A file photograph dated June 14, 2012 shows a fireman working on the 981 oil rig during its operation in the South China Sea. Photo: CFP

China began moving the controversial oil rig near the Xisha Islands on July 15, easing a two-month standoff with Vietnam over vast fisheries and oil and gas reserves.

The rig deployed by Chinese State oil company China National Offshore Oil Corporation (CNOOC) on May 2 sparked deadly riots in Vietnam and tense encounters between Chinese and Vietnamese vessels.

The tension also invited the US to call for Asian nations to freeze further construction. Michael Fuchs, US deputy assistant secretary of state for strategy and multilateral affairs, said on July 11, that Washington wants the 10-nation Association of Southeast Asian Nations and China to have "a real and substantive discussion" to flesh out a call for self-restraint contained in a Declaration of Conduct agreed in 2002.

China told the US to stay out of disputes over the South China Sea and leave the countries in the region to resolve problems themselves.

"It's not up to the US to point fingers at the solution to the dispute at South China Sea. In fact, the source of tension in recent years is the US and their biased position in the Asia-Pacific," Wu Shicun, president of the National Institute for South China Sea Studies, told the Global Times on July 13. Wu said the Philippines will not stop oil and gas development, and Vietnam will not withdraw facilities on islands and reefs in the South China Sea either, due to the importance of securing its oil and gas reserves for their economy. 

Malacca dilemma

Among the complex issues on the South China Sea, energy security is increasingly talked about as a source of increasing tension.

"If tensions escalate then only zero-sum outcomes will result. Everyone will lose; there will be no 'winners,'" Christopher Dent, professor of East Asia's International Political Economy at the University of Leeds in the UK, told the Global Times, adding that energy security is a core issue for China and the other countries in the South China Sea.

China's rapid economic growth has led to a huge increase in oil imports and nearly three-quarters of imported oil transits through the Strait of Malacca, which links to the South China Sea.

In late 2003, President Hu Jintao first mentioned China's "Malacca dilemma," the problem of potential trade bottlenecks in the South China Sea region if the strait were blocked, which would create a potential political and economic crisis. China fears being exposed to the threat of blockade from the US, India, Singapore, Indonesia and Malaysia. This thinking has greatly affected China's diplomacy in Southeast Asia. In the search for alternative sources, one option that has gained momentum is the Sino-Myanmar pipeline, which was finished in September 2013. In fact, the "Malacca dilemma" is shared by the vast majority of Northeast Asian countries. International Energy Agency figures suggest that growth in demand in Southeast Asia and China, coupled with maturing production there, will mean that net oil imports are likely to quadruple by 2030. Major reliance on seaborne energy trade raises Asian states' stake in the security of sea lines and choke points such as the Strait of Malacca. If supplies are significantly interrupted it could bring Asian economies to a standstill, and affect the regional economy.

However, Tao Wang, resident scholar at the Carnegie-Tsinghua Center for Global Policy, warned that claiming sovereignty in the South China Sea would not impact energy security in his article "Malacca is not a significant threat to China's energy security" published on July 14 on the Caixin website. Wang believes that Asia-Pacific countries will do their best to protect shipping. And Dent says that "the economies of the region have become increasingly interdependent, so it is vital that cooperation rather than conflict prevails on South China Sea issues."

Cooperation prospects

Energy security has become increasingly talked about in regional forums such as ASEAN Plus Three, APEC, the Pacific Energy Summit and the East Asia Summit, as well as in bilateral diplomacy within East Asia and the Asia-Pacific.

"But that is more or less it. There are still no real substantive structures of frameworks of programmatic co-operation on energy security in the region," Dent told the Global Times. He urged that it is now time for these to be developed, otherwise "energy security conflicts will intensify and have negative spillover effects into economic, political and security relations."

The so-called "second Persian Gulf" implies the rich oil and gas resources in the South China Sea. The expectation of resource availability and economic interests has contributed to the tension in the South China Sea. In return, the possibility of conflict between great powers in the Asia-Pacific is a major cause of energy-supply anxiety for China and wider East Asia.

If this issue is just about energy and fisheries, an interim solution for claimants to "set aside the sovereignty disputes and jointly develop the natural resources" might help cool the disputes.

However, the strategic rivalry with the US reshaped the disputes. Pierre Noël, Sultan Hassanal Bolkiah Senior Fellow for Economic and Energy Security at the International Institute for Strategic Studies, said in his recent report, unless there are real breakthroughs in Asian and US perceptions of China's military rise, as well as Chinese perceptions of the American military presence in Asia, strategic cooperation is far from certain.

Dent worries that governments cannot see the deepening energy interdependence among states in the region and therefore the growing need to cooperate. Nor can they see how the same energy security challenges will become increasingly acute for everyone over the coming years. "That is a certainty and yet there is no political leadership to initiate real regional cooperation on energy."

Wu suggested in his book Maritime Security in the South China Sea that the governments concerned should demonstrate their political wisdom by moving a step further to "setting aside disputes for joint maintenance of maritime security." There are other areas of potential cooperation, such as protection of marine resources and environment, cooperation in combating piracy, maritime terrorism and the impact of climate change.

After all, the key to improve China's energy security is to maintain peace and stability in the South China Sea. The escalated tension combined with national sentiments will endanger energy investment, infrastructure and supply. Meanwhile, the looming conflicts will increase the risk and cost of transportation, resulting in energy price shocks.