The rich energy resources in the South China Sea have long driven conflict among the countries that have staked frequently overlapping territorial claims over its waters. China, which has laid claim to wide swaths of the sea, has taken an aggressive stance, using various tactics to defend its interests and deter those who have rival claims from drilling and exploration operations. Some countries, such as the Philippines, have settled their disputes with China by choosing to work with Beijing. However, Vietnam has adopted the opposite approach, maintaining a harder-line stance and bringing in third parties to conduct energy exploration as it resists China.
A quiet standoff has been brewing in the South China Sea since May over a joint energy exploration effort between Vietnam and Japan around the energy-rich Vanguard Bank in waters that both Hanoi and Beijing claim as their own. The potential for the dispute to grow louder, however, is increasing. On July 25, Vietnam announced it would allow a Japanese exploratory oil rig to continue operations in waters it and China each claim beyond an originally planned completion date of July 30. The decision came after Beijing reportedly asked Vietnam to withdraw the rig in exchange for China withdrawing the survey ship it sent into the region, along with its accompanying flotilla of coast guard and other vessels. Social media reports suggest that Vietnam would deploy more ships to the area.
Why It Matters
If neither side backs down, and more vessels are indeed dispatched to the scene of the dispute, the risk of a serious escalation akin to the skirmish between China and Vietnam in 2014, similarly over energy exploration, will climb. Significantly, Vietnam's decision to dig in its heels noticeably departs from its previous practices, when it responded to Chinese threats by either halting its exploratory operations or backing away from its decision to explore. Vietnam's response now leaves China with several options. It could decide to reinforce its own survey activities and send in additional escort forces, it could escalate its tactical actions at sea designed to intimidate Hanoi, or it could choose to reduce its own activities in the waters.
A mid-July visit to China by Vietnam National Assembly Chairwoman Nguyen Thi Kim Ngan as tensions over the dispute spiked and ongoing consultations between Beijing and Hanoi had suggested that neither side was willing to escalate the dispute, given the high stakes. After all, for Beijing, a more serious standoff would weaken its carefully managed conciliatory approach to Southeast Asia as it attempts to insulate itself from increased U.S. pressure. In Vietnam, greater tensions over the disputed waters could fan nationalistic fervor, generating an anti-China backlash that grows beyond government control, putting the country's recent investment momentum at risk.
But by extending the contract, Hanoi appears to be more willing to take those risks, banking on the growing focus on the South China Sea by outside powers to bolster its resistance to China's desires and force Beijing to alter its course. Specifically, China must calculate the risks of closer security relations between Hanoi and Washington. An escalation of the current dispute could well strengthen anti-China sentiment inside the Vietnamese Communist Party, sparking a call for increased security relations with the United States — a path Hanoi has so far been reluctant to take. In fact, last year Vietnam abruptly canceled dozens of military engagement activities it had scheduled with the United States. In addition, if China were to step up tactics of intimidation, it could push Vietnam to submit their maritime disputes to the International Court of Justice, putting a further strain on their relationship.
The deployment of the Japanese oil rig in Block 06-1 in mid-May under contract to Rosneft Vietnam B.V. near the oil-rich Vanguard Bank, a region of the South China Sea that both countries claim as their own, prompted China to deploy its own Haiyang Dizhi 8 survey ship to the area in early July. China also hinted that it might go so far as to drill in the area itself if Vietnam did not withdraw. The U.S. State Department issued a statement of concern on July 20, terming China's activity coercive.