Hunt for oil raises stakes between Asian rivals in South China Sea

With the promise of huge reserves under the seabed, the potential for military confrontation surfaces as China and its main Asian rival, India, compete for regional dominance and hydrocarbons.

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DELHI // Tensions are rising in the waters of the South China Sea where the competition for oil and regional dominance between India and China is entering a potentially dangerous phase.

When India's external affairs minister, SM Krishna, flew to Vietnam last week, one of the main points on his agenda was a plan to secure hydrocarbon exploration rights for the international arm of India's state-owned Oil and Natural Gas Corps (ONGC).

It was a controversial move, since the blocks lie offshore in the South China Sea, the most disputed maritime region in the world.

Six different countries have been arguing about ownership of these waters for decades, often citing centuries-old precedents to back up their claims. China has taken a particularly strident approach to the dispute, claiming practically the entire South China Sea as its "indisputable sovereign territory".

For a long time, the claimants were happy to let the quarrel simmer quietly in the background, but the promise of huge hydrocarbon reserves under the seabed has significantly raised the stakes in recent years. With China's main Asian rival now wading into the dispute, the potential for military confrontation has once again surfaced.

A vitriolic editorial last week in one of China's more hawkish state-run newspapers, Global Times, described India's actions as a "serious political provocation".

"China should resolutely stop [ONGC] from pursuing this course of action," it said. "Reasoning may be used first, but if India is persistent in this, China should try every means possible to stop this cooperation from happening."

In a statement on Monday, China's foreign ministry did not name India specifically, but said that oil and gas exploration activities "in this jurisdiction" by "any country" without the approval of the Chinese government "constitutes an infringement upon China's sovereignty and national interest" and was therefore "illegal and invalid".

India says that its plans to explore for oil off the coast of Vietnam are entirely legitimate. "Whatever we do as a peace-loving and law-abiding nation is very much within international norms and conventions," said a spokesman for India's external affairs ministry.

This is unlikely to carry much weight with Beijing, which has been increasingly flexing its military might in the South China Sea. In May and June, Chinese vessels severed the cables of PetroVietnam survey ships operating in Philippine and Vietnamese waters.

The following month, an Indian naval ship, INS Airavat, was confronted by a Chinese warship shortly after leaving a Vietnamese port and accused of trespassing in Chinese waters.

Experts say this recent assertiveness could reflect a growing fear in China that it is losing its grip on the region.

The involvement of the United States, whose secretary of state, Hillary Clinton, last year described the South China Sea as "a leading diplomatic priority" has only heightened concerns in Beijing.

Christian Le Mière, a research fellow for maritime security at the International Institute for Strategic Studies in London, said: "China is increasingly isolated on this issue.

"All the concerned states submitted their claims on the South China Sea in 2009 according to the UN Convention of the Law of the Sea. That correspondence made it apparent that China's claims are highly ambiguous and inconsistent under international law."

US diplomatic cables published recently by WikiLeaks revealed that India's ONGC had already been warned by Chinese officials about working in the region, as had many other international companies, including Chevron and Exxon Mobil in the US, Russia's Gazprom, and Australia's Santos.

The cables also suggest that Chinese pressure may explain why BP, based in the UK, abandoned two exploration blocks it had leased from PetroVietnam.

"On June 8 [2007], China warned BP to cease work in [blocks] 5-2/5-3 and threatened unspecific 'economic consequences' if BP failed to abide," the September 2007 cable said.

"BP, which has significant energy investments in China, particularly in the downstream sector, quickly acceded by suspending, and then cancelling, its PetroVietnam contract."

India is unlikely to be as easily cowed by Chinese pressure. Its "Look East" policy has led it to establish close relations with a number of South East Asian nations, particularly Vietnam, with whom it formalised a strategic partnership in 2007.

Mr Prakash, the external affairs spokesman, said: "We have a long-standing historical relationship with Vietnam. One of the most important aspects is our big ticket investments in energy and hydrocarbons, and we will continue to build on these."

Many interested parties are now watching closely to see what happens when ONGC starts actively searching for oil in the disputed seas.

Ian Storey, a senior fellow at the Institute of South East Asian Studies in Singapore, said: "It remains to be seen how China will react. But if ONGC charters a survey ship to work off Vietnam, it may well be harassed by China's maritime agencies. This would represent a worrying escalation of the dispute."