Vietnam ropes in stakeholders to China territorial dispute

Author: P. K. Ghosh, Observer Research Foundation

Vietnam’s recent granting of seven oil blocks in the South China Sea for exploration by India is part of a plan to internationalise Hanoi’s territorial dispute with China. Hanoi hopes to create more stakeholders who can withstand hegemonistic Chinese ambitions in the area.

As well as India, Vietnam is targeting Russia to invest in oil and gas blocks. Here, Russian President Vladimir Putin shakes hands with Vietnamese Prime Minister Nguyen Tan Dung in Hanoi on 12 November 2013. Putin said that Russia and Vietnam will cooperate in offshore oil exploration and deepen military ties. (Photo: AAP)

It is well known that the Indian government has made heavy investments in energy exploration in the South China Sea. Awarded through the global bidding process, India earlier had three blocks in the Vietnamese region in which about US$360 million was invested through the state-run ONGC Videsh Ltd (OVL).

OVL has been prospecting for oil in Vietnam’s exclusive economic zone in blocks 127 and 128 (Phu Kanh Basin) in territories under dispute. It withdrew from block 127 which proved unviable and dry, while block 128 was bogged down by layers of hard rock and unfavourable geological conditions which made it difficult to penetrate.

Despite these issues, India decided not to withdraw from block 128 for geo-strategic reasons, including a request from the Vietnamese to stay on for another two years. In the meantime Indian operations of extracting natural gas in block 6.1 since 2003 in the region, which is not under dispute, continues from where it got two billion cubic metres of gas in 2011–12 for its 45 per cent participating interest.

While the Chinese had not objected to Vietnam allotting the lucrative block 6.1 to India in Nam Con Son Basin, it objected to India taking up exploration in blocks 127 and 128. Chinese objections have included demarches, pressure on companies not to sell equipment to India and the alleged harassment of an Indian warship, INS Airavat, which had transited through the disputed portion of the South China Sea.

Following talks between Prime Minister Manmohan Singh and General Secretary Nguyen Phu Trong during the Vietnamese leader’s recent high-profile visit to India, eight agreements were signed. There was also an MoU signed, in which the seven oil blocks in the South China Sea were offered to India — including three on an exclusive basis — as well as joint prospecting in some Central Asian countries with which both Hanoi and New Delhi have good political ties.

The blocks have been offered on a nomination basis whereby India’s OVL would not have to go through a bidding round of offering the best production sharing contracts. Instead a direct proposal for production sharing would be negotiated under Vietnam’s petroleum laws.

Aside from India, Hanoi is also targeting Russia and Japan to counter pressure from China as their presence would serve as a deterrent. (Hanoi recently roped in Russia to invest in oil and gas blocks.)

Hanoi’s move could make China uneasy as Chinese foreign policy, especially towards the South China Sea and the East China Sea, has undergone a major shift in the last few years. This change in course has ensured that Deng Xiaoping’s ‘24-character strategy’, which acted as a guideline for foreign and security policy, and China’s phase of ‘biding time’, has evolved into a more forceful assertion of sovereignty claims.

The new Chinese leadership under Xi Jinping — which is keen to establish its authority in the national politics and thus shy away from being called ‘weak or too generous’ — has upped the ante and signalled an uncompromising stand by regarding the South China Sea as a matter of ‘core interests’.

It is not difficult to imagine that the Chinese will be uncomfortable with the current scenario. China is against any ‘outside power’ being involved in the South China Sea, though its own forces are regularly operating in the Indian Ocean region. Vietnam on its part well knows that it makes strategic sense to internationalise the scenario and put into place as many international stakeholders as possible.

The only countries that can probably withstand the pressures from and against China are being wooed by Vietnam. They in turn may like to prop up Vietnam as a bulwark against the increasingly hegemonistic attitude of the Chinese. The United States, Russia and India are the countries that fit well into the Vietnamese game plan.

Dr P. K. Ghosh is a Senior Fellow at the Delhi-based Observer Research Foundation and a former Co-Chair of the CSCAP International Study Group on Maritime Security.

This article was first published here as RSIS Commentary No. 228/2013.