in the South China Sea...., Gazprom plunges right in there....
By M K Bhadrakumar

China would know that climbing the greasy pole of global power politics isn't easy. Rivals play rough. But China couldn't have expected to see Russia among them.

The backdrop is poignant. Russia-China strategic coordination has touched a high level. Beijing has been joyful about the prospect of Vladimir Putin returning to the Kremlin as president in early May after a spell as premier. Beijing sees Putin as the best thing that ever happened to "post-Soviet" Russia. Maybe it was sheer naivety, or brilliant guile, but China preferred to see Putin as a one-dimensional figure consumed by a hatred of the West. Beijing saw a dark Western conspiracy to discredit him as he reclaimed power in the Kremlin.

Therefore, Russian natural gas company Gazprom's announcement on April 6 that it had signed a deal to take a minority stake in the development of two gas projects off the coast of Vietnam would have a Shakespearean touch about it - Et tu, Brute?

The Gazprom deal was certainly Putin's decision. Gazprom will explore two licensed blocks in the Vietnamese continental shelf in the South China Sea. It takes a 49% stake in the offshore blocks, which hold an estimated 1.9 trillion cubic feet of natural gas and more than 25 million tons of gas condensate.

Beijing is apparently taken aback. Chinese Foreign Ministry spokesman Liu Weimin was guarded in his response: "China hoped companies from countries outside the South China Sea region would respect and support efforts by directly concerned parties in resolving disputes through bilateral negotiations."

Beijing was left guessing as the bear waded into the choppy waters of the South China Sea. True, the two exploration blocks are within Vietnam's waters and for Gazprom it is a lucrative business deal. But Gazprom is a state-owned company and is widely regarded as one of Russia's "geopolitical tools".

Chinese commentaries have signaled that Beijing doubts Moscow's intentions. The Global Times pointed out:
Vietnam and the Philippines are both trying to seek help from countries outside the region, making the bilateral negotiations into a multilateral confrontation. China cannot be too cautious about any other superpower involvement in the South China Sea region. Russia should not send any wrong or ambiguous signals about the South China Sea. It will not only make the dispute even more difficult to settle for China, but also raises doubts about Russia's real intentions behind the gas deal.
Besides, Gazprom's gas deal is not a flash in the pan. Russia is systematically rebuilding its Soviet-era ties with Vietnam (which tapped into shared antipathies toward China), especially since 2009 when Putin told his Vietnamese counterpart Nguyen Tan Dung that the relationship had assumed "strategic significance".

Moving eastward
Moscow has given an US$8 billion loan for the construction of Vietnam's first nuclear power plant. Russia is Vietnam's most important source of advanced weapon technology. And the weapons systems include the SS-N-25 Switchblade/Kh-35 Uransubsonic anti-ship missile, the Ka-27 naval helicopter, the SU-30 MK multi-role fighter aircraft, upgraded Kilo Class attack submarines, Gepard Class Corvettes, the Molnia/Project 12418 fast attack craft packed with Moskit/SS-N-22 Sunburn supersonic anti-ship missiles, Svetlyak export class patrol boats (originally developed for the KGB's border guards) equipped with anti-aircraft missiles, and so on - all of which help boost Vietnam's capability to defy China.

Russian Defense Minister Anatoly Serdyukov has promised Moscow's help for Vietnam to build a submarine base for its Kilos, a loan to help Hanoi buy rescue and auxiliary vessels from Russia and planes for Vietnam's navy as well as build a ship repair yard that will also service visiting Russian navy ships.

Moscow hopes to regain access to its Soviet-era military base in Camh Ran Bay. An editorial in the Chinese daily The Global Times last week said:
All the cooperation ... goes beyond economic interests and is chiefly related to political and security concerns. That is the main consideration of Russia when developing the strategic relationship with Vietnam. The importance of the South China Sea [for Russia] depends not only on the abundant resources but also its strategic significance, where the Russian strategic foresight lies. With the economy recovering and military reform advancing, Russia has begun to move eastward.

Vietnam is definitely the springboard ... In essence, Russia standing behind Vietnam is not that different from the US, which is coveting the South China Sea [from] behind the Philippines.
The editorial foresees that Russia's forays will begin to grate on China's vital interests once Russian military prowess is fully restored. What could China possibly do? The editorial says, "China must improve its own strength and seek as many common interests as possible with Russia. National strength is the premise and assurance for a mutually respectful relationship, and within the constraint of common interests, Russia could be cautious in any decisions related to China."

The common wisdom is that Russia is nervous about "rising China" - about becoming its raw-material appendage, about the demographic imbalance in Siberia and the Far East, and so on. Instead, how about a China feeling insecure about Russia's surge in the Asia-Pacific and a Russian-American entente cordiale at some point?

Indeed, influential voices in the US strategic community like former National Security Advisor Zbigniew Brzezinski argue that the US should "welcome into the West" the democratizing Russia and in turn aspire to play the role of a "regional balancer and conciliator" in Asia. He wrote in Foreign Affairs magazine recently:
It is not unrealistic to imagine a larger configuration of the West emerging after 2025. In the course of the next several decades, Russia could embark on a comprehensive law-based democratic transformation compatible with both EU [European Union] and NATO [North Atlantic Treaty Organization] standards ... [Russians] would then be on their way to integration with the transatlantic community. But even before that occurs, a deepening geopolitical community of interest could arise among the US, Europe (including Turkey) and Russia.
Raging storms
Whether a genuine US-Russia concord is possible during Putin's presidency remains a debatable point. However, China also worries that there are Moscow elites who are wedded to "Atlanticism". Arguably, as Brzezinski said in an interview recently, "It's 2012, not the mid-1970s" and Russia and the US are not the enemies they once were; their current ties form a "mixed relationship" - a combination of practicality, antagonism and indifference. They may have political differences over Syria or Iran but they have just as many shared national security interests, which could one day include "rising China".

There is indeed a "residual resentment" in the Russian psyche - as Brzezinski put it. But US President Barack Obama intends to work on it if he gets re-elected. Obama was overheard recently on the sidelines of the a nuclear security summit in Seoul seeking Russian President Dmitry Medvedev's help to convey to Putin that he needs "space" until the November presidential election gets over to deal with missile defense (ABM - anti-ballistc missiles) and other discords in the US-Russia reset.

Moscow has since piped down its rhetoric on the ABM dispute with the US. On the other hand, China has stepped up its criticism of the US's ABM program. Luo Zhaohui, director general of the department of Asian Affairs in the Chinese Foreign Ministry, told the People's Daily on Wednesday that the deployment of the ABM system in the Asia-Pacific would have a "negative effect on global and regional strategic stability, and go against the security needs" of the countries in the region.

Therefore, Gazprom's deal with Vietnam comes as a reality check to Beijing as regards Russian intentions. The Global Times editorial's caption says it all - "Putin looks to Soviet past in South China Sea strategy." The editorial was fairly blunt: "Russia's intentions and activities deserve attention. China must clarify Russia's strategic intentions in the South China Sea. In fact, over the past decades, Russia's attention has never moved away from the region and its has a vested interest in the area."

These Chinese articles appeared on the eve of a visit by Foreign Minister Yang Jiechi on Friday to Moscow, where he met his Russian counterpart Sergey Lavrov and possibly raised the issue of Gazprom's dealings in the South China Sea. Interestingly, on Friday, Jiechi also telephonically spoke with his US counterpart, Hillary Clinton, to convey China's "willingness to cooperate closely" with the US in efforts to reach an early political solution to the crisis in Syria.

Did Yang hint at course correction on Syria? It's hard to say. Beijing did go out on a limb to support Russia's line - which is based on Russia's specific interests in Syria - and put at risk its expanding ties with petrodollar Gulf monarchies. Such enthusiasm was probably unwarranted, as the raging storms that lie beneath the "comprehensive strategic partnership of coordination" between China and Russia would suggest.

Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service.
Great game in the South China Sea....
By The Hanoist

On April 5, Russian energy giant Gazprom plunged into the maritime dispute between Vietnam and China with the announcement it would help state-owned PetroVietnam develop a lucrative off-shore energy field. By taking a major stake in the 5.2 and 5.3 blocks located in the Nam Con Son basin, Gazprom brings both exploration know-how and Russian political clout to the deal.

The entire Nam Con Son Basin lies within Vietnam's 200-mile exclusive economic zone (EEZ) under international law. The eastern portion of the shallow water basin where the two blocks are situated, however, is on the Chinese side of the U-shaped, nine-dash map Beijing uses as the basis for its claim over most of the South China Sea. [1]

Just five days after the Gazprom announcement, China's Foreign Ministry stated its opposition to "the exploration and exploitation of ocean oil and gas resources in Chinese sea territories without our permission" and said it had "made representations and taken measures to stop these illegal activities."

Similar pressure from China caused United Kingdom-based BP to delay production and eventually withdraw from blocks 5.2 and 5.3 in 2009, forcing Vietnam to find a new international drilling partner. In a batch of US Embassy in Hanoi cables released by the transparency group WikiLeaks, American diplomats revealed that BP and other Western companies with business interests in China were under significant pressure to withdraw from Vietnam.

The leaked cables speculated that Vietnam could turn to a non-Western energy company less susceptible to Chinese commercial pressure. Gazprom, which is Russia's largest company and enjoys strong government backing, will likely be more immune to Beijing's pressure.

In recent years, Moscow has presented itself as a reliable friend to Hanoi, one that will not endanger its national security like China or apply pressure for improvement in human rights like the United States and European Union. In return, Russia has won lucrative contracts to modernize the Vietnamese military and build the first two nuclear reactors in the country.

Another regional power in this evolving great game is India. Despite vocal protests from Beijing, Indian-state owned ONGC (Oil and Natural Gas Corp Ltd) entered into a long-term energy cooperation deal with PetroVietnam in November 2011. ONGC reiterated recently that it is moving aggressively ahead with exploration at blocks 127 and 128, which are inside Vietnam's EEZ but also straddle China's nine-dash claim.

Of the private Western firms with contracts in Vietnam, the most prominent is Exxon Mobil. At the end of last year, the US energy giant reported a "potentially significant" offshore oil and gas discovery at block 119 near Danang but also overlapping into waters claimed by China.

Other than a press release announcing the find, Exxon Mobil has taken a relatively low-key approach - a reflection, perhaps, of China's previous warnings to the US company to stop exploring in the area.

For Vietnam, the participation of foreign energy firms in offshore exploration is critical. With its overall energy production beginning to decline, Vietnam needs to drill further from the coast to find productive fields and generate export earnings to fund government coffers.

The presence of Gazprom, ONGC and Exxon Mobil - symbolizing the commercial might of Russia, India and the US respectively - is also important for reinforcing Vietnam's control over its entire 200-mile EEZ.

High power stakes
Just how much oil and gas lie beneath the contested maritime area? According to a much publicized Chinese study, the South China Sea could hold as much as 213 billion barrels of oil, or the equivalent of 80% of Saudi Arabia's known reserves. In a separate BP estimate, the entire region may also contain 2 quadrillion cubic feet of natural gas, more than five times the known natural gas reserves of North America.

Given its massive resource needs, China seems motivated to seize this entire energy bounty for itself. From Beijing's perspective, it is being robbed of around 1.4 million barrels of oil per day from illicit production by Vietnam, Indonesia, Malaysia and the Philippines.

According to energy experts, the geology of the South China Sea has blessed the western and southern rims of the sea with the most productive and easy to extract offshore oil and gas fields. Unfortunately for Beijing, these are the waters furthest from China and within the continental shelf of the other claimants.

One way to possibly lower the heat in the South China Sea would be through joint exploration. However, that would require all of the claimants to clarify their demands and narrow down what areas are truly under dispute.

To untie the knot of competing claims over islands and ocean, researcher Duong Danh Huy has proposed separating the disagreements over the Paracel and Spratly archipelago - claimed in whole or part by China, Taiwan, Vietnam, Philippines, Malaysia and Brunei - with the disputes over the waters of the South China Sea.

As tiny uninhabited islands and rocks, each of the features within the Paracels and Spratlys would be entitled to 12 nautical miles of surrounding water. Control of each of these several hundred 12-mile radii zones would be negotiated separately from that of the remaining expanse of the South China Sea, according to Duong's proposal. All the negotiations would be guided by international maritime law.

So far, however, China has shown a preference for bilateral engagement with individual claimants over a multilateral solution. To enforce its maritime claims, Beijing has stepped up actions seen as intimidation and harassment by outside observers.

Chinese patrol vessels twice last year sabotaged PetroVietnam exploration ships operating within Vietnam's EEZ. In March, China seized 21 Vietnamese fishermen in disputed waters and continues to detain them pending payment of a large fine. Last week, China precipitated a confrontation with the Philippines near the disputed Scarborough Shoal in the Spratly archipelago.

There could be more confrontation ahead. Following news of the Gazprom deal, China's Foreign Ministry declared: "We hope relevant countries will work with us, to avoid pulling extra-regional countries into the disputes. We also hope those extra-regional countries will respect and support dialogue and negotiation between China and relevant countries, and try to avoid getting involved."

As Beijing ratchets up pressure on the smaller claimants, many of them are banding closer together, as evidenced by the recent announcement of joint Vietnam-Philippine military exercises.

Southeast Asian nations are also showing eagerness to counterbalance China by inviting in powers from beyond the region. Singapore just announced that it would host four American littoral combat ships. Despite its intentions, Beijing's actions have unleashed a great game in the maritime commons for energy and security.

1. Map of Vietnam's offshore energy fields in relation to Vietnam's EEZ and China's U-shaped claim, see

The Hanoist writes on Vietnam's politics and people.

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