India: Continued Activity in the South China Sea

Indian state-owned energy company ONGC Videsh Ltd. announced July 19 that it would continue participating in a joint oil and natural gas exploration project with Vietnam in Block 128, one of several potentially exploitable oil blocks in the South China Sea. The company withdrew from the project in May — purportedly over unfavorable exploration conditions — but it reconsidered its position after Hanoi reportedly pledged to give ONGC Videsh additional data and other incentives.

Complicating the project was China, which claims sole domain over the South China Sea and has long opposed joint exploration in its waters unless it includes China. Many observers considered ONGC Videsh's initial withdrawal to be a bow to China's demands, despite New Delhi's claims to the contrary. But with the decision to renew the contract, India has shown its willingness to align with Vietnam amid tensions in the South China Sea, even at the risk of hurting its relations with China. Still, a number of questions remain over the commercial viability of the venture and over the implications of Beijing's response.