A Southward Thrust for China’s Energy Diplomacy in the South China Sea

What could upset the fragile equilibrium in the South China Sea and resurrect emotive issues of national sovereignty, prestige and pride? The biggest risk is that economic recovery, rapid growth and a resurgence of strong demand for energy in Asia will again push China and its Southeast Asian neighbors into contention. China’s oil and gas production has been failing to keep pace with surging consumption, and it is worried that existing reserves will not last much longer. These concerns are shared by other petroleum producers in the South China Sea, among them Vietnam, Malaysia, and Indonesia.
They are currently net exporters of oil or gas or both, but can see the time approaching when their energy reserves will be insufficient to meet domestic demand. They want to extend the life of their reserves by finding more oil and gas. As in China, this is an economic growth imperative as well as an energy security imperative because oil and gas are vital for transport and industry. Meanwhile, the Philippines, a net importer of both oil and gas, urgently needs to find more fossil fuel and regards its offshore zones in the South China Sea as a key to greater self-sufficiency in future.

For the Chinese government, energy policy has become an arm of foreign policy. From being a net exporter of oil in 1993, China today relies on foreign supplies for about half the oil it uses. It is also becoming a major gas importer. For reasons of energy security, China has placed a high priority on getting as much of its future oil and gas as it can from within its land territory, from offshore zones, or as close to home as possible, including Russia and Central Asia. At present, around 75 percent of China’s oil imports come from politically volatile areas of the Middle East and Africa. They have to be shipped to China through distant sea-lanes, which the Chinese armed forces do not yet have the means to protect. These maritime arteries of energy supply could be cut in a crisis.

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