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Setting the Stage for an Energy and Defense Rally

Confrontation on the South China Sea (SCS) has been a major ongoing issue for the Association of the Southeast Asian Nations (ASEAN).

One such conflict will come to a head on July 12, when the international Court of Arbitration in the Hague issues its verdict in the case initiated by the Philippines against China to the U.N. Convention on the Law of the Sea (UNCLOS).

In May 2015, I wrote that China had claimed almost 90% of the SCS as its territory, and since 2013, had expanded its claim on the sea by building islands and declaring them as its own. To date, little has deterred the Chinese from enlarging their “kingdom,” fueling an arms race in Asia, and instigating tension in the region.

The SCS is already an international waterway to which China has complete access. This begs the question: Why is China creating a rampage by claiming it as sovereign territory when it already has all the access it needs?

As recently as April 2016, Chinese surveyors were at Scarborough Shoal, near the Philippines, seemingly in preparation for massive artificial island building and coral dredging, as they drove off traditional fishing communities from the area.

Chinese will likely begin construction of a military base later this year – along with an airstrip – to extend the reach of its air force over the contested waters. In connection with this issue – earlier this year in April, China announced a program to militarize their fishing fleet, including military training for fishermen.

Devil & the Deep Blue Sea

In January 2013, the Philippines initiated the case, The Republic of Philippines v. The People’s Republic of China, following the intense 2012 stand-off over Scarborough Shoal. Beijing refused to participate in the arbitration, citing a lack of jurisdiction.

Last October, the Court decided in the Philippines’ favor on the question of jurisdiction on most matters in the initial filing, and that China’s “non-appearance” didn’t inhibit the Court’s jurisdiction.

In lieu of participating, the Chinese government issued a paper on the SCS in December 2014, outlining its position on the issue of jurisdiction.

The highly anticipated verdict on July 12, however, is important for more than just the two opposing nations.

The Philippines and China are but two of the six overall claimants in the SCS, which includes Brunei, Malaysia, Taiwan, and Vietnam. Other jurisdictions also have overlapping claims or conflicts – including Indonesia, Hong Kong, Tibet, the Uyghur provinces, Arunachal Pradesh (India), Japan, South Korea, Taiwan, and the United States.

The verdict will offer clarity on maritime entitlements in the Spratly Islands, and will, ultimately, have ramifications for the legal maritime entitlements under UNCLOS.

Note: The U.S. government takes no position on the territorial disputes in the Spratly Islands, but does take a strong position on what kinds of claims are made for the surrounding waters.

The SCS is rich with resources – according to estimates by the Energy Information Administration (EIA) – which equates to 11 billion barrels of oil, and 190 trillion cubic feet of natural gas. China, the world’s largest export economy, seeks to use military force to blaze a trail for energy corporations like the China National Offshore Oil Corporation (CNOOC).

The bottom line: The Chinese military has instigated an arms race in the region, and this competition could lead to a major power war, with consequent devastating human and environmental consequences.

Driving the Effort Via Social Media

China’s dominance in the SCS has sparked a growing grassroots and youth initiative movement on social media. Discussions are underway on a campaign to boycott China and avoid a war, and protect the environment, as well as strengthen international law, human rights and democracy in Asia.

One group from the Philippines, Kalayaan Atin Ito (KAI), is organizing protest boat trips to the SCS islands.

“Atin Ito” means “it is ours.” To date, KAI – consisting predominantly of students – has 10,000 members, and a Facebook page with over 48,000 likes.

In December 2015, a KAI group – along with a retired Filipino marine – took a “Freedom Voyage” to the island of Pagasa (Thitu) in the SCS, part of the Kalayaan group of islands.

When the activists returned from Pagasa after their 11-day voyage, the Philippines Coast Guard fined the boat owner $5,111, stranding some students – who didn’t have the money to return home. They pitched tents, but were threatened with eviction. Now they cannot find rental boats for their ongoing work, and are seeking funds to buy an inexpensive fishing boat that can take them to Scarborough Shoal.

Despite this setback, KAI seeks to take more Freedom Voyages, and include activists from every region of the Philippines.

KAI is just one of a growing number of activist organizations, fishing communities and foundations that could eventually form an international social movement alliance to address South and East China Sea issues.

According to Anders Corr, editor of the Journal of Political Risk and founder of Corr Analytics, “A peace fleet composed of an activist alliance of international and local organizations is needed in the South and East China Seas to oppose Chinese expansionism.”

Governments in the region, Corr explains – including the U.S., Philippines, Vietnamese, and other claimant countries – are not doing enough to stop China, because of ongoing attempts by the Chinese to use trade and investment to pressure politicians in these countries to acquiesce to their demands.

A Sea Change on the Horizon

While the Court will not rule on the territorial sovereignty of individual features, it will decide the status of several disputed features in the Spratly Islands and elsewhere in the SCS, and should have immediate geo-political ramifications.

Corr states, “The prediction is that China won’t win. But experts could be subject to wishful thinking.”

According to June Teufel Dreyer, Professor at the Department of Political Science at the University of Miami, “The Philippines’ lawyers expect to win on some points, lose on others. So this won’t be quite as clear as who wins and who loses.”

Dreyer even states, “There’s concern within the tribunal about giving China something it can live with, lest its pre-announced decision to ignore the court’s ruling further undermine respect for international law. If this is true, it will amount to sacrificing justice to placate a powerful rules-breaker, and therefore do greater damage to regard to international law than a ruling strictly based on the merits of the case.”

Should Manila win, Arthur Waldron, Professor of International Relations at the University of Pennsylvania, believes that, “They will be delirious… They will declare a holiday, with the streets full of honking cars…Professors will be wheeled out to comment on the importance of international law.”

There are a few likely outcomes from this ruling – One is that China may declare an Air Defense Identification Zone (ADIZ). While China has not outright said it will pursue this initiative, experts aren’t ruling it out. China can attempt to justify an ADIZ, claiming that, under threat, they had no choice, especially based on perceived wrongdoings.

Either way, just the threat of an ADIZ would raise tensions globally, and force Obama to potentially act on it in his last days in office. And even without an ADIZ, China could up their military presence in the SCS; they could reclaim Scarborough Shoal, or ignore all opposition to drilling for oil and gas and squash any resisting opposition in its way.

According to Corr, irrespective of the verdict, “the trend in China will continue as per its ‘100-year plan.’ China will expand its control close to its borders as it has already done with India, Vietnam, Tibet, South China Sea, East China Sea and others.”

Corr referenced The Hundred-Year Marathon: China’s Secret Strategy to Replace America as the Global Superpower, by Michael Pillsbury, in which Pillsbury writes about how Americans have been seduced into helping China overtake the USA as the world’s leading superpower.

Critically, there is a chance that the Court’s verdict could question or even nullify China’s ambiguous nine-dash, or U-shaped line claim in the SCS as having no basis in international law. This makes for an additional hurdle that military planners will have to deal with. And Waldron is confident that a win by the Philippians will deeply pain Beijing.

“China will lose face and credibility. She is increasing entering a quagmire… Does she really plan to disable us [Filipinos] with a first strike? Or sink a carrier? Or fire missiles at anyone? … Meanwhile Manila is blowing smoke and will continue to do so until they uncork the champagne. China wants her face saved. She wants Manila to let her somehow get out of this mess without soiling her evening gown. Do you honestly think Manila will agree? I don’t, and I ask, what is China’s next move? Deeper into the La Brea Tar Pit of the SCS?”

The China Daily reported on July 4, that China is ready to start negotiations with the Philippines if Manila ignores an arbitration ruling.

Cheng Lai Ki, Master’s Candidate in Intelligence and International Security at King’s College London concludes sardonically, “Doesn’t this sound like a handshake with the right hand while holding a loaded magnum in the left?”

Corr adds, “The Chinese will continue to layer slowly over time as long as they don’t provoke action by the US… Each layer they impose is a success for them, such as having threatened to remove the Sierra Madre.” He references the U.S. ship now occupied by the Philippine Navy, run aground in the Spratly islands.

“If China successfully builds on Scarborough Shoal, it gives them a strategic foothold near Subic Bay, and a strong fait accompli against the United States that will embolden China on all fronts,” Corr warns.

Whatever the result on July 12, it’s evident that the next few months are going to be tense.

From an investment standpoint, instability in the SCS will disrupt supply chains, prolong oil and gas exploration, and heighten military activity – all good for energy prices and the defense industry, despite the price that the region will pay.

Good investing,

Shelley Goldberg

Shelley Goldberg

, Senior Correspondent

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