The project, many years in the making, was a joint venture between Repsol of Spain, Mubadala of Abu Dhabi and the state-owned energy company PetroVietnam. Commercial drilling was due to begin this April and oil and gas were expected to flow for at least 10 years. A specialised platform built in the port of Vung Tau lies idle, as do the contracted drilling rig and storage tanker.
So far, the Vietnamese government has not admitted that the project has been suspended. Nor has it confirmed that another Repsol project on a neighbouring block of seabed was cancelled last year.
Both the Repsol blocks lie within Vietnam’s claimed exclusive economic zone. A reasonable interpretation of international law would give it the right to the resources in the blocks. Unfortunately for Vietnam, China does not subscribe to that reasonable view.
Over the past decade, China has increased the degree of intimidation that it is prepared to use to achieve its strategic objectives. In 2007, Beijing threatened international energy companies, suggesting that their businesses in China were at risk if they pursued offshore ventures with Vietnam. BP and Chevron were among the companies that folded. In 2011 and 2012, Chinese ships used force against Vietnamese oil survey vessels, cutting and snagging their seismic cables. In 2017, China threatened to attack Vietnamese positions on the Vanguard Bank in the South China Sea if Repsol’s development was not halted.
It is not yet clear what kind of threat was issued in the latest confrontation. But the Vietnamese decision did coincide with China’s deployment of a 40-ship naval flotilla off Hainan, just two days sailing from the drill location. This is the situation that Vietnamese leadership finds itself in: a huge neighbour is prepared to imply the use of military force to threaten Vietnam’s vital economic interests.
Vietnam is facing significant economic woes. Its public debt is the highest of the ASEAN countries (excluding Singapore). Debt has risen rapidly from 50 per cent of GDP in 2011 to 64 per cent in 2016 and is now thought to be bumping the legal ceiling of 65 per cent. To try to avoid breaching that limit, sales of stakes in state-owned companies have risen sharply and ministers have pledged to cut the state payroll, including for the police. Austerity is being imposed on the traditional tools of Communist Party control.
In addition, taxes are going up. The government has introduced a new levy on fuel, ostensibly to cut carbon emissions, but really to try to balance the books. Tax increases are never popular but as existing oil fields become exhausted the government urgently needs to replace declining revenue sources. The Red Emperor field was planned to be productive within months but the suspension now creates a hole in next year’s state budget. Ironically, China’s moves out at sea have made its communist comrade more vulnerable on land.
What options does Hanoi have? For some years it has been trying to build up its naval deterrent capabilities with new ships, submarines and missiles. Vietnam could probably sink a few Chinese ships if it came to a fight, but the consequences for it — both military and economic — would be dire. By backing down over this oil drill Vietnam has demonstrated its lack of a credible naval deterrent. Not even the visit of one of the mightiest warships on earth, the USS Carl Vinson, to Da Nang days before the scheduled start of Repsol’s oil drilling was sufficient to give Vietnam the confidence to ignore Chinese threats.
Another option is diplomacy. In the days after the Repsol decision, the Chinese Foreign Minister Wang Yi visited Hanoi. Talks were friendly but there was a sharp disconnect in the official statements. The Chinese talked of ‘exploring feasible ways for joint development’ whereas the Vietnamese suggested that ‘the issues must be tackled in respect of … the United Nations Convention on the Law of the Sea’.
Diplomacy with third countries is tricky for Vietnam given its long-standing aversion to alliances and the Communist Party’s distrust of the United States. Vietnam’s current leadership team under General-Secretary Nguyen Phu Trong are ‘system-loyalists’ determined to maintain Communist Party leadership. They see their Chinese counterparts as more reliable than the democracy-loving Americans. The hard-liners are currently engaged in a severe crackdown on political dissidents, reasoning that Washington is unlikely to sanction them given the current geopolitical climate. For the same reasons, Beijing can be reasonably sure that Hanoi is not about to jump into the US camp simply because of the loss of oil revenue from the South China Sea.
Hanoi’s options are very limited. It, along with all the other Southeast Asian claimant states in the South China Sea, is still refusing to concede on the main Chinese demand for ‘joint development’. It continues to court international support and to engage China in discussions. But it does not seem to have a strategy to develop the resources that international law says rightfully belong to it. And the economic costs of this predicament are rising.
Bill Hayton is Associate Fellow at Chatham House (The Royal Institute of International Affairs). You can find him on Twitter @bill_hayton.
Hayton’s article sounds more like a positions paper from anti-government groupies, disguised as “democracy activists” throughout Vietnam: short of an immediate declaration of war against China, the VCP colludes with the CCP – turning the vassal state into a real Chinese province by 2020 (changed from previous target of 2015)! In fact,the “‘good neighbour, good comrade and good friend’ to the north” is a slogan used by Vietnamese protestors, code-wording for traitor government. With the Q1/2018 at 7.48per cent GDP growth on top of the full year 6.8per cent in 2017, Vietnam economy is doing well despite depressed oil prices and public debt of 61.5per cent has never been among the “economic woes” when assets from SOE’s exceeding 160per cent GDP (World Bank – Dec 11, 2017)!
This is a red herring.
Journalists have a duty to report the news accurately, sensitively and without bias.
In my view, Bill Hayton has failed in all three categories when he claimed that “Both the Repsol blocks lie within Vietnam’s claimed exclusive economic zone. A reasonable interpretation of international law would give it the right to the resources in the blocks.”
These assertions contain serious factual errors because according to Article 57 of the UN Convention on the Law of the Sea, (Unclos) “The exclusive economic zone shall not extend beyond 200 nautical miles from the baselines from which the breadth of the territorial sea is measured.”
But if a littoral state is facing the island of another littoral state then under Article 15 of UNCLOS the new maritime boundary between them is equidistant, which may now be even less than 200 nm (334 km).
According to a Reuters report, Repsol’s ‘Red Emperor’ drilling project which was suspended by Vietnam in April this year, is “part of Block 07/03 in the Nam Con Son basin, (situated) 440 km off the coast of Vietnam’s southern city of Vung Tau”.
In the case of Repsol’s other troubled oil drilling project in the oilfield known as “Wanan Bei-21 by China and “block 136-03” by Vietnam, Bill Hayton contradicted himself when he wrote in his BBC piece dated 24 July 2017 that “Vietnam has reportedly terminated a gas-drilling expedition in a disputed area of the South China Sea, following strong threats from China. The drilling expedition began last month in an area of sea about 400km (250 miles) off Vietnam’s south-east coast.”
It is not rocket-science because anyone with even a cursory knowledge of the provisions of UNCLOS can see that the “Red Emperor” and Wanan Bei-21 (block 136-03) oil fields are clearly located outside of Vietnam’s 200 nm (334 km) Exclusive Economic Zone (EEZ) and a reasonable interpretation of international law (UNCLOS) would NOT give Vietnam the right to the resources in these two blocks.
Hayton’s other claim that the Vietnamese leadership finds a huge neighbour that “is prepared to imply the use of military force to threaten Vietnam’s vital economic interests” is equally baseless because just last month the foreign ministers from China and Vietnam pledged to address disputes peacefully.
China’s foreign minister, Wang Yi, told reporters in Vietnam that “Both sides should abide by the basic governing principles on resolving maritime issues.”
The Vietnamese Foreign Minister, Pham Binh Minh told reporters that “We are ready to work with China to resolve arising issues.”
The other good news is that in 2017 the bilateral trade volume between China and Vietnam reached US$100 billion for the first time and in the first two months of 2018 Vietnam exported $9.4 billion worth of products to China, now Vietnam’s biggest export market, posting a year-on-year rise of 24.4 per cent.
Why not look at a map? The nearest point of inhabited Vietnamese territory to the drilling site is not the city of Vung Tau but the island of Con Son off the southeastern coast of Vietnam. Start your 200 nautical mile measurement from there…
Nice try but I’m afraid you’ve made yourself look a little silly.
The disputes in the SCS can only be resolved by referring to the provisions of the UN Convention on the Law of the Sea (UNCLOS) not by using a map and a ruler.
Article 57 of the UN Convention on the Law of the Sea, (UNCLOS) states that “The exclusive economic zone shall not extend beyond 200 nautical miles from the baselines from which the breadth of the territorial sea is measured.”
And Article 5 states that “Except where otherwise provided in this Convention, the normal baseline for measuring the breadth of the territorial sea is the low-water line along the coast as marked on large-scale charts officially recognized by the coastal State”.
The crude methodology that you proposed for Vietnam is arguably not legal because according to Associate Law Prof Robert C. Beckman “Vietnam’s system of straight baselines was protested vigorously by other States on the basis that Vietnam did not meet the criteria established in Article 7 of UNCLOS”.
He added “The islands used as basepoints for Vietnam’s claimed straight based lines are said to be “small, scattered and largely distant from the mainland coast, such that of the nine turning points defined, five are more than 50 nautical miles offshore“and it is therefore difficult to see how Vietnam’s baselines conform to the requirement in Article 7(1) of UNCLOS that straight baselines can be used “if there is a fringe of islands in its immediate vicinity.”
In fact, Prof Beckman also wrote that “All of the States bordering the South China Sea claim an exclusive economic zone (EEZ) measured from the baselines along their mainland coasts, or in the case of the Philippines and Indonesia, from archipelagic baselines.”
Vietnam is not an archipelagic state.
But I guess, according to you, Associate Law Prof. Beckman also managed to make himself look silly.
The island of Con Dao is capable of supporting human habitation. Therefore it generates an EEZ of up to 200 nautical miles – independent of the EEZ drawn from the coast of the Vietnamese mainland.