Beijing pressure intense in South China Sea row

PUBLISHED : Friday, 23 September, 2011, 12:00am
UPDATED : Friday, 23 September, 2011, 12:00am


China's protests against international oil firms signing exploration deals with Vietnam in the disputed South China Sea were more extensive - and successful - than previously thought, according to leaked US diplomatic cables released by WikiLeaks.

The cables highlight a campaign going back to 2006 that saw oil giants - including Exxon Mobil, BP and Chevron - as well as smaller firms such as Petronas of Malaysia, coming under pressure after striking deals with Hanoi. Some pulled out or put their exploration plans off southern Vietnam on ice.

By July 2007 a confidential cable from the US embassy in Hanoi noted that four US and eight foreign companies were involved, with about five deals suspended or cancelled.

The leaks come amid increasing concerns in Beijing, with Chinese ships cutting cables on a Hanoi-chartered survey vessel working for foreign firms in May. Officials also issued fresh warnings last week to India's state-owned oil giant against expanding oil and gas exploration with Vietnam.

'India should bear in mind that its actions in the South China Sea will push China to the limit. China cherishes the Sino-Indian friendship, but this does not mean China values it above all else,' an editorial in the state-run Global Times warned.

'China has been peaceful for so long that some countries doubt whether it will stick to its stated bottom line. China should remind them of how clear this line really is,' it said.

Chinese envoys and scholars privately have voiced similar, if slightly less hawkish, concerns despite regional diplomacy. 'It is not so much a campaign as the need to assert sovereignty whenever and wherever that sovereignty is challenged,' one envoy said. 'And Vietnam's attempts to internationalise this dispute with foreign oil exploration are a clear challenge ... we have made it very clear that it is unacceptable.'

The WikiLeaks cables chart various protests and approaches to foreign oil companies by Chinese diplomats internationally, including some made directly to US oil firms at their bases in Houston, Texas.

They appear to chart mounting US concern ahead of increased diplomacy last year as Washington warned it had a national interest in a peaceful regional solution - a statement that raised Beijing's ire.

The South China Morning Post reported exclusively in July 2008 that Exxon Mobil - the world's largest oil firm - had been repeatedly threatened by Chinese diplomats to scrap exploration deals with Vietnam or face possible punishments against its China businesses. The Foreign Ministry confirmed the protests at the time, saying Exxon's actions were a breach of China's sovereignty.

The cables confirm Exxon faced threats but decided to stay on, unlike rival Chevron and a US$2 billion joint venture between BP, ConocoPhillips and the Japanese petroleum company Idemitsu to develop a gas field and pipeline. According to a September 2007 cable, BP scrapped the deal under pressure and the company lost US$200 million in the process.

A September 2007 cable from the US embassy in Hanoi described Chinese diplomats in Washington and Beijing repeatedly warning Chevron, which had teamed up with Petronas, to halt exploration.

'A Chevron executive confessed that his company's recent entry into a large gas-concession agreement with PetroChina in Sichuan province - a project he described as a significant opening for Chevron in China - helped persuade the company to quietly accede to China's demand and suspend operations in [Block] 122,' the cable said.

Other cables indicate that:

The US embassy in Hanoi noted in July 2008 that the Post report was possibly 'an unwelcome surprise' for Hanoi, given the difficulties in juggling domestic nationalism and its complex relationship with Beijing. 'Chinese bullying of foreign companies in an attempt to compel them to cease oil and gas exploration efforts in the South China Sea reminds Vietnamese officials that just as the Vietnamese may not approve of all US policies, neither do Chinese actions always serve Hanoi's interests,' another cable soon after noted.

Within days of the report, Vietnam vowed to protect the interests of Exxon while Russian diplomats also questioned their US counterparts over the Chinese harassment, saying their own extensive interests in Vietnam had not been affected.

In September 2008, Exxon officials, smarting from a surprise Hong Kong-mainland decision to rule out its joint venture with CLP to build a liquified natural gas terminal in Hong Kong, did not believe the plan's collapse stemmed from its Vietnam trouble.

Exxon officials have refused to comment about the WikiLeaks disclosures or current exploration activity off Vietnam.

Ian Storey, a Singapore-based regional security scholar, said Chinese efforts were definitely more widespread than previously thought. 'We can clearly see it now as part of China's campaign to assert its claimed jurisdictional maritime rights,' he said.

'It does not seem that it is about to stop, whatever diplomacy might be under way.'

Oil industry publication Energy Intelligence recently stated that companies active on both the mainland and in the South China Sea would face future dilemmas.

'Firms with aspirations in China's booming energy market face difficult decisions about whether to go ahead with projects in the South China Sea ... and risk losing favour with Beijing,' an article said.