COLUMN-South China Sea oil dispute unlikely to have a winner: Clyde Russell

Wed May 28, 2014 10:48pm EDT

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--Clyde Russell is a Reuters columnist. The views expressed are his own.--

By Clyde Russell

LAUNCESTON, Australia, May 29 (Reuters) - One of the lessons from recent history is that intractable disputes are rarely solved as long as one or more of the parties believe they can win.

This appears to be the case with the increasingly confrontational situation between China and its neighbours over the South China Sea, with all sides still pressing claims unacceptable to each other.

The latest flashpoint is the Chinese decision to position an oil drilling rig in the South China Sea in waters claimed by both China and Vietnam.

Vietnam claimed one it its fishing boats, operating near the rig, was sunk by Chinese craft on May 26, prompting Beijing to say it capsized after "harassing" and colliding with a Chinese vessel.

And it's not just China and Vietnam, with the Philippines, Malaysia, Brunei and Taiwan all claiming parts of the South China Sea, while rejecting China's assertion that 90 percent of the waters belong to it.

China is also engaged in a dispute with Japan over small islands that lie between them in the East China Sea, with Chinese fighter jets flying in close proximity to a Japanese surveillance aircraft in the latest ratcheting up of tensions.

In trying to understand the dispute, it's always best to ask what's at stake.

On an economic level it's believed the South China Sea is rich in oil and gas deposits, with the U.S. Energy Information Agency estimating 11 billion barrels of oil and 190 trillion cubic feet of gas in proved and probable reserves.

For China, developing major oil and gas fields under its sovereign control has obvious appeal, but both Vietnam and the Philippines are also hungry for energy resources.

On the political side it appears that China is becoming more assertive, taking the view that its status as Asia's largest economy means it should take more of a leading role in the region.

Beijing is also investing heavily in boosting its military capabilities to give muscle to a more robust approach, and also to counter the influence of the United States, which counts Japan, the Philippines and Australia as firm allies in the region.

For the smaller countries of Southeast Asia there appears to be a determination to stand up to what they see as Chinese bullying, using the tactic learned by children in playgrounds across the world that unless you stand up to the bully, he will continue his bad behaviour.

But this isn't a schoolyard and the legitimate fear is that the situation can move quickly from sinking fishing boats to armed skirmishes and ultimately all out conflict.

The main problem is that the countries involved haven't yet worked out that none of them can win.

While China would almost certainly win a military conflict, assuming no U.S. involvement, it would lose politically and economically by becoming a pariah among its East Asian neighbours, and probably with major trading partners such as the European Union.

Likewise, Vietnam, the Philippines and the others have to recognise the reality of a powerful China and how it's better to build a working relationship with Beijing that allows for economic development without domination.

LEADERSHIP LACKING

The South China Sea dispute doesn't need to deteriorate into conflict, but it will take leadership and compromise by all parties, something that seems unlikely currently.

The Philippines is trying its luck by seeking arbitration at the United Nations Convention on the Law of the Sea (UNCLOS), seeking recognition of its right to exploit resources within a 200-nautical mile exclusive economic zone.

The convention allows countries a 12-mile zone of control with a claim to 200 miles to exploit resources.

The problem in the South China Sea is that several countries seek these rights from disputed small islands and reefs, creating a multitude of overlapping claims.

Even if Manila is successful at the UNCLOS, the value of any ruling is doubtful given the lack of any enforcement mechanism.

It seems to me that the best solution would be for the all the involved parties to sit down and work out a structure for everybody's benefit.

This could take the form of a transnational corporation with weighted shareholding that would be granted exclusive rights to exploit the resources, with the output and profits being shared.

Or a multinational agency could be set up to coordinate developments and provide a mutually-agreed dispute resolution process.

But these sorts of steps first require a recognition that nobody is going to win outright.

If you look at some other long-running disputes since the end of World War Two, a clear pattern emerges.

As long as one side believes in total victory, the conflict drags on. The Israeli-Palestinian situation and Colombia's low-intensity but 50-year-old civil war are examples of this.

However, the resolution of decades of conflict in Northern Ireland and South Africa are examples of leaders from all sides coming to the conclusion that victory is unachievable and compromise is ultimately better.

But the cautionary lesson from those conflicts is that things often have to deteriorate to near the point of no return before true leadership emerges.

This is the real risk for the South China Sea and its vast reserves of oil and gas.

In trying to gain the prize for themselves, the countries involved will end up with nothing more than a costly and long-running dispute.

Perhaps they should refer to the Art of War, the renowned text by Chinese general Sun Tzu, in which he said: "There is no instance of a country having benefited from prolonged warfare". (Editing by Joseph Radford)

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