MANILA A wrecked navy transport ship perched on a remote coral reef could be the next flashpoint in the South China Sea, where China and five other claimants bitterly dispute territory.
The Philippines is accusing China of encroachment after three Chinese ships, including a naval frigate, converged just 5 nautical miles from an old transport ship that Manila ran aground on a reef in 1999 to mark its territory.
Philippine officials say they fear the Chinese ships will block supplies to about a dozen Filipino marines stationed in abject conditions on the rusting ship, raising tensions over one of Asia's biggest security issues.
The area, known as Second Thomas Shoal, is a strategic gateway to Reed Bank, believed to be rich in oil and natural gas. In 2010, Manila awarded an Anglo-Filipino consortium a license to explore for gas on Reed Bank but drilling stalled last year due to the presence of Chinese ships.
Manila says Reed Bank, about 80 nautical miles west of Palawan island at the southwestern end of the Philippine archipelago, is within the country's 200-nautical mile exclusive economic zone.
Beijing says it is part of the Spratlys, a group of 250 uninhabitable islets spread over 165,000 square miles, claimed entirely by China, Taiwan and Vietnam and in part by Malaysia, Brunei and the Philippines.
"China should pull out of the area because under international law, they do not have the right to be there," said Raul Hernandez, a spokesman for the Philippine Department of Foreign Affairs, noting the area's proximity to Palawan, the country's largest province. He said the Chinese ships were a "provocation and illegal presence".
Chinese Foreign Ministry spokesman Hong Lei said on Tuesday the Second Thomas Shoal was part of the Spratly Islands, over which China had "indisputable sovereignty".
"It is beyond reproach for Chinese boats to carry out patrols in these waters," Hong said, adding China called on all parties to "refrain from taking actions that complicate the situation".
CHINA REPORT WARNS OF CRISIS AHEAD
The tension illustrates how a decades-old territorial squabble over the South China Sea is entering a more contentious chapter as claimant nations spread deeper into disputed waters in search of energy supplies, while building up navies and alliances with other nations.
Vietnam this week again accused China of endangering the lives of its fishermen with the ramming of a trawler in the South China Sea.
"The actions of the Chinese vessels have seriously violated Vietnam's sovereignty, sovereign rights and jurisdiction in the East Sea, threatening lives and property damage of Vietnam's fishermen," Foreign Ministry spokesman Luong Thanh Nghi said in a statement posted on Tuesday. Vietnam handed a diplomatic note the Chinese Embassy in Hanoi to protest the incident.
China said it was merely acting to prevent illegal fishing in Chinese waters, adding that Vietnam's accusations "did not accord with the facts".
A report issued on Tuesday by Chinese military think tank the Centre for National Defence Policy said it was the U.S. "pivot" back to Asia which had "shattered" the relative calm of the South China Sea, warning of crisis ahead.
"While the conditions do not yet exist for a large-scale armed clash, the dispute is becoming normalized and long-term ... and ineffective management may lead to a serious crisis," the report said, according to the China News Service.
The tension comes just before U.S. Defense Secretary Chuck Hagel meets his Asia-Pacific counterparts at the so-called Shangri-La Dialogue in Singapore at the weekend. The South China Sea is on the agenda of the regional security forum.
Second Thomas Shoal is one of several possible flashpoints in the South China Sea that could force the United States to intervene in defence of its Southeast Asian allies.
"CLEAR AND PRESENT DANGER"
As of Tuesday, two Chinese marine surveillance ships remained in the area, Philippine navy spokesman Colonel Edgardo Arevalo said, adding the fishing boats and the frigate had left.
"The presence of those ships is a clear and present danger," said another senior Philippine navy officer, who declined to be identified as he is not authorized to speak to media. He said the Philippines believed China was trying to pressure it to leave the shoal.
"We don't want to wake up one day with fresh structures sitting near our navy ship there. We have to bite the bullet and strengthen our position there or risk losing the territory."
The Association of South East Asian Nations (ASEAN), a 10-nation grouping that includes the Philippines, has been talking to China about a binding code of conduct to ease tension. But China says it will negotiate "when the time is ripe".
ASEAN foreign ministers are due to meet in Thailand in August to forge a position on the code of conduct before meeting Chinese officials in late August or early September in Beijing.
Zha Daojiong, an international relations professor at Beijing's Peking University, said China was serious about asserting its claims in the South China Sea.
"There is now a quiet agreement among different Chinese voices that sometimes you have to act as well as issuing statements," he said.
Ian Storey, a scholar at Singapore's Institute of South East Asian Studies, said tension at Second Thomas Shoal could prove more dangerous than last year's stand-off at unoccupied Scarborough Shoal, given the presence of Filipino troops.
"It is hard to imagine China using force to gain full control over Second Thomas, but some kind of blockade to drive out the Philippines' troops would have to be a possibility," Storey said. "There is a real chance of escalation or miscalculation."
(Additional reporting by Greg Torode in Hong Kong, Martin Petty in Hanoi and Terril Jones and Ben Blanchard in Beijing; Editing by Jason Szep, Robert Birsel and Michael Perry)