Aside from the issue of national territory and the emotions that territorial issues naturally evoke on all sides, several other factors have made this dispute a very difficult and potentially dangerous one.

First, the issue is overlaid by a broader conflict in relation to military strategy. The strategic importance of the Senkaku Islands is increasing for both China and Japan. The islands lie approximately 140km northeast of Taiwan and due north of the southwestern tip of the Ryukyu island chain that includes Okinawa. Not only has an invasion of the Senkakus by the Chinese military become one of the Japanese Ground Self-Defence Forces’ threat scenarios, but China is also developing an island strategy for maritime breakout into the Western Pacific. This strategy centres on the Ryukyu islands, which US and Japanese forces are now exercising to defend.

Second, none of the countries involved recognise that there is a territorial dispute over the islands. Japanese Foreign Minister Maehara Seiji recently stated unequivocally: ‘There is no territorial dispute in the East China Sea….The Senkaku Islands are an integral part of Japan’s sovereign territory’. A little over a week earlier, Minister of State for Government Revitalisation, Renho, had hastily withdrawn her comment that the dispute was a ‘territorial issue’. More generally, Japan’s approach to territorial disputes is to recognise that they exist only in cases where it is a claimant (as in the case of Dokdo/Takeshima with South Korea and the so-called ‘Northern Territories’ with Russia).

For their part, both China and Taiwan are also absolutist about what are called the Diaoyu islands in China, and the Taiyoutai in Taiwan. In the most recent dispute, the Chinese government referred to the Diaoyu Islands as China’s ‘sacred territory’. And in 1992, China made a unilateral declaration under the Territorial Waters Act, which stipulated that the Daioyu Islands were Chinese territories. These mutually exclusive or zero-sum positions make discussions about the real issues at stake – access to seabed resources and fishing rights – harder. It is the fishermen of China and Taiwan who are in the frontline of the assertion of their countries’ territorial claims through their repeated incursions in large numbers into the waters around the Senkakus.

Third, the nations’ conflicting sovereignty claims are intertwined with issues relating to Exclusive Economic Zones (EEZs). In June 1996, Japan ratified the UN Convention on the Law of the Sea (UNCLOS) and promptly declared an EEZ of 200 nm around its territory including the Senkakus. China and Taiwan both claim territorial sovereignty over the islands, but no EEZ. Mark Valencia argues that settling the territorial dispute would be much easier if it could be separated from EEZ claims. Japan could obtain compensation in the details of any joint seabed development arrangement if it were to relinquish sovereignty over the Senkakus.

Fourth, the risk of military confrontation will increase if China underestimates Japan’s willingness to respond to a show of Chinese military force. As Leszek Busynski argues in his essay in the April 2009 issue of Contemporary Southeast Asia, rivalry between states can co-exist with high levels of economic interdependence. He reasons that this is particularly the case when one side (China) harbours national ambitions and is under the influence of a strong military with an expansionist agenda. The biggest risk of a military confrontation between China and Japan would arise if naval vessels were deployed to guard either side’s drilling activities in the East China Sea. Equally risky would be the deployment of armed fisheries patrol boats to accompany Chinese fishing fleets, a tactic that China is currently employing in the South China Sea. This could lead to a direct confrontation with the Japan Coast Guard.

Finally, some of the constraints that might have curbed Chinese retaliation against Japan in the past have weakened or disappeared. The Chinese economy and military are a lot stronger than they were in the 1990s (and even earlier) when Chinese leaders were willing to shelve the Senkaku Islands issue in order to build constructive economic relations with Japan. In 2010, Japanese aid has also become a more peripheral consideration for China. The question now is whether the Chinese government will be willing to limit its responses to the ‘managed confrontation’ that has characterised its approach in the past.

Potential consequences for both sides

China’s influence in the Asia Pacific has been rising at the same time as it has offered reassurance to its Asian neighbours through the use of ‘soft’ power. A harsh response on the Senkaku issue, particularly a military response, would undermine China’s soft power strategy in the region, which up to now has been very successful. It would also alarm Southeast Asian countries such as Vietnam, the Philippines, Indonesia and Malaysia who have their own maritime territorial disputes with China.

China’s overt diplomatic hostility towards Japan and the potential threat of military backup have helped to cement the US-Japan alliance at the very time when it has been showing signs of weakness. US government spokespersons as well as former US Deputy Secretary of State Richard Armitage have reiterated statements that the 1960 US-Japan Security Treaty applies to all territories ‘under the administration of Japan’, which includes the Senkakus.

For Japan, the fall-out has been felt in its delicately evolving resource relationship with China. China has notified Japan that it has suspended further talks on concluding a bilateral treaty on the joint development of the Shirakaba/Chunxiao gas field in the East China Sea. Japan now faces stronger Chinese assertions of seabed exploration and mining rights just when it was hoping to make progress in the dispute over the boundaries of their respective EEZs. Further consequences may also be felt by Japan in the fields of trade (higher tariffs on Japanese goods), and tourism.

The territorial dispute over the Senkakus casts a long shadow over Sino-Japanese relations and the bilateral relationship has been effectively placed on hold until some sort of resolution could be found. Progress may also be slowed in other key areas such as the development of an East Asian Community, given that China-Japan relations are absolutely central to the evolution of this economic and trade framework.

Aurelia George Mulgan is Professor of Politics at the University of New South Wales, Australian Defence Force Academy.