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Thayer South China Sea: Oil Bids for Paracel Islands

Thayer South China Sea: Oil Bids for Paracel Islands

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Published by Carlyle Alan Thayer
A brief analysis of the motivations behind China's offer of an oil exploration block in waters off the Paracel islands that are disputed by Vietnam.
A brief analysis of the motivations behind China's offer of an oil exploration block in waters off the Paracel islands that are disputed by Vietnam.

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Categories:Types, Research, History
Published by: Carlyle Alan Thayer on Sep 10, 2012
Copyright:Attribution Non-commercial

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11/06/2012

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Background Brief:South China Sea: Oil Bids forParacel IslandsCarlyle A. ThayerSeptember 3, 2012
[client name deleted]As you might know, the Vietnamese government has been protesting again
China
sCNOOC [China National Offshore Oil Company] has put up 2
6 blocks in this year’s
second round of auctions, according to a statement on the Beijing-
based company’s
website. A site known as 65/12 is within 50 kilometers (31 miles) of the ParacelIslands in the South China Sea near a block put up for bid last year that prompted aprotest from Vietnam.Vietnam has protested this move. We would be grateful for your assessment of thefollowing:1. What is the point of China putting up such a controversial block for bid only todraw protests from Vietnam? Is China up to anything else?ANSWER: From China's point of view there is nothing controversial about putting upa block near the Paracel islands. Vietnam protested in March, and all Vietnameseprotests are like
water on a duck's back
. What China is doing is slowly developingpromising oil concessions in the South China Sea. It will gradually expand its activitiesand pre-empt states that have an overlapping claim. China will contest thePhilippines first because it is weak.2. Will such continued efforts gradually talk Western audiences and outsiders intobelieving that there should be no dispute in these areas anymore?ANSWER: The dispute over the Paracel islands is only a dispute betweenChina/Taiwan and Vietnam. After Vietnam joined ASEAN and after the Mischief Reef incident in 1995, Vietnam lobbied strongly for the Paracels to be included in a codeof conduct. This not only failed but the weaker Declaration on Conduct of Partiesalso failed to include the geographic scope. Vietnamese leaders must realize thatVietnam's claims to the Paracels are not widely supported by other members of ASEAN.3. Again, will this tender be able to lure foreign companies?ANSWER: It all depends on how much risk a foreign company thinks it will take. TheCrestone affair in 1992-94 revealed that some opportunist foreign companies maybid with the idea they can rely on Chinese protection. China did not come toCrestone's aid in 1994. Or foreign companies may want to curry favour with China. In
Thayer Consultancy
ABN # 65 648 097 123

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