China's Oil Rig Gambit: South China Sea Game-Changer?

Tyler Durden's picture

Submitted by Carl Thayer via The Diplomat,

China’s placement of the giant state-owned oil rig HD-981 in Block 143 inside Vietnam’s Exclusive Economic Zone (EEZ) on May 2 was unexpected, provocative and illegal.

This incident marks the first time China has placed one of its oil rigs in the EEZ of another state without prior permission. This was an unexpected move because China-Vietnam relations have been on an upward trajectory since the visit to Hanoi by Premier Li Keqiang in October. At that time, both sides indicated they had reached agreement to carry forward discussions on maritime issues. China’s move was also unexpected because Vietnam has not undertaken any discernible provocative action that would justify China’s unprecedented actions.

China’s deployment of the rig was provocative because the oil rig was accompanied by as many as 80 ships, including seven People’s Liberation Army Navy warships. When Vietnam dispatched Coast Guard vessels to defend its sovereign jurisdiction, China responded by ordering its ships to use water cannons and to deliberately ram the Vietnamese vessels. These actions were not only highly dangerous, but caused injuries to the Vietnamese crew.

China’s actions are illegal under international law. Chinese Foreign Ministry spokesperson Hua Chunying justified China’s actions by claiming the rig’s operations were in Chinese “territorial waters” and had nothing to do with Vietnam. In other words, China has adopted a position similar to Japan with regard to the Senkaku Islands by declaring there is no dispute with Vietnam.

China has placed itself in an inconsistent position. China has been provocative in using paramilitary ships and aircraft to challenge Japan’s assertion of administrative control over the Senkakus. China seeks to get Tokyo to admit that the Senkaku Islands are disputed. Yet Beijing has adopted Japan’s stance with respect to Block 143 by refusing to acknowledge that there is a legal dispute between China and Vietnam.

Chinese spokesperson  Hua Chunying only presented a general statement, not a detailed legal argument in support of China’s actions. Her claim that the oil rig is in Chinese “territorial waters” lacks any foundation because there is no Chinese land feature within twelve nautical miles of Block 143 on which to base this assertion. Chinese statements refer to the Paracel Islands – and not Hainan Island – as the basis for its claim.

China’s lack of clarity has led academic specialists and regional analysts to speculate about the possible legal basis of China’s claim. In 1996 China issued baselines around the Paracel Islands, including Triton Island. Specialists argue that China’s claim could be based on the proximity of Triton, and its entitlement to a continental shelf and EEZ.

Other specialists point out that the 1996 baselines do not conform to Article 8 of the United Nations Convention on the Law of the Sea and cannot be used to advance a legal claim over Block 143.

If the former line of argument is accepted, China’s hypothetical EEZ would overlap with the EEZ promulgated by Vietnam. This would constitute a legal dispute. International law requires the two parties to enter into provisional arrangement, refrain from the use of force or the threat of force, and take no action to upset the status quo. Clearly China’s placement of the oil rig and its 80 escorts in Block 143 constitutes a violation of international law.

Analysts are divided on the motivations and objectives of China’s current bout of aggressiveness. Three main interpretations have been put forth.

The first interpretation views the placement of the HD-981 rig in Block 143 as the inevitable response by China to Vietnam’s promulgation of the Law of the Sea in mid-2012. Prior to the adoption of this law by Vietnam’s National Assembly, China unsuccessfully brought intense diplomatic pressure on Hanoi not to proceed. Immediately after the law was adopted, the China National Offshore Oil Company (CNOOC) issued a tender for blocks in the South China Sea that overlapped with blocks issued by Vietnam within its EEZ.

According to this interpretation, the current controversy is the result of a decision by CNOOC to follow through and begin exploring these blocks. In CNOOC’s view, Block 143 fell within Chinese jurisdiction. In China’s view, commercial exploration activities in Block 143 would undercut Vietnam’s claims to sovereign jurisdiction.

The first interpretation is questionable given the sheer size and composition of the fleet of 80 ships and vessels that accompanied the oil rig. This was clearly no ordinary commercial venture but a pre-emptive move to prevent Vietnam from defending its EEZ.

Diplomatic sources in Beijing also report that CNOOC officials revealed they were ordered to place the rig in Block 143 despite their misgivings on commercial grounds. CNOOC officials pointed to the costs of keeping the rig on station until mid-August when oil exploration is scheduled to cease. Other observers point out that the prospects of finding commercial reserves of oil and gas in this area are quite low.

A second interpretation posits that China’s actions were in response to the operations by ExxonMobil in nearby blocks..

This interpretation seems unlikely. ExxonMobil has been operating in Block 119 from 2011. While China protested the award of an oil exploration contract to ExxonMobil, China has not stepped up its objections in recent months. It is also unclear how the placement of a Chinese oil rig in Block 143 would deter ExxonMobil from operating elsewhere.

Finally, China’s actions appear to be disproportional and very likely counterproductive. Block 143 does not directly affect U.S. interests. Chinese interference with ExxonMobil would be a direct challenge to the Obama administration’s statement that U.S. national interests included “unimpeded lawful commerce.”

The third interpretation, first publicized by The Nelson Report (May 6, 2014), argues that China’s actions were pre-planned in response to President Barack Obama’s recent visit to Japan, South Korea, Malaysia and the Philippines. During his visit, President Obama publicly opposed the settlement of territorial disputes by intimidation and coercion.

China was angered by the Obama administration’s prior criticism of China’s nine-dash line claim to the South China Sea and U.S. support for the Philippines’ decision to request international arbitration to settle its territorial dispute with China. In addition, China was outraged by President Obama’s public declaration of support of Japan and its administration of the Senkaku islands as well as President Obama’s declaration that U.S. alliance commitment to the Philippines were ironclad.

In sum, the third interpretation argues that China chose to directly confront the main premises of the Obama administration’s rebalance to Asia. China chose to expose the gap between Obama’s rhetoric and U.S. capability to respond to China’s assertion of its sovereignty claims.

Some analysts who support the third interpretation argue that China has taken heart from President Obama’s inability to respond effectively to the crises in Syria and the Ukraine. Therefore China manufactured the oil rig crisis to demonstrate to regional states that the United States is a “paper tiger.”

The third interpretation has plausibility. But it begs the question of why Vietnam was the focus for this crisis. Also, China’s actions could prove counter-productive, coming on the eve of a summit meeting in Myanmar of the heads of government of the ten states comprising the Association of Southeast Asian Nations (ASEAN).

On March 18, China and ASEAN held the tenth joint working group meeting on the Implementation of the Declaration on Conduct of Parties in the South China Sea (DOC) in Singapore. This was followed up by the seventh ASEAN-China Senior Officials’ Meeting on the Implementation of the DOC in Pattaya, Thailand on April 21. While progress has been slow, there were some encouraging signs that confidence building projects under the DOC might be developed. As one ASEAN diplomat put it to the author, “the journey [consultations with China] is more important than the destination [achieving a binding COC].”

China’s deployment of the oil rig and accompanying fleet ensured that the South China Sea would be a hot button issue at the ASEAN Summit. ASEAN Foreign Ministers issued a stand alone statement on May 10 expressing “their serious concerns over the on-gong developments in the South China Sea, which increased tensions in the area.” It is significant that a separate statement was issued on the South China Sea. This statement implicitly expresses support for Vietnam and lays the foundation for a similar statement by ASEAN heads of government/state.

The Foreign Ministers’ statement did not specifically mention China by name but it reiterated ASEAN standard policy on the South China Sea. The statement urged the parties concerned to act in accord with international law, including the United Nations Convention on the Law of the Sea, to exercise self-restraint, avoid actions that could undermine peace and stability, and to resolve disputes by peaceful means without resorting to the threat or use of force.

The ASEAN Foreign Ministers’ Statement called on all parties to fully and effectively implement the DOC. The Statement also called for the need for “expeditiously working towards an early conclusion of the Code of Conduct in the South China Sea.”

The ASEAN Foreign Ministers’ Statement did not mention China by name in deference to Beijing. But the Statement may be read as a shift in the views by individual members of ASEAN that territorial disputes involving the Paracel Islands and its surrounding waters are a bilateral matter between China and Vietnam.

An endorsement of the Statement by the Foreign Ministers on the South China Sea by the ASEAN Summit will provide political and diplomatic cover for the United States and other maritime nations to express their concern.

Japan’s Prime Minister Shinzo Abe has already come out in public in support of Vietnam. The U.S. State Department issued a statement characterizing Chinese actions “provocative.” More importantly, Assistant Secretary of State Danny Russel just visited Vietnam on a scheduled trip. He will be able to take his first-hand assessment back to Washington to shape the Obama Administration’s response.

Beneath the ASEAN diplomatic surface, however, China’s actions are likely to stoke anxieties already held by the Philippines, Vietnam, Malaysia, Singapore, and Indonesia. These states will seek to shore up their own maritime capabilities and to seek reassurance of support from the United States and other maritime powers such as Japan, Australia, and India.

Vietnam has reiterated its determination to respond to Chinese tactics of ramming its vessels. The current stand-off between Chinese and Vietnamese vessels in the waters around the CNOOC oil rig therefore holds the potential for an accident, a miscalculation, or the use of deadly force.

It is more likely that China and Vietnam will manage this affair by preventing matters from escalating to the extent that armed force is used. As of May 2, China and Vietnam have held six face-to-face diplomatic meetings in Beijing and three meetings in Hanoi between the Ministry of Foreign Affairs and Chinese Embassy officials.

Vietnam has requested that China receive a high-level special envoy. Diplomatic rumor has it that the special envoy will be a member of the Vietnam Communist Party (VCP) Politburo. Vietnam has resorted to sending special envoys to Beijing on two occasions in recent years and both visits resulted in a lowering of tension.

On May 8, the VCP Central Committee opened a long-planned executive session. This will provide Vietnam’s leaders with an opportunity to review the current crisis and to work out an effective political and diplomatic strategy to deal with China. Consensus on this issue will give the special envoy authority to speak on behalf of the Hanoi leadership.

When China first announced the deployment of its oil rig, it stated that its operations would terminate on August 15. This provides plenty of time for both sides to orchestrate and manage the confrontation in Block 143 and provide a face saving means for ending the confrontation.

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dirtyfiles's picture

to big to fail..

ZerOhead's picture

"China’s placement of the giant state-owned oil rig HD-981 in Block 143 inside Vietnam’s Exclusive Economic Zone (EEZ) on May 2 was unexpected, provocative and illegal."

I wonder where they learned those manners from...

CrashisOptimistic's picture

Well yes, but the issue here is perspective.  These Diplomat people want to sit at their keyboards and pontificate about sophisticated maneuverings and imagined pressures applied via this choice or that choice and they FORGET THE PROBLEM WHICH IS RIGHT HERE:

Scroll down the dropdown and select China and look at the fucking black line.

Low odds of commercial amounts of oil there? So the fuck what?  That black line bespeaks desperation.  You start drilling anywhere there is ANY chance of oil.  They ain't going to sell it.  They're going to burn it.

This is not 20 years ago.  People HAVE to have oil and they will do whatever it takes to get it.

Tao 4 the Show's picture

Truly, CrashisOptimistic. And I love these analysts who seem so befuddled by violations of pretend rules that countries temporarily follow for pretend reasons. The world just moved a step closer to truth now that Russia stopped playing games on one level. So now the actual rules they play by are easier to see. Get over it.

CrashisOptimistic's picture

I blame the EU.  Their song and dance of 2011 where they had these 2 AM meetings and came out and announced their big breakthrough successful agreement to . . . delay the problem and not deal with it AGAIN AND AGAIN AND AGAIN.

In the end?  The EU taxpayer sent money to Greece.  Again and again and again.  Swaps?  Nope.  Disallowed.  So much for contract law.

I know the ZH people sit on the edge of their seats waiting for the magical moment when someone demands gold for oil, but of course this will never happen.  The moment is coming when paper won't buy oil, but neither will something else that has no function.

It will be labor.  Or food.  Or some other hard asset that has modern function.  When THAT happens, that's when wars would have to start.  Frankly, it's probably why Russia is still playing that game.  They are bleeding their enemies dry as it is.  They may want to bleed them further before they take the step of "keeping the oil for our grandchildren."

Tao 4 the Show's picture

I would comment on the EU, but Nigel Farage has said it all better than I can (and with a witty English accent to boot).

So What's picture

IMHO: The Chinese will regret what they ask for. Vietnam is the only that's not included under US umbrella. South Korea, Japan and Taiwan have seen US actions protecting them or have outright contractual treaties; one recalled Clinton sending carriers to the Taiwan strait.
Vietnam is the odd man out and thus paradoxically it should be the one China should fear most, because it is the only that Japan and USA can use to fight a proxy war against China. Once the shooting starts, all the tankers along the coast going up to China are fair game. Even 25% of these tankers from the middle east carrying oil are knocked out, preferably by US drones, China will be in economic collapse within six month. Talking about mass social unrest domestically.
Anyway, at least Tibet will soon be free.

CrashisOptimistic's picture

It's a bit deeper.

Japan also gets tankers steaming north around Singapore.  They have no oil.  Zero.  China has about 40% of their daily consumption domestically coming out of the ground in their northeast.

These are third party tankers. 

When one gets hit, Lloyds pulls all insurance.  They ALL stop.  All of them.  Not just those going to China.

Behold . . . the Russian/Chinese pipelines.

Japan is fucked.

newbie vampire's picture

Japan is fucked.


No......................... they got unlimited power from Fukushima.   Everything's all good.

newbie vampire's picture

"The moment is coming when paper won't buy oil, but neither will something else that has no function."

It may not have any function but when paper won't buy oil, I will still insist on it before you get any oil.  Or do you expect someone to give you oil for nuthin ?

cocky roach's picture

A lot of us aren't really waiting on the edge of our seat. A lot of us stack very patiently, because we know gold will rise. We know this not because of analysts, but because of history.

813kml's picture

It's amusing when the pearl clutchers at the Diplomat get their panties in a twist.  Their professors brainwashed them to believe that all countries of the world are more than happy to bend over for their masters, US Empire.  It completely throws them for a loop when the slaves get all uppity.

China, in concert with Russia, is giving the US a taste of its own medicine.  They see the facade of US power starting to crumble, the more they force the US to act the more openings are created by idiotic US moves.  I would say that most nations of the world truly despise the US for its actions over the past 50+ years, this won't end pretty.

newbie vampire's picture

" I would say that most nations of the world truly despise the US for its actions over the past 50+ years, this won't end pretty."

But we got an unlimited supply of Americans on welfare.  The administration can simply draft the cannon fodder and send them to the front with the blessing of the Nobel Prize Peace winner.

August's picture

There won't be any "front" for US troopers to defend.  The US will fight its next great war with either 1) bluster, proxies and mercs, or 2) WMDs.  Actual US groud troops will be most useful in maintaining order in The Homeland itself, particularly after the Incoming has come in, and this time it won't just be fire-balloons drifting in from the Pacific.

ZerOhead's picture

Dog pissing on a tree to mark it's territory...

Telemakhos's picture

China has a history of cooperating to get natural resources rather than seizing them.  They're partnering with much of sub-Saharan Africa, and they even bought mineral rights in Afghanistan, despite the poor security situation preventing them from being able to access those minerals.  When they want resources, the Chinese tend to cooperate with the locals and, in the process, build good trading relations with them.  And, yes, the Chinese want and need resources, but they aren't so desperate as to send the military out to seize them: they prefer more harmonious strategies for achieving more stable economic outcomes.  When they send military ships somewhere, it's to send a very clear message, and it's not one of desperation.

If they wanted to, they could have held out the carrot instead of the stick to Vietnam and partnered with them to develop the undersea oil reserves jointly.  In fact, in November and February, Hanoi and Beijing were meeting to work on exactly that.  China is already Vietnam's #2 trading partner, and it would have risen to #1 very quickly and won back some love lost in its past dealings with Vietnam (i.e. the 1979 war), love that the US instead has been eagerly trying to gain.

The Chinese suddenly deliberately chose to be assholes about this instead: not just to claim the oil unilaterally, contrary to their own earlier plans, but to send in military ships.  They're doing this at the same time that Russia is demonstrating that the US will not keep Ukraine from being dismembered after supporting the change in government there.  It's a parallel move: China is demonstrating that the US will not intervene to aid Vietnam in a dispute where China's actions are blatantly illegal.  This isn't about the oil, but about making the rest of the world, and especially Asia, question US resolve: it's not an economic move, but a geopolitical one.  

CrashisOptimistic's picture

You missed the point, too.

Oil is so overwhelming important that nothing else matters.  Oil rigs are tremendously expensive suckers.  You don't go deploying one to make a point or demonstrate someone's resolve or to show a flag.  You can play that game with military ships.  You don't waste an oil rig on that because . . . .

You deploy them for one and only one reason.  To get your lifeblood.

ebear's picture

"You deploy them for one and only one reason.  To get your lifeblood."

In which case, they're wasting their time:


The Paracel island territory does not have significant discovered conventional oil and gas fields and thus has no proved or probable reserves. Geologic evidence suggests the area does not have significant potential in terms of conventional hydrocarbons.

N2OJoe's picture

You're all missing the big difference here: The Chinese military has no presence in sub-Saharan Africa or Afghanistan.

The price of sending a few existing warships to intimidate your neighbor into "donating" resources is much less than buying the rights at fair market value.

You didn't think they were dumping massive amounts of currency into their military without expecting a return on investment, did you?

lolmao500's picture

China has a history of cooperating to get natural resources rather than seizing them.

You mean, buying people off? They learned that from the US... but yeah China has understood that the US approach was too radical, too much theft involved. So they make it look good. Give the locals MORE than the US would have... and make the locals accept and love the Chinese so chinese people can move there, grow big families and in a few generations, much of Africa will love China/be part Chinese. China is playing the long game... the US policy makers and businesses are only thinking about the short term.

verum quod lies's picture

A country deploying a large floating oil rig and 80 ships into someone else's territorial waters is hardly the 'long game'.

teslaberry's picture







ptolemy_newit's picture

the placement looks to be more than 200 miles of the coast of vietnam?


ptolemy_newit's picture

the placement looks to be more than 200 miles of the coast of vietnam?


Ignatius's picture

Where does an 800lb gorilla sit?

ebworthen's picture

With dentures or without?

Hulk's picture

Big red bulbous, tumour laden ass or regular ass ???

NoDebt's picture

"Vietnam has not undertaken any discernible provocative action that would justify China’s unprecedented actions."

Yes they did.  They had to audacity to be sitting on top of resources China wants.  That's more than enough provocation.

"China’s actions are illegal under international law."

Yeah, so?  Who's gonna stop them?

"China has placed itself in an inconsistent position."

Oh, please.  Like everybody else is pure as the driven snow.

Another quality pile of intellectual crap from The Diplomat.  Doing their little circle jerk about "international law" which isn't stopping and has never stopped anyone from following a more basic law, and one that's making a spectacular comeback in recent years:  If you're strong enough to take it and hold it, it's yours.  There is no cavalry coming to save the day.

ZerOhead's picture

When there is no real rule of international law other than the threat or use of overwhelming force this is what you get.

They have learned the game well from the best government money could buy.

This shit has to stop.

NoDebt's picture

Agree completely, obviously.  But who's gonna stop them?  Nobody wants or trusts the US to do the right thing, at least not any more (and our capacity to do so wanes by the day).  So what's left?  Nothing.  Exactly as you said.  Might makes right is all that's left.  Take it, hold it, it's yours.


ZerOhead's picture

Possession is 9/10ths of the law.

Unless it's drugs of course... in which case it's 10/10ths.

intric8's picture

Any problem in the world can be remedied with the careful application of high explosives

newbie vampire's picture

"This shit has to stop."

Yep.............. and the Nobel Prize Peace award winner and POTUS welcomes the opportunity to show who's the boss.  Americans in their millions are ever ready to die for Japan and the Philippines, so why exclude Vietnam on the technicality of not having a defence agreement. 

Someone should apologise to the families of Americans who died unnecessarily in Vietnam. How are we to know they were our allies ?/sarc

Yes like, the POTUS and Lurch could hardly wait to put boots on the ground in Syria.  Death and Injury ?  Hell, what difference does that make ? 

American lives have so little value.

Snidley Whipsnae's picture

IIRC, Shortly after the US military departed Viet Nam the Viet Namese were feeling very frisky and told the Chinese to clear out of a strip of disputed border land that belonged to Viet Nam.

China quickly dispatched troops and pushed the NVA out of the disputed land... a short lived but bloody battle.

Chinese army is pretty good at sweep and clear ops... But I don't know how good their navy is.




Kirk2NCC1701's picture

"Illegal"?  Good one.  Ever heard of "Possession is Nine Tenths of the Law"?  Why do you think we got the MIC, DOD, CIA and NSA?  Nothing to do with forcing the USD onto everyone is it?

mrblah's picture

"The third interpretation has plausibility. But it begs the question of why Vietnam was the focus for this crisis"

Well Damn, I wonder why they would choose VIETNAM of all places to demonstrate that the U.S. is a "paper-tiger"? Whos promise to "defend" asian countries is bullshit?

Did the author miss history class? From first grade to graduation, and then continue to not bother reading anything up until the present day?

JJdog's picture

Will Michelle Obama hold up a sign "# Give our ocean back" for the poor Vietnamese people?

mrblah's picture

No shes too busy trying to lobby for air-time to hold up a "#droneskillkids" sign...

.....oh wait a minute.

hardcleareye's picture

WTF does the first lady has to do with China oil rigs??? 


ebworthen's picture

Act first, seek permission later.

Who funded and armed Vietnam when they were fighting the U.S.?  China.

Who kicked Vietnam's butt in the late 70's for fiddling in Cambodia?  China.

Who is going to come to Vietnam's rescue when China takes what it wants, the U.S.?

Good luck with that, Vietnam.

Treason Season's picture

...Who funded and armed Vietnam when they were fighting the U.S.?  China....

I believe it was Rockefeller via Russia that funded Uncle Ho, not the Chinese though it's all good for the NWO.

hardcleareye's picture

Cite sources and explain please......

RafterManFMJ's picture

Hey left hand, what's that right hand doing?

yogibear's picture

So when does China get the keys to the White house?

newbie vampire's picture

"So when does China get the keys to the White house?"

The Chinese know better than to fuck around with Wall Street and the Banksters. 


rsnoble's picture

Illegal?  Thanks for being such a role model and showing everyone how to do it US.

Guitarbill's picture

Funny how we don't hear anything in the MSM about those "Chinese terrorist"...

NoDebt's picture

Chinese terrorists + Most Favored Nation status = Most Favored Terrorists?

I almost chuckled at the thought but then I realized.... yes, they might actually call them that.  With a straight face.  I put NOTHING past these bought-and-paid-for politicians.

Schacht Mat's picture

What is China doing?  Why, they are following the American playbook.  Which one, you may ask?  Well, the one that the US wrote when, about 140 years ago, we started asserting our influence over the Caribbean Sea.  We certainly taught them well - wait until the rest of the world is occupied with their own issues (for us it was Bismarck and the rise of Prussian power in continental Europe, followed by the German Dreadnought challenge to British naval supremacy), such as is the case with us and Europe squaring off with Russia in far Eastern Europe and the MENA region, and then start to chip away at foreign spheres of influence in the particular body of water - in this case the South and East China seas.  We may currently be lousy at effectively managing our foreign affairs, but we certainly have been excellent teachers for our adversaries.

BTW - how do you say "Manifest Destiny" in mandarin.....