Oil and gas in troubled waters

Japan and China

Oct 6th 2005 BEIJING AND TOKYO
From The Economist print edition

Two resource-hungry nations square off in the East China Sea

FOR China and Japan this has been an exceptionally difficult year in an always troubled relationship. Among their many disagreements, which in April triggered the biggest anti-Japanese protests in communist China's history, is a long-simmering territorial dispute in the East China Sea that lately has taken a turn for the worse. With Japanese officials and politicians accusing China of deploying “gunboats”, nationalist sentiment on both sides is complicating efforts for a resolution.

Two days of talks in Tokyo ended on October 1st with no agreement on the dispute, which focuses on the exploitation of undersea oil and gas deposits straddling what Japan says is the border line between the two countries' exclusive economic zones (EEZs). China does not recognise the border line and says that in any case its drilling is in an undisputed area. Japan says China's activities could suck gas from its side of the line.

Three weeks before the talks—the third round since October last year—the Chinese navy made a dramatic appearance near a Chinese drilling platform at the Chunxiao field (known by the Japanese as Shirakaba). It deployed five vessels, including missile-equipped destroyers and frigates. Last week, Japanese officials said that one of the boats had turned a gun turret—but had not locked its radar—on to a Japanese P3-C reconnaissance aircraft that was monitoring the activity. Keizo Takemi, a veteran politician who heads the ruling Liberal Democratic Party's parliamentary group on marine resources, calls this “gunboat diplomacy”. As Mr Takemi puts it: “The Chinese side have used military power to leverage their political situation. The squadron was an attack squadron and its purpose was quite clear—to strengthen against the Japanese position. This is a really unfortunate development, for it could lead to the kind of vicious cycle that descends into military conflict.”

Last week, China confirmed that it had set up a “reserve vessel squadron” in the East China Sea. Despite Japan's calls for drilling activities near the disputed border line to be suspended pending an agreement, Japan says it suspects that China recently began production of gas or oil at the Tianwaitian field (called Kashi in Japanese) near Chunxiao. The Japanese believe Tianwaitian's resources might also straddle the line.

Japan too has been stepping up the pressure. In July it granted drilling rights in the area, including in the Japanese-claimed side of Shirakaba, to a Japanese company, Teikoku Oil (it does not help that this means Imperial Oil). Were Teikoku to begin drilling, this would raise tensions enormously, since the line China claims as the EEZ boundary puts the site well within China's side.

So who is in the right? Unfortunately, there is no clear answer. Under the UN's Convention on the Law of the Sea, an EEZ can extend up to 200 nautical miles from a country's shoreline. But the East China Sea between China and Japan is only about 360 nautical miles at its very widest. Japan says the boundary should be the median line between the two countries. China says its EEZ should extend to the edge of its continental shelf, which would put the line almost up against Japan's shores. The convention does not give specifics of how overlapping EEZ and continental shelf claims should be resolved.

There are some positive signs. Japan says it will be very careful not to be drawn into any tit-for-tat response to China's naval deployments. And China, though insistent at last week's talks on pushing its continental shelf approach, did not reject outright a proposal by Japan for joint development of fields straddling the median line. To Japan's annoyance, however, China did raise the issue of possible joint exploration near the Senkaku Islands—Diaoyutai in Chinese—which are controlled by Japan but claimed by China. Japan worries that China's efforts to focus on this area are intended to undermine Japan's sovereignty claim.

Mindful perhaps of the danger of rekindling the nationalist sentiment that erupted with such fury in Chinese cities in April, the official media in China have been low-key in their coverage of recent developments. A Japanese official says that his side has been trying to focus instead on the business potential of joint development. “Once it becomes a territorial issue, it can get very nasty and very difficult to solve,” he says. But it may already be too late.

Copyright © 2005 The Economist Newspaper and The Economist Group. All rights reserved.