It has been over a month since China installed an oil rig in the disputed South China Sea (SCS). Ever since, China has shifted the location of the rig thrice. The installation of the rig appears to be a well calibrated move. Evidently, China has adopted a ‘salami slicing’ (step-by-step approach) in the SCS. It took over Mischief Reef from the Philippines in 1995; established Sansha city on the Yongxing Island/Woody Island a few kilometres from its Hainan Province; cut the cables of the Vietnamese vessels; occupied Scarborough Shoal; and is now constructing a runway on Johnson South Reef. The rig appears to be their next move in the region.

Subsequent to the installation, China issued an official document titled ‘The operation of HYSY 981 grilling rig: Vietnam’s Provocation and China’s Position’ on the 8 June, reaffirming its position. It has also taken the issue to the UN. Chinese Deputy Ambassador Wang Min sent a ‘position paper’ on the rig to the UN Secretary General Ban Ki-Moon and asked the UN chief to circulate it to the 193 members of the General Assembly. This is in sharp contrast to China’s previous gestures. During the Shangri La Dialogue, Lt. General Wang Ghuanzhong of the People’s Liberation Army reiterated China’s position that territorial disputes should be settled bilaterally between the claimants with clear indication that the US should keep away from the disputes. Until now China stood for bilateral solution of disputes and was against any arbitration. By issuing the statement and sending a ‘position paper’, China is itself internationalising the issue.

These developments have further increased the tension in the SCS dispute making it further complicated. It is hence perplexing to understand as to why China issued a ‘position paper’ on the rig in the disputed area. What is China’s end game in the region?

Rig HYSY 981 in the Disputed Area

The rig is placed between the Paracel Islands occupied by China and the Vietnam. Since 1974, China occupied the Paracels (Xisha/Hoangsa Island).The problem arises with the different interpretation of the position of the rig. According to Vietnam, the rig is operating within 200 nautical miles of its Exclusive Economic Zone (EEZ) and on its continental shelf but China says that it is operating in its own territory. China and Vietnam have already signed the agreement on the delimitation of the territorial seas; EEZs and the continental shelf in the Beibu Gulf (Gulf of Tonkin); and the agreement on the fishery cooperation in the region in 2000. Till date, this is the only maritime boundary agreement that China has had with any other country.

There are two reasons for China establishing the rig; energy security and the strategic concerns in the region. Since 1993, China has been a net importer of oil and is heavily dependent on supply from abroad. Thus, to reduce the dependence on foreign oil, China is in the process of exploring different plausible locations; and the SCS has approximately 11 billion barrels of oil reserves and 190 trillion cubic feet of natural gas. On the strategic front, there is an increasing role of external powers in the region. China Daily reported that “the United States was the real threat…pointing to U.S. cyber-warfare and missile defence capabilities and the fact that U.S. defence spending far exceeded China‘s.” Nevertheless, the most likely rationale for the installation of the rig is that it is China’s response to the changing strategic environment of the SCS.

China's Endgame in the Region

China has realised that the SCS is vital for both solidifying its influence in the Southeast Asia, as well as for its regional aspirations. China aspires to play an important role in the region with minimum US influence and has thus turned towards multilateral solution to the dispute. Perhaps it has realised that if it continues defying international laws and UN mandates, it will give more space for the US to interfere in the region as is evident in the case of the enhancing US-Philippines alliance. 

Yet, another reason for putting forward the ‘position paper’ is to stop the discussion for a ‘Code of Conduct’ in the region which is already due after the ‘2002 code of Conduct’. By putting forward the ‘position paper’, China is trying to make its own stand clear and thereby putting the blame on the Vietnam.

At this juncture, China’s strategy in the region appears to be a combination of tactical timing and ambiguity. Thus the installation of the rig has taken the dispute to a multilateral forum. However, its solution remains uncertain.