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					    the national bureau    of   asian research


         nbr special report #30     |   july 2011



from disputed waters
to seas of opportunity
Overcoming Barriers to Maritime
Cooperation in East and Southeast Asia
  By Clive Schofield, Ian Townsend-Gault, Hasjim Djalal,
  Ian Storey, Meredith Miller, and Tim Cook
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nbr special report #30             |   july 2011




from disputed waters
to seas of opportunity
Overcoming Barriers to Maritime
Cooperation in East and Southeast Asia

                              TABLE OF CONTENTS



 iii   Foreword
       Tim Cook


  1    From Disputed Waters to Seas of Opportunity:
       Overcoming Barriers to Maritime Cooperation in East and Southeast Asia
       Clive Schofield, Ian Townsend-Gault, Hasjim Djalal,
       Ian Storey, Meredith Miller, and Tim Cook
                                             FOREWORD




O
             utstanding maritime sovereignty disputes in East and Southeast Asia are among the
             greatest potential threats to the security and economic well-being of states in the region
             and around the globe. Major waterways, notably the East China Sea, South China Sea,
             and Gulf of Thailand, are vital to the free flow of trade and goods and contain both living
and non-living resources that sustain the economies and populations of claimant and user states.
With the advent of new technologies that allow for deepwater drilling, mining, and exploration,
the potential of the region’s resources is even greater still. Yet overlapping jurisdictional claims
and states’ attempts to assert their positions have scuttled everything from surveying activities to
harnessing the resources already known to exist. Given the complexity of the domestic political,
historic, legal, economic, and strategic factors involved, resolution to these disputes has eluded the
claimant states. Complicating the situation further is the mounting pressure to develop any energy
resources that exist in the region as global energy demand soars.
   Dispute resolution efforts have been ongoing at the official and Track II levels for decades,
resulting in several agreements to shelve sovereignty conflicts and to develop the resources jointly
under interim arrangements—a favored method to build confidence and move forward. A number
of bilateral agreements in the Gulf of Thailand have allowed some resource development projects
to go ahead. Confidence-building measures in the South China Sea between China and ASEAN,
specifically the 2002 Declaration on the Conduct of Parties in the South China Sea (DoC), have
also helped contain tensions, even in the absence of formal implementation. Yet there are limits to
the arrangements currently in place, some of which have been placed on hold indefinitely.
   Tensions thus continue to rise and regularly make front page news, particularly among
claimants in the South China Sea. The relationship between China and Vietnam has perhaps been
the most heated in this area, marked by numerous incidents in recent years. Incidents involving
other claimant states over the Spratly Islands, as well as over the building of military garrisons
on reefs and atolls in the South China Sea, have kept tensions simmering and serve as a stimulus
for military modernization programs in the region. Consequently, the chances of these states
resolving their differences in the near term are slim at best.
   Recognizing that resolutions to these regional maritime jurisdictional disputes are not likely to
occur possibly for decades, yet also cognizant of the immediate importance of the disputed waters
for trade and resources, the National Bureau of Asian Research (NBR) set out to examine these
disputes and their impacts and to offer fresh perspectives on how such conflicts may be managed
prior to political resolution. To do so, NBR assembled an international team of experts for a three-
year project, “Maritime Energy Resources in Asia: Opportunities for Joint Development” (MERA)
to explore recent developments in the region and provide policymakers with new insights and
practical options that could contribute to ameliorating these contentious disputes.
   The project is supported by the John D. and Catherine T. MacArthur Foundation’s Asia Security
Initiative and is led by principal investigator Dr. Clive Schofield (Australian Centre for Ocean
Resource and Security, University of Wollongong, Australia). This editorial report draws from
the key findings and perspectives of the project team of scholars, as well as from the combined
expertise and insights of the project’s principal investigator, senior advisors, and NBR staff who
gathered for a three-day workshop in May 2011 to draft this report. The objective of this report




                                                                                                           iii
        is to summarize and focus on the policy-relevant aspects of the MERA project, unconstrained by
        national policies or sovereignty imperatives.
            I would like to recognize and express appreciation to the authors of this report for their time
        and dedication, as well as for their support of the MERA project in all stages. I would also like
        to extend sincere appreciation to the MacArthur Foundation for its generous financial support,
        without which this project would not have been possible.


              Tim Cook
              Senior Project Director
              The National Bureau of Asian Research




iv   NBR SPECIAL REPORT u JULY 2011
 the national bureau                   of   asian research
 nbr special report #30                     |   july 2011




From Disputed Waters to Seas of
Opportunity: Overcoming Barriers
to Maritime Cooperation in
East and Southeast Asia
Clive Schofield, Ian Townsend-Gault, Hasjim Djalal,
Ian Storey, Meredith Miller, and Tim Cook

CLIVE SCHOFIELD   is Professor and Director of Research at the Australian Centre for
Ocean Resource and Security (ANCORS), University of Wollongong, Australia. He
currently holds an Australian Research Council Future Fellowship and is the principal
investigator for NBR’s “Maritime Energy Resources in Asia: Opportunities for Joint
Development” project. He can be reached at <clives@uow.edu.au>.
IAN TOWNSEND-GAULT is Director of Southeast Asian Legal Studies at the Centre for
Asian Legal Studies, Faculty of Law, University of British Columbia. He can be reached
at <itgault@law.ubc.ca>.
HASJIM DJALAL is a member of the Indonesian Maritime Council; Senior Advisor to the
Indonesian Minister for Maritime Affairs and Fisheries, the Indonesian Minister of
Transport, and the Indonesian Naval Chief of Staff; and a member of the Legal Experts
Team of the Indonesian Minister of Defense. He can be reached at <hdh@cbn.net.id>.
IAN STOREY is a Fellow at the Institute of Southeast Asian Studies (ISEAS), Singapore,
and Editor of the peer-reviewed journal Contemporary Southeast Asia. He can be
reached at <ijstorey@iseas.edu.sg>.
MEREDITH MILLER is Vice President of Trade, Economic, and Energy Affairs & Outreach
at the National Bureau of Asian Research. She can be reached at <mmiller@nbr.org>.
TIM COOK is a Senior Project Director at the National Bureau of Asian Research. He
can be reached at <tcook@nbr.org>.


                                                                                         1
EXECUTIVE SUMMARY
   This report highlights findings from the National Bureau of Asian Research’s three-year
project “Maritime Energy Resources in Asia: Opportunities for Joint Development,” which
assesses maritime jurisdictional disputes and opportunities for cooperation in East and
Southeast Asia.

MAIN FINDINGS
   Long-standing disputes over maritime jurisdictional claims in the East China Sea, South
China Sea, and Gulf of Thailand threaten the long-term stability and prosperity of states
in East and Southeast Asia. Despite numerous multilateral efforts in recent decades and
international legal regimes such as the UN Convention on the Law of the Sea, tensions among
claimant states and user states remain high. Resolution of these disputes has eluded the
claimant states, given the complexity of the domestic political, historic, legal, economic, and
strategic factors involved and the pressure to develop the estimated vast energy resources in
the disputed areas. Concerns over resource access, coupled with the claimant states’ failure
to implement confidence-building measures (CBM) to ease tensions, demonstrate that
political resolution is unlikely in the near term. In the absence of a long-term agreement,
claimant states must take concerted interim actions to ease tensions, foster cooperation and
trust, and maintain joint stewardship of the environment and marine resources.

POLICY IMPLICATIONS
   •	 States	can	better	manage	current	tensions	by	implementing	CBMs,	including	those	outlined	
      in the Declaration on the Conduct of Parties in the South China Sea (DoC). These could
      include the use of telephone hotlines, advance notification of military exercises, joint
      search and rescue capabilities, cooperation on countering transnational threats, rules of
      conduct for engagement on the high seas, and increased military transparency.
   •	 Notwithstanding	the	lack	of	progress	in	implementing	the	DoC,	China	and	the	ASEAN	
      states should begin negotiations on a code of conduct for the South China Sea that would
      formalize CBMs and reduce destabilizing actions.
   •	 Interim	management	of	the	multiple	interconnected	territorial	and	maritime	disputes	
      in Asia’s waters is the best way to ensure the freedom of navigation and free flow of
      trade that is critical to the regional and global economies. Such arrangements need not
      prejudice states’ maritime claims in the near term.
T
          he semi-enclosed maritime spaces of the East China Sea, South China Sea, and Gulf of
         Thailand host sea lines of communication (SLOC) that are critically important not only to
         the states of East and Southeast Asia but also to global trade. These waters moreover contain
         a marine environment of astonishing biodiversity that supports fisheries that, in turn,
are primarily responsible for sustaining hundreds of millions of people. Further, it has long been
speculated that these areas contain substantial reserves of seabed energy resources—a possibility
that is particularly attractive in an era of increasing energy security concerns. While seabed energy
reserves have been discovered and are in the process of being developed on the peripheries of the
East China Sea, South China Sea, and Gulf of Thailand, the full potential of these areas remains
unproven and unrealized as a consequence of the territorial and maritime jurisdictional disputes
that remain a persistent feature of these waters. Indeed, these maritime spaces are characterized by
multiple sovereignty disputes over small and isolated islands, rocks, and reefs, together with broad,
though not always well-defined, overlapping jurisdictional claims.
    Sovereignty and maritime jurisdictional disputes in East and Southeast Asia are long-standing
flashpoints with the potential to threaten peace, security, and, accordingly, economic prosperity in
these regions. Conflicting sovereignty claims over the islands and other insular features in these
areas, together with associated overlapping maritime claims, have been sources of tension for
decades. These disputes have led to numerous incidents and even armed confrontations between
claimant states in the past. Given the persistence of these disputes, potential exists for such
incidents to recur, with attendant risks of escalation into wider conflict.
    The absence of dispute resolution holds hostage the positive benefits that these maritime spaces
and the resources thereof could otherwise afford states in the region. Particularly from an energy
standpoint, Asia’s sea lanes are critical transit points for—and potentially significant sources of—
the hydrocarbons on which the region’s economies depend to sustain their growth trajectories.
Many states in the region are severely deficient in domestic energy resources and are increasingly
dependent on imports to meet their requirements. For example, in East Asia, Japan and South
Korea have long relied on imported crude oil to meet almost all of their requirements, and in 2009
China depended on imported crude to meet 53% of its needs. This dependence on imported oil
and gas is predicted to rise sharply in the future for almost all East and Southeast Asian states (the
exception being Brunei).
    The majority of these imported energy resources come from Africa and the Middle East and
are transported by sea through maritime chokepoints in Southeast Asia such as the Straits of
Malacca, Singapore, Sunda, Lombok, Makassar, and Balabac, before continuing through the South
China and East China seas to their final ports of call. A major clash or demonstration of force
in any of these bodies of water could seriously disrupt regional energy security, as ships adjust
their navigation routes. Given the concentration of oil reserves, for example, in the Middle East,
alternative sources of supply that do not require transit through the affected region are at present
in short supply (see Figures 1–3).
    Regional disputes range from sovereignty claims over islands and associated waters to
contention over the capacity of predominantly small, isolated, and uninhabited insular features
to support extensive claims to maritime spaces. Disagreements over the weight that should
be accorded to islands in delimitating maritime boundaries, as well as differences over the
appropriate approach or methodology for boundary delimitation, exacerbate the complex nature
of the disputes and ultimately delay final resolution. Attempts to resolve these disputes have been


                   FROM DISPUTED WATERS TO SEAS OF OPPORTUNITY u NBR SPECIAL REPORT
                                                                                                         3
       figure 1       East China Sea




       s o u r c e : I Made Andi Arsana and Clive Schofield for the National Bureau of Asian Research, 2010.




4   NBR SPECIAL REPORT u JULY 2011
figure 2       South China Sea




s o u r c e : I Made Andi Arsana and Clive Schofield for the National Bureau of Asian Research, 2010.



                    FROM DISPUTED WATERS TO SEAS OF OPPORTUNITY u NBR SPECIAL REPORT
                                                                                                        5
       figure 3       Gulf of Thailand




       s o u r c e : I Made Andi Arsana and Clive Schofield for the National Bureau of Asian Research, 2010.




6   NBR SPECIAL REPORT u JULY 2011
ongoing for decades at the government and Track II levels with limited success. That said, advances
in international legal approaches based on the UN Convention on the Law of the Sea (UNCLOS),
bilateral boundary delimitation negotiations, and agreements for the joint development of
resources have arguably served to temper state behavior, offer alternative options, and generally
emphasize diplomacy and dialogue over military force in dispute settlement.
    Nevertheless, there are alarming signs of rising tensions among states in East and Southeast
Asia over their overlapping claims. For example, on at least two occasions in the first half of 2011,
Chinese patrol boats harassed seismic survey vessels chartered by the Philippine and Vietnamese
governments, forcing them to temporarily suspend their exploration activities. The first event
took place in March at Reed Bank, an area that the Philippines regards as part of its 200–nautical
mile (nm) exclusive economic zone (EEZ), and the second in May in waters off the Vietnamese
central province of Phu Yen. Both Manila and Hanoi protested the actions undertaken by Chinese
patrol boats. Another recent incident occurred in September 2010 when the Japanese Coast Guard
detained a Chinese fishing boat captain after a collision in disputed waters in the East China
Sea. That episode, and the ensuing diplomatic fallout, stoked nationalistic tensions between the
two countries and further dimmed prospects of implementing the 2008 agreement on a joint
development zone and gas project. Meanwhile, in the Gulf of Thailand the significant deterioration
in relations between Cambodia and Thailand, ostensibly as a consequence of disputes along their
land boundary, retains the potential to spill offshore. These incidents and a host of similar spats
have occurred frequently over the years. In every instance tensions and mistrust increase among
the principal actors, calling into question the ability of states to resolve these disputes in the
foreseeable future.
    Where overlapping maritime claims exist, uncertainty over jurisdiction inevitably complicates
ocean resources management. Uncoordinated policies lead to destructive and unsustainable
resource competition, especially over living marine resources. Confrontation between rival
fishing fleets and the resulting friction can quickly embroil coastal states’ enforcement authorities,
particularly when local security forces perceive themselves to be merely patrolling what is
rightfully “their” maritime space. Resource competition also tends to stoke nationalist sentiments,
as occurred with the protests in China over Japan’s detention of the Chinese fishing boat captain.
Such strident nationalism raises the stakes for political leaders as they risk appearing weak to their
citizens if they back down. In the worst-case scenario, if tensions escalate into armed conflict,
freedom of navigation and seaborne trade, including the transit of critical energy resources, would
be compromised.
    A more immediate and problematic consequence of these sovereignty and maritime disputes—
and one of particular significance from the energy security perspective—is that the presence of
multiple overlapping claims to jurisdiction generally tends to prevent exploration for and access
to any seabed energy resources that may be present. This is exemplified by the recent incidents
in the South China Sea outlined above, where seismic survey activities have been disrupted by
the objections and intervention of another claimant state. International oil and gas companies
are generally reluctant to conduct exploration operations in disputed areas. Further, even if
exploration activities were to be successful and seabed energy resources were discovered, their
development tends to be unfeasible without fiscal and legal certainty and continuity. Resources
located in disputed areas potentially have a crucial role to play in the economic well-being and
political stability of the coastal states involved—if such resources can be exploited. This is especially


                    FROM DISPUTED WATERS TO SEAS OF OPPORTUNITY u NBR SPECIAL REPORT
                                                                                                            7
       the case if development can be realized in a timely manner, given the increasingly pressing nature
       of the energy security concerns of the states involved.
           Recognizing the fact that maritime jurisdictional disputes in the South China Sea, East China
       Sea, and Gulf of Thailand are not likely to be resolved in the foreseeable future, yet also cognizant
       of the immediate importance of the disputed waters for trade and the provision of vital resources
       for peoples and economies in the region, the National Bureau of Asian Research (NBR) set out to
       critically examine these disputes and their impacts with a view to offering fresh perspectives on
       how they might be managed and their consequences better addressed prior to political resolution.
       To accomplish this, NBR assembled an international team of rising experts, guided by principal
       investigator Clive Schofield and senior advisors Hasjim Djalal and Ian Townsend-Gault, to
       explore notable recent developments in the region and provide policymakers with new insights
       and practical tools to ameliorate or better manage these contentious disputes. This publication,
       compiled by the principal investigator, senior project advisors, and NBR staff, focuses on the
       policy-relevant aspects of NBR’s “Maritime Energy Resources in Asia” (MERA) project.
           This report begins with a discussion of what is at stake in the East and South China seas and
       the Gulf of Thailand. From there, the report assesses recent trends, both positive and negative,
       including the unrealized benefits afforded by these maritime spaces. The subsequent section
       assesses potential ways claimant countries and other stakeholders could move forward. Finally,
       the report concludes with a viable set of policy recommendations for contributing to a more stable
       maritime regime, which would in turn promote the economic prospects of the region.


       What is at Stake?
       Sea Lane Security
           The maritime spaces that make up the East China Sea, South China Sea, and Gulf of Thailand
       are increasingly important to the coastal states involved, as well as regionally and internationally,
       for a number of reasons. A particularly salient concern relates to navigation and the free
       flow of maritime trade. This is of fundamental importance to the functioning of the export-
       oriented economies of East and Southeast Asia. According to the UN Conference on Trade and
       Development’s (UNCTAD) Review of Maritime Transport 2010, over 80% of global trade is carried
       by sea. UNCTAD indicates that in 2009 the volume of seaborne trade was 7.8 billion tons, down
       4.5% from 8.2 billion tons in 2008 due to the global downturn but still significantly greater than
       the almost 6.0 billion tons in 2000 and 2.6 billion tons in 1970. Further, Asia accounted for 41% of
       loaded seaborne goods.
           There is also an increasingly strong energy security dimension to navigational concerns held
       by the littoral states. The SLOCs through the South China and East China seas are already vital
       to the energy needs of the coastal states and their role is only likely to become more pronounced
       in the future. Indeed, International Energy Agency (IEA) 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. If that is indeed the case, imports would account for 74%
       of Southeast Asia’s oil demands, compared with 25% in 2008. This, in turn, implies substantially
       increased tanker traffic in key chokepoints, notably the Straits of Malacca and Singapore at the
       southwestern entrance to the South China Sea and those of Luzon and Taiwan to the north. Also
       of significance is the route via the Straits of Lombok and Makassar and the entrance to the South



8   NBR SPECIAL REPORT u JULY 2011
China Sea via the Balabac Strait between the Philippines archipelago and Borneo, which is a
favored route for very large crude carriers (VLCC) when fully laden.

Shared Living Resources: Fish for the Future?
    The South and East China Seas host marine environments startlingly rich in biodiversity. In
particular, the South China Sea has been recognized as an area of globally significant biodiversity,
while the East China Sea and Gulf of Thailand are similarly productive. These environments also
support fisheries of significance in global, and certainly regional, terms. Indeed, the UN Global
Environment Facility (GEF)—a partnership of ten international agencies1—has suggested that the
South China Sea alone accounts for as much as one-tenth of global fish catches. Like the South
China Sea, the semi-enclosed nature of the East China Sea tends to result in a relatively slow
circulation and exchange of waters. This factor, coupled with its unique environmental features,
has produced a marine environment that supports migratory species.
    These marine living resources are fundamental to the food security of coastal populations
numbered in the hundreds of millions, making access to the South China Sea and Gulf of Thailand
an enduring maritime concern of the littoral states. Moreover, in its report The State of World
Fisheries and Aquaculture 2010, the UN Food and Agriculture Organization (FAO) found that
in 2007 consumption of fish in Asia was 74.5 million tons, which accounts for two-thirds of total
global fish consumption. Consumption per capita in Southeast Asia increased from 12.7 kilograms
(kg) in 1961 to 29.8 kg in 2007, while per capita consumption in East Asia increased from 10.8
kg in 1961 to 30.1 kg in 2007. The significance of this issue is underscored by the same report’s
findings that in 2008 85% of marine fish stocks were either fully exploited (53%) or overexploited,
depleted, or recovering (32%). Protecting and preserving the marine environment of these seas is
therefore a clear and urgent consideration, requiring the establishment of marine protected areas
(MPA) in certain parts of the South China Sea and the preservation of the coral reef ecosystems of
the sea’s disputed islands, which provide important nursery and breeding grounds that are crucial
to sustaining the fishery as a whole.
    A significant additional challenge in this context is the migratory nature of many key fish
stocks within these waters. Fish stocks tend to migrate within and between national maritime
jurisdictions and areas subject to multiple claims (see Figure 4). This, in turn, dictates that these
valuable living resources can largely be considered a “common pool” resource and managed as a
whole—something that is manifestly not occurring at present. In this context, the need for strict
ecosystem-wide, and thus transboundary, management of these threatened resources is compelling.

Continuing Threats to the Marine Environment
   The marine environment in each of the areas under study is under threat in a number of ways.
In its report From Ridge to Reef, the Global Environmental Facility (GEF) suggests that over 80%
of reefs in the South China Sea and Gulf of Thailand are at risk and will collapse within 20 years
unless sustainable practices are adopted; 70% of mangrove cover has been lost in the last 70 years,
and at current rates of habitat loss the remainder will be lost by 2030; and 20%–60% of seagrass
beds have disappeared over the last 50 years, while those still in existence are also threatened with
destruction. The East China Sea is also host to fragile ecosystems, and the marine living resources

 1   The GEF is a partnership of the UN Development Programme, the UN Environment Programme, the World Bank, the UN Food and Agriculture
     Organization, the UN Industrial Development Organization, the African Development Bank, the Asian Development Bank, the European Bank
     for Reconstruction and Development, the Inter-American Development Bank, and the International Fund for Agricultural Development.



                           FROM DISPUTED WATERS TO SEAS OF OPPORTUNITY u NBR SPECIAL REPORT
                                                                                                                                             9
        figure 4       East China Sea fisheries




        s o u r c e : I Made Andi Arsana and Clive Schofield, 2011. Used with permission.




10   NBR SPECIAL REPORT u JULY 2011
that it supports are likewise extremely vulnerable to, among other threats, land-based pollution
that has compromised or destroyed the spawning, breeding, feeding, and wintering grounds of
important fish stocks, thus undermining the sustainability of fisheries. Competitive exploitation
of shared fish stocks on the part of the rival fishing fleets of the littoral states has likewise led to
significant overfishing of shared stocks.
    This situation is likely to further deteriorate as ocean-going traffic and oil and gas activities rise.
Ship-source pollution of an operational nature—such as from tankers discharging contaminated
water after cleaning their tanks—has long been a problem and will continue unless the coastal
states are able to exercise jurisdiction to interdict this practice. The risk of pollution resulting
from an accident or ship casualty is ever present. This threat is highlighted by the fact that many
English-language names of features among the disputed Spratly Islands in the South China Sea
derive from the names of vessels that wrecked upon them. There are also still serious questions as
to the ability of states or nonstate actors to take the mitigation and clean-up measures that will be
required in such an event. The negative consequences of the jurisdictional impasse are once again
evident, and questions remain regarding the will and ability of governments to make optimal and
timely responses to operational ship-source pollution or damage resulting from a marine casualty.
    It is also expected that oil exploration and production, including from deep and ultradeep water
areas (at depths in excess of one thousand feet and five thousand feet, respectively), will increase in
the Gulf of Thailand, South China Sea, and East China Sea and, with this, the risk of a significant
discharge from a rig or platform as a result of a mishap. The 2010 Deepwater Horizon incident in
the Gulf of Mexico underscored the technical and other challenges facing technologically advanced
countries and their licensees when confronted with problems of this nature. Once again, questions
arise as to the readiness and capacity of states and platform operators to respond effectively to a
significant discharge from such activities.
    As the sections of this report on human security factors and vulnerable marine resources show,
the potential economic and human costs of the continued deterioration of the marine environment
are extremely high.

Assessing the Oil Factor
   The areas of overlapping claims in the East China Sea, South China Sea, and Gulf of Thailand
have long been thought to host substantial reserves of seabed energy resources. In light of the
disputes in these regions, however, such possibilities have proved impossible to verify.
   The potential presence of substantial and, critically, close-to-hand reserves of oil has been
viewed as a significant driver for the expansive maritime claims of the states involved. The lure of
such oil riches goes a long way to explaining the general intransigence of these states with regard to
their maritime claims—there exists a fear that to compromise is to potentially lose out on “their”
proper share of this urgently required resource.
   In regional terms, energy demand and import dependency continue to rise, fostering concerns
among governments that perceive energy imports to be a strategic vulnerability. Northeast Asian
states such as South Korea and Japan are highly energy import dependent; Japan, for instance,
imports 90% of its oil requirements by sea. China became a net oil importer in 1993, importing
47% of its oil requirements in 2010 from the Middle East and 30% from Africa, according to the
U.S. Energy Information Administration (EIA). In Southeast Asia, indigenous production is
plateauing or declining such that current or recent exporters such as Indonesia, Malaysia, and



                    FROM DISPUTED WATERS TO SEAS OF OPPORTUNITY u NBR SPECIAL REPORT
                                                                                                              11
        Vietnam are becoming (or in Indonesia’s case have already become) dependent on imports.
        Indeed, in Southeast Asia, only Brunei is likely to remain an oil-exporting state in the near future,
        but in global terms Brunei’s exports are insignificant.
            The Gulf of Thailand has already proved to be a relatively abundant source of seabed
        hydrocarbons, especially gas. It is notable that multiple commercial discoveries have been
        made in undisputed Thai waters just to the west of the large overlapping claims area that exists
        between Cambodia and Thailand. Promising finds have reportedly also been made in uncontested
        Cambodian waters. There are, therefore, strong indications that the Thai-Cambodian overlapping
        claims area holds further seabed energy reserves, especially along the central part of the Gulf
        of Thailand coincident with part of the Pattani Trough—a geological structure already proven
        to host commercially viable fields in Thai waters. These seabed areas constitute arguably some
        of the best undrilled acreage in Southeast Asia. Accessing these seabed energy resources offers
        Cambodia a potential means of transforming its developing economy. For its part, Thailand, as a
        rapidly industrializing state, has ever-pressing energy security concerns that make the prospect of
        enhanced domestic oil and gas production especially appealing.
            With regard to the East China Sea, seabed oil and gas resources have been greatly sought
        by the coastal states—as witnessed by their issuing of numerous and, on occasion, overlapping
        exploration blocks since at least the 1970s—but with little success until recently. Since 2000,
        these exploration activities have finally begun to yield concrete results, due to the discovery of a
        series of predominantly gas-producing fields on the Chinese side of, but in close proximity to, the
        theoretical median or equidistance line in the central part of the sea.
            Estimates regarding the scale of these resources vary wildly, especially for the South China
        Sea. For example, Chinese estimates have ranged from 105 to 213 billion barrels of oil. However,
        these assessments deal in overall oil and gas resources rather than in recoverable reserves—a vital
        distinction. The industry rule of thumb is a 10% recovery rate for frontier provinces such that
        these Chinese figures scale back to still substantial reserve estimates of 10.5–21.3 billion barrels
        of recoverable oil. Other estimates, such as from extraregional players in the United States and
        Russia, are considerably lower.
            For example, the U.S. Geological Survey’s (USGS) “Assessment of Undiscovered Oil and Gas
        Resources in Southeast Asia, 2010” identified 23 geologic provinces that may be suitable for oil
        and gas development in Southeast Asia, of which 9 are located in the South China Sea region
        (including marginal areas of the South China Sea as well as onshore areas that are not subject
        to dispute). The USGS estimated that total conventional oil resources for these provinces is 15.6
        billion barrels, equating to recoverable reserves of 1.6 billion barrels using the 10% recovery rule.
            An alternative, frequently quoted estimate is that of Russia’s Research Institute of Geology
        of Foreign Countries. This estimate of 6 billion barrels for the South China Sea includes 70%
        as gas, so the oil component equates to 1.8 billion barrels of oil. Gas reserves here may, in fact,
        hold considerable promise, especially as recovery rates from gas fields tend to be significantly
        higher than for oil fields (75% vs. 10%). That said, estimates for South China Sea gas reserves
        suffer from uncertainties of a similar magnitude as those for oil, and for analogous reasons (lack
        of exploration opportunities because of sovereignty disputes and overlapping maritime claims).
        Once again, Chinese estimates are characteristically optimistic, but the Chinese figures, in
        common with many other estimates, tend to include conventional as well as unconventional gas
        resources. Unconventional gas resources, notably gas hydrates, may well prove to be an attractive




12   NBR SPECIAL REPORT u JULY 2011
alternative to conventional oil and gas resources in the future. Their exploitation, however, is
presently far beyond the horizon technically. This failure to distinguish between conventional
and unconventional gas resources makes many estimates highly suspect from the point of view of
near- to medium-term energy security considerations.
    Considering that EIA figures indicate that global consumption of conventional oil (i.e., crude
oil and condensates) totaled approximately 26.9 billion barrels in 2010 alone, the potential
significance of even an optimistic assessment of reserves in the East China Sea, South China Sea,
and Gulf of Thailand is small, at least in a global context. That is not to suggest, however, that such
resources, if indeed they do exist and can be viably exploited, would not be of significance on a
regional or country-by-country scale. It does indicate, though, that tales of the oil riches of the
South China Sea should be kept in perspective.

New Technologies, New Frontiers
    Resource exploration activities in offshore areas are being enhanced through significant
technological developments. Notable areas where substantial developments have taken place are in
the fields of seabed energy exploration, seabed mining, the utilization of marine genetic resources,
ocean energy, and climate change mitigation activities. The continental shelf and deep seabed have
the potential to offer a range of other biological and mineral resources that are increasingly being
exploited, aided by considerable advances in deep-sea exploration technologies.
    Offshore areas are an established and important source of non-living resources such as
hydrocarbons, and this is likely to be reinforced in the foreseeable future as oil prices rise in
response to plateauing and declining production coupled with increasing demand. Improved
technology is increasingly allowing economically viable exploration and exploitation of offshore
oil and gas resources in more hostile conditions, including deeper waters farther offshore. Dramatic
technological advances in the oil and gas industry have in recent years enabled exploration in deep
and ultradeep waters. This has involved drilling deeper wells, as well as significant innovations in
production platform design and geophysical exploration technologies, all of which have significantly
enhanced the chances of success in deep seabed exploration and exploitation. Notwithstanding the
Deepwater Horizon incident and the various moratoriums on offshore drilling that the accident
inspired, deepwater and ultra-deepwater drilling for seabed hydrocarbons is likely to grow as an
important option for future oil exploration. For example, although Chinese offshore production
is currently relatively near-shore and in shallow waters, such as in the Bohai Gulf and Gulf of
Tonkin, deepwater exploration activities in the East China Sea and South China Sea are increasing.
China’s recent domestic construction of semi-submersible, deepwater drilling rigs that are capable
of drilling in up to 3,000 meters (m) of water underscores this point.
    Underlying the oil factor in regional maritime disputes, as well as growing interest in deepwater
drilling in these waters, is that there is little indication of a sustained move away from reliance on
oil as the primary energy source driving the world economy. As oil supplies become increasingly
constrained while demand continues to spiral upward, the high likelihood of increasing oil prices
will reinforce the case for the exploration and exploitation of unconventional oil reserves such as
deepwater and ultra-deepwater oil reserves.

Looking beyond Oil and Gas
  Despite the focus that tends to be placed on oil and gas reserves, these do not constitute the only
minerals that can be extracted from the seabed. While deep-sea minerals such as polymetallic

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        nodules have been under consideration since at least the 1960s, more recent advances have occurred
        in the collection and utilization of minerals such as phosphorites, evaporates, polymetallic
        sulphides, and nontraditional hydrocarbons such as gas hydrates. Although the exploitation of
        some of these resources, especially hydrates, does not appear to be commercially viable at present,
        this situation may change over time as requirements and prices change and technologies develop.
        Current efforts to exploit massive sulphide deposits on the sea floor—from around 1,600-m depths
        in the Bismarck Sea off Papua New Guinea—illustrate the potential for such novel developments
        in the Pacific island states. Indeed, Papua New Guinea granted the world’s first deep-sea mining
        lease to Nautilus Minerals for the development of the Solwara 1 project in January 2011.
            Also of note is growing interest in and use of marine genetic resources, which offer an additional
        dimension to traditional marine living resources. Marine biota (plants and animals) represent a
        relatively untapped resource offering developmental potential for a range of applications in the
        fields of medicine, agriculture (providing specialist health foods and dietary supplements, as well
        as agricultural chemicals such as herbicides and pesticides), cosmetics, and in industries where
        marine products can provide valuable enzymes and catalysts in industrial processes.
            This has led to the emergence of marine “bioprospecting” and this type of activity represents
        a potentially rich resource and opportunity for coastal states. Indeed, products related to marine
        biotechnology were estimated to be worth $100 billion in 2000 alone. The potential for further
        growth in marine bioprospecting, especially from relatively unknown areas subject to competing
        jurisdictional claims or located in deepwaters is underscored by the fact that, of over 30,000
        marine natural products reported since the 1960s, less than 2% derive from deep-sea organisms.
        The extremely biodiversity-rich yet underexplored waters of the East China Sea, South China Sea,
        and Gulf of Thailand seem to offer great potential in this regard.

        Alternatives: Ocean Energy and Climate Change Mitigation Activities
           The extensive marine areas under consideration also represent an enormous but as yet largely
        untapped resource in responding to the adverse impacts of climate change. For example, a
        number of marine geo-engineering schemes are currently being pioneered to boost the capacity
        of the oceans to store and absorb atmospheric carbon dioxide, including ocean fertilization,
        biological sequestration of carbon dioxide, and offshore carbon capture. Additionally, the “Fourth
        Assessment Report of the Intergovernmental Panel on Climate Change” acknowledged the huge
        potential role that energy produced by wind, waves, currents, and tides, as well as from ocean
        thermal energy conversion techniques, can play as a partial alternative to fossil fuels, but also
        emphasized that the proportion of these energy sources that are commercially exploitable is still
        very low. The potential use of the waters of the East China Sea, South China Sea, and Gulf of
        Thailand for these purposes remains to be realized.


        Where Are We Now? Positive and Negative Trends
           Though a quick review of the headlines on any given day might give the impression that
        the maritime jurisdictional disputes in East and Southeast Asia are beyond resolution and will
        inevitably lead to widespread regional conflict, there do exist grounds for cautious optimism as
        well as significant reasons for increasing concern. This section takes stock of recent trends in these




14   NBR SPECIAL REPORT u JULY 2011
disputes, first highlighting those in which progress is being made and in which the foundations for
moving forward have arguably emerged.

Positive Trends
    Incremental progress in defining maritime boundaries. One noteworthy way in which coastal
states can clarify their maritime claims and resolve disputes with neighboring states is to delimit
their maritime boundaries. Such boundary definition has the virtue of providing clarity and
certainty to all maritime states and users, thereby helping to minimize the risk of friction and
conflict. The clear delimitation of maritime boundaries also provides the jurisdictional framework
and stable maritime regime necessary for comprehensive and sustainable management of the
marine environment and its resources. Although many potential maritime boundaries in the East
China Sea, South China Sea, and Gulf of Thailand remain to be delimited, some progress—while
partial and gradual in character—has been achieved, including agreements of relatively recent
vintage. Examples include the 1997 Thailand-Vietnam EEZ agreement, China and Vietnam’s
2000 agreement on maritime boundary delimitation in the Gulf of Tonkin/Beibu Gulf, the 2003
Indonesia-Vietnam continental shelf boundary agreement, Brunei and Malaysia’s “exchange of
letters” in 2009, and the 2009 agreement between Indonesia and Singapore to extend their partially
delimited territorial sea boundary.
    A clearer approach to maritime delimitation. In this context, recent developments in the
international law of maritime boundary delimitation are significant. In particular, the 2009
decision of the International Court of Justice (ICJ) in the maritime boundary case between
Romania and Ukraine has delivered greater certainty of approach to a subject that was suffering
from a surfeit of concepts and approaches. The court held that, first, a provisional delimitation
line should be established using “geometrically objective” methods that were “appropriate for the
geography of the area.” The ICJ determined in the Black Sea case that a geometrically objective
method was the construction of an equidistance line and, further, suggested that the use of
equidistance should be applied “unless there are compelling reasons that make this unfeasible in
the particular case.” This explicit and forceful statement in favor of an equidistance line, made as
part of a unanimous ruling from the court, represents a significant step forward compared with
previous, less compellingly clear ICJ statements on this issue.
    At the second stage of the process, the ICJ determined that it would assess whether any factors
existed that should lead to an adjustment of the provisional line in order to achieve an equitable
result. Finally, at the third stage, the line is to be subject to a “disproportionality” test, that is, a
comparison of the relevant coastal lengths of the two parties versus the proportion of the relevant
maritime area divided between them.
    If judicial bodies maintain this clear three-stage approach, it will bring a measure of
predictability to maritime boundary litigation, and hence encourage recourse to this form of
settlement. This approach to maritime delimitation is also likely to prove influential in future
boundary negotiations between coastal states, even if the Black Sea ruling is only binding upon
Romania and Ukraine. As an authoritative ruling of the ICJ, the decision is likely to inform
progress toward the definition of presently undelimited maritime boundaries in the Asian cases
under examination. That said, it must be observed that this growing clarity of approach to the
delimitation of maritime boundaries, while helpful, does not necessarily deliver instant solutions
to complex maritime boundary disputes, especially where such disputes involve sovereignty over



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        islands and fundamentally inimical approaches to jurisdictional claims as is the case in the East
        China Sea and South China Sea.
            An emerging trend on the treatment of islands. A key consideration in maritime boundary
        delimitation and, indeed, a key cause of many maritime boundary disputes, including those
        in East and Southeast Asian waters, is the issue of the treatment of islands. A review of this
        treatment, especially the jurisprudence of international judicial and arbitral courts, suggests
        that a trend is emerging toward awarding islands a significantly reduced effect with respect to
        maritime delimitation. This has proved to be the case especially where such islands are relatively
        insignificant or are located a considerable distance off mainland coasts such that a great disparity
        in relevant coastlines is evident. Such features would tend to have a disproportionate impact on
        the construction of an equidistance-based boundary line and be likely to lead to an inequitable
        result. Consequently, the potential influence of islands on maritime boundary delimitation lines
        has generally been discounted. Indeed, it seems that at least some of the South China Sea littoral
        states, notably Malaysia and Vietnam, take the view that the disputed South China Sea islands
        are incapable of generating claims to EEZ and continental shelf rights. This is strongly implied by
        the fact that these countries have made submissions for extended continental shelf rights beyond
        200 nm from the baselines along their mainland coasts. Judging by its protest notes, China does
        not share this view. If this restrictive opinion was to hold sway, however, the importance of at
        least some of the contested features could be considerably lessened and the scope of overlapping
        maritime jurisdictional claims considerably curtailed. It also appears that the distinction between
        natural and artificial islands will be maintained. (The latter are restricted to the definition of a
        500-m safety zone around them.)
            Implementation of joint maritime development arrangements. An additional feature of East
        and Southeast Asian waters is the existence of multiple joint maritime development agreements.
        Indeed, there appears to be a notable concentration of state practice on joint development in these
        regions. In addition to long-established zones such as those between South Korea and Japan (1974)
        and Malaysia and Thailand (agreed in principle in 1979), joint zones have been established between
        Malaysia and Vietnam (in 1992) concerning seabed hydrocarbons exploration and development,
        and between China and Vietnam (in 2000) concerning joint fishing activities in their 2000
        maritime boundary treaty. Cambodia and Thailand also agreed in principle in 2001 to pursue
        an accord on joint maritime development in part of their overlapping claims area, although little
        progress has subsequently been achieved. Moreover, a series of provisional fishery zones have been
        established in the East China Sea on a bilateral basis between Japan and China in 1997, Japan and
        South Korea in 2000, and China and South Korea in 2001 (see Figure 4). In 2008, China and Japan
        also agreed in principle on the definition of a joint zone in the northern area of the East China
        Sea, but implementation of this agreement has yet to significantly progress. With respect to the
        South China Sea, the conclusion of the Declaration on the Conduct of Parties in the South China
        Sea (DoC) in 2002 and the subsequent creation of the China-Philippines-Vietnam Joint Marine
        Seismic Undertaking (JMSU) could also be regarded as positive developments in this context,
        although the lack of meaningful implementation of the DoC and the lapsing of the JMSU in 2008
        undermine this view.
            These joint management zones are consistent with Articles 74(3) and 83(3) of UNCLOS that
        respectively deal with EEZ and continental shelf delimitation and that call in identical language
        for states, pending agreement and in a spirit of understanding and cooperation, to “make every




16   NBR SPECIAL REPORT u JULY 2011
effort to enter into provisional arrangements of a practical nature.” Importantly, several of these
joint zones appear to be functioning with considerable success. For example, although it took a
considerable time for Malaysia and Thailand to convert their agreement in principle into a formal
treaty, joint exploration activities have yielded several commercially viable gas discoveries that
are in the process of being developed, although challenges remain in terms of reconciling seabed
energy developments and the needs of coastal communities. Overall, though, this progress and the
popularity of the joint development concept in East and Southeast Asia augers well for this type
of dispute management mechanism and interim oceans governance to be applied elsewhere in the
East China Sea, South China Sea, and Gulf of Thailand.
    States making their positions clearer. The nature and extent of rights and responsibilities
in maritime spaces is established in UNCLOS, coupled with customary international law.
International law endows each coastal state with a territorial sea that should be no more than
12 nm wide, over which it exercises sovereignty subject to the right of innocent passage for foreign
vessels. A contiguous zone, within which certain domestic laws (for instance related to customs and
sanitation) can be enforced, may also be claimed out to 24 nm. Coastal states have the sovereign
right to explore for and exploit the natural resources of the seabed and subsoil of their continental
shelf, now taken to extend to 200 nm and possibly beyond. States can also claim an EEZ out to 200
nm, which gives them rights to explore and exploit the living and non-living resources of the water
column, seabed, and subsoil, as well as certain other rights, though there is some contention in the
region over the extent to which coastal states can control other activities.
    States parties to the UNCLOS are expected to couch their maritime claims in accordance with
its provisions and, indeed, the East and Southeast Asian coastal states predominantly do so or, at
least, claim to do so. That said, certain states base their claims on other factors, including “historic
waters.” Of particular note in this context is China’s (and Taiwan’s) nine-dashed line map of the
South China Sea (see Figure 2).
    Although China has never provided an authoritative explanation concerning the nature of this
line or series of partial lines, either in terms of what is being claimed or its legal justification, a
positive trend is perhaps detectable. For example, China’s objection to the extended continental
shelf submissions in 2009 by Vietnam alone and by Malaysia and Vietnam jointly used language
that is consistent with UNCLOS. That is, a Chinese note verbale referred to China having sovereignty
over waters “adjacent” to the disputed South China Sea islands and “sovereign rights” over “relevant
waters as well as the seabed and subsoil thereof.” This can be interpreted as a reference to claims to
territorial sea, EEZ, and continental shelf rights based on the islands rather than as a reference to
claims to historic waters or similar within the nine-dashed line, as has been speculated. Such a view
is supported by the content of China’s note to the UN Secretary General on April 14, 2011. This note
was a counter protest in response to a protest note on the part of the Philippines over China’s use
of the nine-dashed line map in its own protests directed against the extended continental shelf
submissions of Vietnam alone and Malaysia and Vietnam jointly. China’s April 2011 note claimed
that the disputed islands are “fully entitled to territorial sea, EEZ and continental shelf.”
Unfortunately, however, this conclusion involves a certain amount of speculation and perhaps even
wishful thinking, as China has yet to make its claims entirely explicit.
    The workshop process. Recognizing the complex and multiple claims to the South China Sea,
Indonesia initiated an informal workshop process in 1989 as a method of better managing tensions
in the region and avoiding wider conflict. These informal workshops were not intended to solve



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                                                                                                           17
        territorial disputes among the various claimants but rather aimed to achieve three objectives: first,
        to devise cooperative programs in which all claimants took part; second, to promote dialogue among
        the directly interested parties so that they could work toward dispute solutions; and, third, to develop
        a confidence-building process to aid cooperation and build trust, which was sorely lacking.
            After more than twenty years of regular meetings, experiences indicate that engagement on
        technical cooperation is far easier than resolving territorial, sovereignty, and jurisdictional issues.
        As a direct result of the workshop process, a number of cooperative agreements and activities have
        been worked out between claimant states in the region, in areas such as biodiversity exploration,
        the monitoring of sea-level rise, and marine environmental monitoring—all of which are critical
        activities that will help countries in the region make progress in ways that do not require resolution
        of sovereignty or boundary claims. For example, in 2002, a multinational team of scientists from
        Indonesia, Malaysia, Singapore, Thailand, the Philippines, Vietnam, China, and Taiwan engaged in
        a biodiversity exploration in Indonesia’s Anambas islands. The expedition discovered new species
        and served to enhance cooperation and confidence in an area that was little explored due to rival
        claims. The program on Southeast Asian Networking on Education and Training (SEANET) that
        Taiwan and China have initiated at their joint expense is another example of a cooperative activity
        that engages all participants from the South China Sea workshop process. The SEANET program
        aims both to increase scientific and technical knowledge regarding ocean issues and to intensify
        networking among scientists in the South China Sea area.
            Overall, the workshop process continues to enjoy regional support, as evidenced not merely
        by attendance at meetings but also through contributions in cash and in kind to the cooperative
        projects it has designed.
            Increased dialogue between experts. The past decade has seen a gradual proliferation of unofficial
        meetings at which an increasing range of maritime and other issues have been discussed. Host
        institutions have included the Diplomatic Academy of Vietnam in collaboration with the Vietnam
        Lawyers Association, the Institute for South China Sea Studies on Hainan Island, and, later in
        2011, the Academia Sinica of Taiwan, the Centre for International Law at the National University
        of Singapore, and the Foreign Service Institute of the Philippine Department of Foreign Affairs.
        Presenters include government officials and researchers from the region and beyond. The value of
        these dialogues lies not only in allowing for the exchange of ideas concerning pressing issues but
        also in exposing local officials and experts to a wide range of opinions and perspectives they might
        not otherwise encounter. This has a beneficial impact on policy formulation and reduces the risk
        of an overly parochial approach to the issues.
            Internationalization of the disputes. Secretary of State Hillary Clinton and eleven other foreign
        ministers raised concerns at the ASEAN Regional Forum (ARF) meeting in July 2010 about recent
        developments in the South China Sea and the consequent need to push forward with the DoC.
        This was the first time since the ARF was founded in 1994 that the South China Sea issue had
        been addressed in a substantive manner and set a positive precedent for the issue to be discussed
        at subsequent multilateral security forums, such as the ASEAN Defence Ministers’ Meeting Plus
        (ADMM-Plus) in October 2010, when eight countries brought up the dispute.
            There are also encouraging signs that ASEAN is moving toward a stronger consensus that
        discussions with China on the dispute should be multilateral. For instance, in May 2011 in Beijing,
        Malaysian deputy prime minister Muhyiddin Yassin stressed the importance of a multilateral
        approach. In the same month, at the ASEAN leaders’ retreat in Jakarta, Philippine president




18   NBR SPECIAL REPORT u JULY 2011
Benigno Aquino called for the ASEAN claimants to take a common stand on the South China Sea
within the ASEAN framework.

Negative Trends
    Despite the positive momentum these developments provide toward permanently resolving
Asia’s maritime jurisdictional disputes, there are unfortunately also trends that are slowing—or
even reversing—the positive impacts. The trends below offer a sober reminder of the complexities
standing in the way of dispute resolution in the near term.
    Growing concerns and increasing tensions over resource scarcity. One overarching factor in the
East and Southeast Asian maritime disputes under discussion is increasing pressure over access to
the valuable resources contained, or suspected to exist, within broad areas subject to overlapping
claims. As already outlined, marine resources, both living and non-living, are of increasing
importance to the coastal states along the East China Sea, South China Sea, and Gulf of Thailand.
Regional energy security concerns are likely to escalate further as domestic production flattens or
declines and demand simultaneously increases at a rapid rate. The growing resultant dependence
on imported energy supplies will likely lead states to place greater priority on accessing the
potential seabed energy resources in contested areas. This drive to access disputed seabed energy
resources carries the risk of generating incidents and clashes, as has occurred already with respect
to attempts by the Philippines and Vietnam to conduct survey work in the South China Sea in the
first half of 2011 and China’s reactions to these activities. Further, as previously mentioned, there
are growing concerns over the health of key fish stocks in the region, heretofore renewable living
resources that are critical to regional food security. These increasing pressures, and intensifying
efforts to use and exploit ocean resources, are already acting as drivers of increasing tensions
between the coastal states involved.
    Intractable disputes? Critical and currently intractable points of disagreement between the
involved states are less a trend than an abiding reality of the maritime legal and geopolitical
environment of the region. These issues provide the fundamental basis for, and obstacles to, the
resolution of maritime claims in these waters. Sovereignty disputes over islands remain the primary
cause of broad areas of overlapping claims to the maritime jurisdiction in these waters. The
fundamental linkage between states and their constituent territories, allied to the powerful influences
of nationalism, patriotism, and the demands of domestic and international politics, means that states
tend to defend staunchly their territory. This holds true no matter how small or apparently
intrinsically worthless such fragments of territory may appear, even, for instance, tiny, remote, and
uninhabited islets. When the marine resources, real or imagined, contained in the maritime spaces
potentially associated with these small islands are added to the equation, the likelihood of
compromise on the all-important question of sovereignty tends to diminish to a vanishing point.
    Thus, for all the progress that has been made in terms of delimiting maritime boundaries in
East and Southeast Asia, as well as in the international legal approaches to maritime delimitation,
there is clearly a long way to go before a comprehensive network of maritime boundaries is defined
and, thus, a clear jurisdictional framework established. Sovereignty disputes over islands remain
the primary cause of the overlapping claims to maritime jurisdiction in these waters.
    In the East China Sea, in particular, it is also the case that the interested states—China and
South Korea, on the one hand, and Japan, on the other—hold fundamentally opposing views
regarding the basis for maritime entitlements in the region and thus how maritime boundaries



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        should be determined. This disagreement prevents the ready application of the type of approach
        suggested by the Black Sea case. Whereas in the past Japan has been understood as favoring
        division on the basis of a median or equidistance line, China and South Korea base their claims on
        “natural prolongation” principles—that is, that each coastal state should have rights over the part
        of the continental shelf linked to its land territory (i.e., the part forming a natural prolongation
        of its land territory into and under the sea). According to this approach, the location of the
        maritime boundary should be determined or at least influenced by the geophysical characteristics
        of the sea floor, notably its geology (composition and structure) and geomorphology (shape, form,
        and configuration). As the Okinawa Trough can be taken to represent a break between distinct
        continental shelves, and thus continental shelf entitlements, and this subsurface feature is located
        far closer to Japan’s Ryukyu island chain than to the coasts of China and South Korea, a continental
        shelf delimitation line coincident with the Okinawa Trough would be highly advantageous to
        China and South Korea, leaving much of the East China Sea on the Chinese and Korean side of
        the line. There are, however, indications that the area of the East China Sea subject to dispute
        among the littoral states has expanded. China’s preliminary submission for extended continental
        shelf rights includes points located to the east of the Okinawa Trough and thus beyond what had
        generally been understood to be the limit of China’s previous claim along the axis of the trough.
        Perhaps in response to this development, Japanese commentators have emphasized Japan’s claim
        to a 200-nm EEZ, suggesting that Japan’s claims may extend to the west of the median line in the
        East China Sea that had been viewed as the Japanese claim in the past.
            Maintaining excessive claims. A particularly problematic feature of regional maritime disputes
        is that many of the states involved maintain what can be legitimately termed excessive maritime
        claims. That these claims are often long-standing does not render them any less troubling or hard
        to overcome. The most prevalent type of excessive maritime claim is that of straight baselines
        that run contrary to the spirit of the relevant UNCLOS provisions in Article 7. Indeed, many of
        the claims to straight baselines that have been advanced, involving coastlines that are not deeply
        indented, cut into, or fronted by a fringe of islands, can be considered contrary to a reasonable
        interpretation of international law and, consequently, such claims have excited international
        protests, especially from the United States. That this regional practice appears to be somewhat
        consistent—that is, the claims of many states are as excessive as their neighbors—is of little help
        in resolving regional disputes. Excessive baseline claims are a consistently complicating factor in
        regional efforts to delimit maritime boundaries.
            Problematic historic claims. Another type of excessive maritime claim that is a particular
        feature of the maritime spaces of East and Southeast Asia are dubious claims based on alleged
        historic rights. There is, however, a distinction between historic claims to title over territory,
        including islands, and historic claims to maritime spaces. Most of the claimant states to the
        disputed islands of the South China Sea base their claims to sovereignty at least partially on
        historic factors including discovery, use, and occupation of the island territories in question. The
        same holds true with respect to competing Chinese/Taiwanese and Japanese claims to sovereignty
        over the disputed islands in the southern East China Sea, called the Diaoyu Islands by China and
        the Senkaku Islands by Japan. Although a full rehearsal of the competing claims to sovereignty
        over the disputed South China Sea islands is beyond the scope of this report, it can be observed
        that none of the claims made, whether historically inspired or based on other arguments such as




20   NBR SPECIAL REPORT u JULY 2011
proximity, are especially strong, despite the fact that several of the claimant states frequently refer
to their claims as “indisputable.”
    Alleged historic claims to maritime spaces are arguably made even more problematic as they
appear to run counter to the UNCLOS provisions, to which, it is worth reemphasizing, the vast
majority of East and Southeast Asian coastal states are party. As previously noted, certain states
in East and Southeast Asia appear to claim maritime areas on the basis of historic use—what has
been termed “historic waters.” This term does not appear in UNCLOS. Instead, the convention
refers only to “so-called ‘historic’ bays.” This hardly constitutes a ringing endorsement of the
concept, which some states duly reject because of its uncertain nature (for instance, the United
States accepts only three out of eighteen such claims worldwide). Of particular note here are
Cambodia and Vietnam’s 1982 claim to an area of “joint historic waters” in the Gulf of Thailand,
the Philippines’ claim to rights within a box formed by several nineteenth-century treaties, and
China’s infamous nine-dashed line.
    Concerning the claims of the Philippines, Manila has promulgated legislation that is consistent
with the provisions laid out in the UNCLOS. Indeed, in 2009, the Philippines revised its baselines
through Republic Act No. 9522, such that it now claims archipelagic baselines in accord with the
terms of the UN Convention. However, Manila simultaneously does not appear to have abandoned
its long-standing claim that the maritime spaces located within the box defined by the Philippine
Treaty Limits are part of the country’s territorial sea (notwithstanding the fact that the Philippines
apparently claims a 12-nm-breadth territorial sea and the limits of the box are up to 285 nm from
the baselines of the Philippines). Such claims are clearly inconsistent with the UNCLOS and
remain highly problematic from the perspective of the Philippines’ neighbors. The Philippines
also claims sovereignty over all of the islands within an irregular pentagonal box, terming these
features the “Kalayaan Island Group” (KIG). The KIG box does not appear to represent a claim to
historic waters, however, and the above-mentioned 2009 baselines revision leaves the South China
Sea islands claimed by the Philippines outside the country’s archipelagic baselines, instead dealing
with them under the “regime of islands,” that is, in a manner consistent with UNCLOS.
    China’s dashed line remains equally mysterious and potentially problematic. In 1947, the
Guomindang government of the Republic of China issued a map which included a line with eleven
dashes in the South China Sea. The map was subsequently adopted by the People’s Republic of
China (PRC) in 1949, though two of the dashes were removed in the Gulf of Tonkin in 1953.
However many dashes there are, the line segments depicted are very close to the coastlines of
the other littoral states. China has never explicitly clarified what this discontinuous line actually
means. For example, the dashes have sometimes been joined up in a U-shaped line that appears
to encompass much of the South China Sea. It remains unclear whether this line signifies a claim
to sovereignty within it (i.e., over the disputed islands), indicates a unilateral claim to a maritime
boundary, or represents a claim to the maritime spaces within the dashes, whether as historic
waters or as another type of maritime zone. China’s inclusion of the nine-dashed line in protest
notes to Vietnam as well as to Malaysia and Vietnam jointly in response to their 2009 submissions
to the UN Commission on the Limits of the Continental Shelf (CLCS) provoked considerable
regional uncertainty and anxiety. Legally speaking, the ambiguous historic claims outlined
above are unlikely to prove defensible before an international court or tribunal. In light of this,
and because none of the South China Sea claimant states appears to have a compelling claim to




                   FROM DISPUTED WATERS TO SEAS OF OPPORTUNITY u NBR SPECIAL REPORT
                                                                                                          21
        sovereignty over the disputed islands, a resort to dispute resolution via an international body such
        as the ICJ seems extremely unlikely.
            Moreover, in 2010 PRC officials further muddied the waters by reportedly referring to the South
        China Sea as a “core interest,” seemingly elevating the dispute to be on par with Taiwan and, by
        implication, suggesting that Beijing was both unwilling to negotiate the issue and prepared to use
        force. In the face of the negative regional reaction, however, Chinese officials and academics have
        ceased referring to the South China Sea as a core interest.
            Growing complexity in claims. As noted above, the various submissions made by East and
        Southeast Asian coastal states to the CLCS regarding the outer limits of their continental shelves,
        as well as the reactions of states such as China to these submissions, are instructive and offer a
        route toward a clearer understanding of some maritime claims. Nonetheless, regional submissions
        for extended continental shelf rights appear to add an additional layer of complexity to an already
        convoluted scenario of interwoven and overlapping maritime claims. Further, as demonstrated
        by the robust nature of the protests and counter-protests that these submissions have provoked,
        extended continental shelf rights are an additional, and technically and legally highly involved,
        source of contention among the disputing parties.
            ASEAN and China’s failure to implement the DoC. Despite both China and ASEAN recently
        reaffirming the importance of the DoC, the two sides have failed to achieve a breakthrough on
        guidelines to implement the agreement. The main sticking point, it seems, is Beijing’s continued
        objection to the ASEAN states discussing the issue among themselves prior to meeting with China.
        According to the Chinese government, the South China Sea dispute is a bilateral problem and thus
        should be discussed bilaterally. As a result, a meeting of the ASEAN-China Joint Working Group
        on the DoC yielded no progress in December 2010 and a planned meeting in March 2011 did not
        eventuate. Failure to even gradually, partially, or incrementally implement the DoC means that
        tensions in the South China Sea will persist, raising the stakes for military confrontations at sea
        and further instability.
            Militarization of the South China Sea dispute. As tensions fester and ASEAN and China (as well
        as Japan and China in the East China Sea) fail to make progress on the concrete implementation of
        conflict management and conflict avoidance mechanisms, the rapid modernization of the People’s
        Liberation Army (PLA) is shifting Asia’s balance of military power in the PRC’s favor, thereby
        strengthening Beijing’s hand in the South China Sea. China’s defense budget is the highest in Asia
        and second only to the United States globally. The pace and scope of PLA modernization, especially
        with regard to the PLA Navy, is changing the strategic context of the dispute, increasingly placing
        China in a much stronger position to uphold its sovereignty claims and, if necessary, pressure the
        other disputants. The growing asymmetry in military power between China and Southeast Asian
        claimants is arguably likely to render the status quo unsustainable.
            Preparing for contingencies in the South China Sea is also driving military modernization
        programs in certain Southeast Asian countries. In particular, Vietnam, which feels most threatened
        by China’s assertive behavior and growing military muscle, has sought to strengthen its air and
        naval capabilities through the acquisition of advanced weapons platforms from overseas. This
        includes jet fighters, corvettes, frigates, and fast patrol boats from Russia. Most strikingly, Hanoi
        has placed an order in Russia for six Kilo-class submarines which will provide the Vietnamese
        navy with anti-access/area-denial capabilities vis-à-vis the PLA Navy. Malaysia has based its first
        two submarines in Sabah close to its territorial claims in the Spratly Islands. The Philippines has




22   NBR SPECIAL REPORT u JULY 2011
long been disadvantaged by the weak state of its armed forces, though indications suggest the
political will is now present to address the situation. President Aquino recently announced extra
funding for the Armed Forces of the Philippines to upgrade the country’s military facilities in the
Spratly Islands and provide the navy and air force with more modern equipment. Overall, there is
a trend toward greater militarization of the South China Sea.
    The South China Sea dispute in the context of Sino-U.S. relations. The South China Sea has joined
the list of contentious issues in Sino-U.S. relations. While U.S. policy has remained consistent
with regard to the South China Sea disputes—the United States does not take sides on competing
claims, opposes the use of force or threat to use force, and supports a peaceful resolution based
on international law—senior U.S. officials have become more vocal in articulating their concerns
about growing tensions among the various claimants. For example, at the June 2010 Shangri-La
Dialogue in Singapore, U.S. Secretary of Defense Robert Gates referred to the South China Sea
as an “area of growing concern” for the United States and at the ARF meeting in July, Secretary
of State Clinton described the South China Sea as “pivotal” to regional security and argued that
freedom of navigation was a U.S. national interest. Recent confrontations at sea between China
and the United States underscore the fact that the two countries have fundamentally different
interpretations concerning the legality of foreign military surveillance activities in EEZs. This
has become increasingly conflated with the territorial and maritime jurisdictional disputes in the
South China Sea.
    A downward trend in Sino-Japanese relations. The territorial dispute over the Senkaku/Diaoyu
Islands in the East China Sea remains a major source of friction in Sino-Japanese relations. In
September 2010, the ramming of a Japanese Coast Guard vessel by a Chinese trawler near the
disputed islands, along with the subsequent detention of the trawler and its crew, plunged bilateral
ties to a post–Cold War low. Though relations have improved since then, the unresolved nature
of the dispute has the potential to upset Sino-Japanese relations in the future, especially as the
issue has become a lightning rod for nationalists in both countries. Japanese anxieties have been
magnified by China’s recent assertiveness in the maritime domain and the lack of transparency
associated with the rapid modernization of the PLA. Further, little progress is apparent in ongoing
attempts to turn the 2008 “principled consensus” on Sino-Japanese cooperation in the East China
Sea, including agreement in principle on a maritime joint development zone, into a formal treaty
and operational joint development mechanism. As is the case in the South China Sea dispute, the
absence of conflict avoidance and conflict management mechanisms between the armed forces of
China and Japan raises the risks of an accidental confrontation at sea that could rapidly escalate.
    Growing lack of clarity regarding EEZ rights. Some states claim that EEZ rights include the right to
control activities such as hydrographic surveying, as well as naval maneuvers by foreign warships.
This has been firmly resisted by a number of countries, including the United States. While Part II
of the UNCLOS, dealing with territorial seas and contiguous zones, is quite clear that activities
such as marine scientific research and hydrographic surveying are subject to the jurisdiction of the
coastal state within the territorial sea, Part V of the UN Convention on EEZs merely states that
the coastal state can regulate marine scientific research and makes no mention of hydrographic
surveying. This absence in Part V is arguably significant and it follows that any activity, such
as hydrographic surveying, which is not expressly declared to be within the jurisdiction of the
coastal state, remains one of the freedoms of the seas retained within claimed EEZs. It is thus
difficult to interpret Part V of the convention in the expansive way favored by some. There are,


                   FROM DISPUTED WATERS TO SEAS OF OPPORTUNITY u NBR SPECIAL REPORT
                                                                                                           23
        however, no obstacles to the development of a new rule of customary international law, provided
        that it does not violate a treaty provision (for example, the UNCLOS). The current trend, however,
        makes for a lack of clarity in the nature of coastal state rights in EEZs, and hence sets the scene for
        confrontations between vessels from states asserting such rights and those denying them.
            Thailand-Cambodia tensions. The volatile nature of Thailand-Cambodia relations continues to
        hamper efforts to resolve their overlapping claims in the Gulf of Thailand, an area believed to contain
        with high probability substantial oil and gas resources. Significant signs of progress toward settlement
        of the dispute emerged in June 2001, when the two countries signed a memorandum of understanding
        (MOU) regarding the area of their overlapping maritime claims to the continental shelf. Despite
        regular meetings and some suggestions of progress being made, no agreement has been forthcoming,
        either with respect to maritime boundary delimitation for the northern part of the overlapping
        claims area near the coast or with respect to the realization of a maritime joint development area
        for the overlapping areas in the central gulf located farther to the south.
            In November 2009, during one of several recent low points in the bilateral relationship, the
        Thai cabinet sought to abrogate the MOU following Cambodia’s retention of Thaksin Shinawatra,
        Thailand’s former prime minister who was ousted in a 2006 coup, as an economic advisor. Tensions
        subsided following Thaksin’s resignation in August 2010, only to shift to the decades-long dispute
        over the two countries’ land border near Preah Vihear Temple. The ICJ awarded the temple to
        Cambodia in 1962, but Thailand claims the land adjacent to the temple that was not settled by the
        ICJ ruling. Nationalist tensions over the land border have flared several times in recent years, with
        skirmishes resulting in fatalities in early 2011. These disputes have raised considerable concern
        among the countries’ ASEAN neighbors. The two sides have agreed to the presence of Indonesian
        surveyors and have re-opened the land border, but mistrust and animosity, and thus the chances
        of renewed violent clashes, remain high. Against this backdrop of poor bilateral relations, other
        issues—most notably in the maritime domain—are unlikely to be resolved easily. It remains to be
        seen whether the change of government in Thailand resulting from the July 2011 election will lead
        to a substantial change in this scenario, although incoming prime minister Yingluck Shinawatra
        listed improving international relations as a priority.
            Slow progress in the implementation of provisional arrangements. As previously noted,
        Articles 74 and 83 of the UNCLOS provide that states should consider entering into “provisional
        arrangements of a practical nature” pending a final delimitation agreement. Examples include
        the joint development arrangements currently existing in many parts of the world, including
        a number in East and Southeast Asia. In the present context, attention should be drawn to the
        “principled consensus” between China and Japan that seemed to pave the way for some form of
        cooperative arrangement but appears to have stalled. The experience of Malaysia and Thailand in
        the Gulf of Thailand does, however, suggest that even though a considerable period of time may
        pass (even over a decade) between the agreement and its practical implementation, successful joint
        development can nonetheless be achieved. More recently, China has repeated offers to enter into
        joint development agreement with some South China Sea littoral states but only on a bilateral
        basis, as opposed to the multilateral approach favored by ASEAN states. It is also difficult to
        determine precisely where such joint development might take place, particularly in the absence of
        clarification of China’s claims to maritime jurisdiction in the South China Sea. The result is that a
        useful way of moving forward is not being pursued.




24   NBR SPECIAL REPORT u JULY 2011
Moving Forward in the Absence of Resolution
    While immediate resolution of the maritime jurisdictional disputes should be the top priority
for states in the region, the seemingly intractable nature of key aspects of these disputes and
their complexity, coupled with historical and geopolitical factors, strongly suggest that enduring
resolution of the disputes is not likely to occur in the near to medium term. Given the importance
of these areas, it is imperative that states agree on ways to mitigate tensions and move forward on
cooperative activities and confidence-building measures in the absence of resolution. The status
quo is simply unsustainable, holds the likelihood for future conflict, forestalls opportunities to
access urgently needed resources, and undermines the proper management of critically important
marine living resources and the ocean environment. To avoid a dire outcome, there are several
mechanisms that could be useful for states to implement in the absence of final resolution.
Although implementation of the DoC may not occur soon, the agreement does contain some
potentially valuable confidence-building measures, which, if put into effect, could help better
manage the dispute.

Proper Valuation of Resources
    Underlying the oil factor in the disputed maritime spaces in East and Southeast Asia are strong
indications that global oil production is peaking. Oil prices are thus likely to rise in the future—
an unwelcome prospect for states that are increasingly dependent on imports to meet their oil
requirements. This, in turn, will have an impact on the benefits to be derived from developing
the resources underlying the disputed areas of the East China Sea, South China Sea, and Gulf of
Thailand, if these resources do indeed exist. On the one hand, elevated oil prices will increase the
value of any reserves. But on the other hand, the value of such reserves in energy security terms is
undermined by the long lead times required before exploration and development can actually be
realized. In the context of the waters under consideration, some kind of settlement, or at the least
joint accommodation on overlapping maritime jurisdictional claims, is a necessary requirement—
no easy task. Further, it takes ten or more years from discovery of a field to the first oil being
produced. Thereafter, there tends to be a relatively rapid build-up of production for several years
to a peak plateau, followed by an exponential decline in production as reservoir pressure drops.
Consequently, even if sovereignty and maritime jurisdictional disputes were settled or shelved
tomorrow, peak production from any fields that exist in the disputed waters under consideration
would not contribute substantially to the littoral states’ energy security picture for as long as
fifteen years. This suggests that the role of the seabed energy resources that may lie locked within
disputed waters should not be overstated. Further, such resources in any case would only cushion
import dependence to a limited extent, given the scale and growth of regional energy demands. In
short, when set against the scale of expected oil and gas imports and escalating demands for such
supplies, these potential but unproven seabed energy resources offer no “silver bullet” to address
imminent regional energy security concerns.

The Benefits of Jurisdictional Clarity
   Exercises of state power are not compatible with secrecy or incoherence and muddle. As in domestic
law, international law provides states and individuals with a right to know where they stand and
what their rights and obligations may be. This is consistent with the generally accepted view of the
rule of law, which in turn is an essential component of the modern concept of good governance.


                   FROM DISPUTED WATERS TO SEAS OF OPPORTUNITY u NBR SPECIAL REPORT
                                                                                                        25
           This report identifies a number of areas where doubts exist as to the nature and extent of state
        rights offshore. Similar ambiguity exists in the ways in which states are (or are not) discharging
        their obligations. Not only is all this unhelpful, it is also unnecessary. The UNCLOS is one of the
        most extensively and intensively researched areas of international law. The jurisdictional concepts
        behind the convention are well understood, as are the areas where state practices diverge from the
        wording of the UNCLOS, both in ways where such practices contradict it and in ways in which
        they remain compatible with it. A lack of jurisdictional clarity is incompatible with confidence-
        building and cooperation, both of which are required in the areas under study. It is therefore
        important to establish clarity regarding claims to the various maritime zones.

        Including Taiwan in Dispute Resolution Discussions
            The status of Taiwan is a matter reaching far beyond the ambit of this report. Nonetheless,
        in considering the maritime dispute matters discussed herein, Taiwan cannot simply be ignored,
        any more than it can be in APEC (Asia-Pacific Economic Cooperation), the Asian Development
        Bank, the World Trade Organization, or the South China Sea workshop process. If Taipei can be
        accommodated in these contexts, it should be possible to find a means whereby Taiwan can play a
        part in dispute settlement and cooperative activities for the development of East Asian energy and
        other natural resources. It seems counterintuitive that Myanmar, as a non-South China Sea littoral
        state, is a party to the DoC (as Timor Leste will also become if admitted to ASEAN), while Taiwan
        is excluded. Given the objectives of the declaration, this cannot be a satisfactory state of affairs.
        This need not prejudice the position of any party as regards to the status of the island. It is for this
        reason, for instance, that the South China Sea workshop process has adopted the name “Chinese
        Taipei” for the island in accordance with APEC practice and other cooperative initiatives.

        More Resources for the Workshop Process
           While the South China Sea workshop process can claim to have made and still be making an
        impact, there is no doubt that its activities are running at a slower rate than was the case when it
        was receiving significant financial support from outside the region, most notably from Canada.
        During its first decade, the process developed a series of technical working groups that were
        forums for regional experts in fields such as marine scientific research, environment and ecology,
        transportation and communications, resource assessment and management, and law to meet and
        consider opportunities for cooperation in detail. A number of “groups of experts” were created
        under the working groups to give particular issues even greater scrutiny, such as environmental
        legislation, zones of cooperation, and hydrographic surveying. These meetings took place in
        virtually every part of the greater South China Sea region, with the annual workshop always in
        Indonesia. The annual workshop received reports and proposals from the bodies and considered
        their work plans for the following year. The process also had informal staff of its own. While
        there may not be the need to return to a schedule that saw up to eight meetings in one year, a
        greater level of support from inside and outside the region would allow for a return to a pace that
        would be more conducive achieving the objectives that the process was established for in 1989.
        At present, contributions to the special fund that assists the participation of some participants
        come primarily from China, Taiwan, and Vietnam. Indonesia continues to meet local expenses.
        Various mechanisms are available, however, for providing support from outside the region, such
        as through foundations, universities, research organizations, and the like, which would also help
        avoid the issue of nonregional governmental involvement.



26   NBR SPECIAL REPORT u JULY 2011
Implementation of Confidence-Building Measures in the DoC
   As a matter of priority, ASEAN and China should put into effect the confidence-building
measures contained in the DoC. Progress in this area could help lower tensions, prevent naval
confrontations, and build trust among the claimant countries. Valuable measures would include:
  •	 Telephone hotlines. The establishment of telephone hotlines between the defense departments
     of claimant countries would allow rapid exchange of information during crises and prevent
     standoffs at sea from escalating into armed confrontation. Encouragingly, in 2010 Vietnam
     and China agreed to establish a telephone hotline. But such mechanisms need to be more than
     mere symbols of good intent and must be effectively implemented and tested on a regular basis.
     The United States and China have a telephone hotline for emergency situations, but during the
     March 2009 USS Impeccable incident off Hainan Island, the Chinese failed to respond when the
     Americans put through several calls.
  •	 Advanced notification of military exercises. Military exercises have also generated friction in the
     South China Sea. In recent years the PLA has increased the scope, sophistication, and frequency
     of naval exercises in the South China Sea. Paragraph 5 of the DoC encourages the parties to
     notify each other of forthcoming military exercises in the area. Yet there is little evidence to
     suggest that this has occurred in a regular or systematic manner. Advanced notification of
     military training exercises—including timeframes, geographical coordinates, and objectives—
     would increase transparency and contribute to a lowering of tensions.
  •	 Combating transnational threats and search and rescue training. Paragraph 6 of the DoC enjoins
     the parties to conduct search and rescue (SAR) operations and to engage in cooperative
     activities aimed at combating transnational threats such as illegal trafficking and maritime
     piracy. Both activities would require the ASEAN states and China to increase combined
     training and exercises between or among their armed forces. SAR training exercises between
     the navies of Southeast Asia and China have thus far been limited to table-top exercises and
     must progress toward exercises at sea similar to those conducted by the U.S. Coast Guard,
     PLA, and Hong Kong Marine Police. Counter-piracy cooperation is another promising avenue
     of cooperation, given that this is a problem that creates a negative impact on the free flow of
     maritime trade in Southeast Asia, especially in the South China Sea where incidents of piracy
     have been on the rise. The Regional Cooperation Agreement on Combating Piracy and Armed
     Robbery against Ships in Asia (ReCAAP)—which has an information-sharing center located in
     Singapore—could be used as a vehicle to promote ASEAN-China counter-piracy cooperation
     in the disputed areas.
  •	 Incidents at sea agreement. The ASEAN states and China should give serious consideration to
     an incidents at sea (INCSEA) agreement. Such an agreement would establish “rules of the road”
     at sea and prohibit provocative or dangerous behaviors. During the Cold War, the Soviet Union
     signed a series of INCSEA agreements with NATO countries and Japan, including the 1972
     U.S.-Soviet Agreement on the Prevention of Incidents On and Over the High Seas, which, inter
     alia, required warships to remain well clear of each other to avoid the risk of collision, maintain
     safe distances from ships under surveillance, practice clear signaling when undertaking
     maneuvers, and not make simulated attacks on passing vessels, including from the air. Two
     ASEAN members, Indonesia and Malaysia, signed an INCSEA-type agreement in 2001, and in
     2010 their navies agreed on rules of engagement to prevent clashes in the disputed Ambalat area
     in the Celebes Sea, off the eastern coast of the island of Borneo. Discussions between the United
     States and China through the 1998 Military Maritime Consultative Agreement on an INCSEA
     agreement have been stymied, however, by radically different interpretations of the legality of


                   FROM DISPUTED WATERS TO SEAS OF OPPORTUNITY u NBR SPECIAL REPORT
                                                                                                           27
             military surveillance activities in EEZs. The absence of an INCSEA agreement between China
             and Japan also increases the risk of a Sino-Japanese confrontation in the East China Sea.
           •	 Increased transparency. Increased transparency is an effective method of enhancing trust and
              reducing tensions between and among countries with overlapping sovereignty claims. The South
              China Sea disputants—particularly China, Vietnam, Malaysia, and now the Philippines—have
              been building up their military facilities on occupied islets in the Spratly Islands since the
              DoC was signed, thereby violating the spirit, if not the letter, of the agreement, which calls on
              all parties to exercise “self restraint.” The expansion of military infrastructure in the Spratly
              Islands appears to be partly a response to a perception that rulings handed down by the ICJ
              in 2002 and 2008 favored claimants best able to demonstrate effective administration over
              the disputed territories in question. In this context, it is worth noting, however, that once a
              dispute is known to exist, any action taken by one of the parties to further their claims after this
              date—through, for example, an act of building up its administration—would be immaterial as a
              matter of international law. That said, the perception that possession is nine-tenths of the law is
              a powerful one, and states seem to remain keen to bolster their claims as much as they possibly
              can. Greater transparency among the claimants concerning their facilities, troop numbers, and
              military equipment would also contribute to a lowering of mistrust.
           •	 ASEAN-China Code of Conduct for the South China Sea. Paragraph 10 of the DoC notes that the
              adoption of a formal code of conduct for the South China Sea would “further promote peace
              and stability in the region.” Notwithstanding the lack of progress in implementing the DoC,
              ASEAN and China should begin the process of negotiating a code of conduct that formalizes
              the confidence-building measures outlined above and prohibits destabilizing actions.


        Overcoming Uncertainties and Delivering Benefits:
        The Value of Maritime Dispute Resolution
           Toward jurisdictional certainty. Fundamentally, moving toward the resolution or at least the
        interim management of the multiple, interlocking territorial and maritime disputes that are
        such a persistent and critically important feature of these maritime areas holds out that prospect
        that maritime jurisdictional clarity, certainty, and stability can be realized. This is of crucial
        significance to all the coastal states and user states involved. A stable maritime regime ensures the
        freedom of navigation and flow of trade that is critical to the regional and global economies. Such
        a scenario also enhances the likelihood of sustainable management and governance of the oceans.
        This, in turn, could lead to the conservation of marine resources and the environment, facilitate
        access to urgently desired seabed energy resources, and thereby enhance regional maritime and
        economic security.
           Enhanced environmental and food security. Part V of UNCLOS and other international and
        regional legal instruments, together with general principles of international law, make provision for
        the sustainable exploitation of the living resources of the seas, while ensuring the preservation and
        protection of the marine environment and biosphere. These are aspects of the much broader agenda
        of maintaining law and order at sea and require the exercise of state power, unilaterally or collectively,
        to undertake stock assessments, set harvesting quotas and other limits, as well as conduct monitoring,
        control, and surveillance (MCS) as well as enforcement duties. Yet this is especially problematic in
        areas of broad overlapping claims to maritime jurisdiction. Consequently, the exercise of these
        responsibilities is read by some states as an infringement of their jurisdictional rights, leading to,
        for example, fisheries-inspired conflicts. Moreover, this scenario is set against context of the



28   NBR SPECIAL REPORT u JULY 2011
widespread overexploitation of fish stocks globally. Prioritizing the goals of the enhancement of
human security (that is, sustainable management of marine living resources) and environmental
protection could become feasible if the jurisdictional impasse is surmounted or bypassed.
   Reduced risk of confrontations at sea. The operationalization of confidence-building measures,
such as telephone hotlines, advanced notification of military exercises, and INCSEA agreements,
would dramatically reduce the frequency of standoffs at sea between naval ships, law enforcement
vessels, and fishing trawlers, and hence lower the risk of military escalation. Such measures would
also improve good order at sea and promote stability in the SLOCs of the South China Sea.
   Improved regional relationships. Joint cooperative endeavors, increased dialogue, and the
concrete implementation of confidence-building measures between and among the ASEAN states,
China, Japan, the United States, and other stakeholders would positively enhance bilateral and
multilateral relationships in the Asia-Pacific, preempt military confrontations, and allow regional
governments to focus on the peaceful and sustainable exploitation of maritime resources.


Conclusion
   The absence of agreement in the foreseeable future on maritime jurisdictional disputes in Asian
waters cannot and should not foreclose opportunities for claimants and user states to realize the
countless benefits to be derived from the seas. Though ultimate resolution of these disputes must
remain the primary long-term goal, significant progress and cooperation can still be made in the
interim and should be encouraged by all parties. There exist multiple ways to address contentious
territorial and maritime disputes, including creative mechanisms that can apply to overlapping
maritime jurisdictional claims, some of which have been highlighted here. This report has also
attempted to highlight the contending positive and negative factors and trends at work in the
disputed waters of East and Southeast Asia. There is simply too much at stake for states not to seize
the opportunity to progress from the present scenario of disputed and ill-governed waters to the
greater opportunities available in the East China Sea, South China Sea, and Gulf of Thailand.
   To deliver the maximum benefit from the maritime regions discussed in this report and the
promises these regions hold—ranging from the exploitation of hydrocarbon resources to the
protection of marine environments and biodiversity—multilateral solutions offer the best chances
to move forward. Harnessing the political will and courage to look past differences and focus on
these opportunities, as is occurring in some areas outlined here, is of critical importance. Doing
so is not tantamount to relinquishing state claims but rather enhances norms of cooperation and
builds trust among adversaries, establishing the foundations on which to build long-term solutions.




                   FROM DISPUTED WATERS TO SEAS OF OPPORTUNITY u NBR SPECIAL REPORT
                                                                                                        29
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                                                strategic asia 2010–11
                                                asia’s
                                                rising power
                                                and America’s Continued Purpose
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                                                The National Bureau of Asian Research • September 2010 •356 pp
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                                                About the Book
           TABLE OF CONTENTS
                                                Strategic Asia 2010–11: Asia’s Rising Power and America’s Continued Purpose marks the
Overview
                                                tenth anniversary edition of NBR’s Strategic Asia series and takes stock of the Strategic
Strategic Asia: Continuing Success with         Asia region by providing an integrated perspective on the major issues that influence
Continuing Risks
                                                peace, security, and power. In this volume, leading experts provide a continent-wide
u Ashley J. Tellis, Carnegie Endowment for
    International Peace and NBR                 net assessment of the core trends and issues affecting the region and examine Asia’s
                                                performance in nine key functional areas.
Thematic Studies

The Geopolitics of Strategic Asia, 2000–2020    Previous Volumes
u Aaron L. Friedberg, Princeton University


Asia and the World Economy in 2030:             Strategic Asia 2009–10: Economic Meltdown and Geopolitical Stability
Growth, Integration, and Governance             Strategic Asia 2008–09: Challenges and Choices
u Peter A. Petri, Brandeis University and the
    East-West Center                            Strategic Asia 2007–08: Domestic Political Change and Grand Strategy
                                                Strategic Asia 2006–07: Trade, Interdependence, and Security
Military Modernization in the Asia-Pacific:
Assessing New Capabilities                      Strategic Asia 2005–06: Military Modernization in an Era of Uncertainty
u Richard A. Bitzinger, Nanyang                 Strategic Asia 2004–05: Confronting Terrorism in the Pursuit of Power
    Technological University
                                                Strategic Asia 2003–04: Fragility and Crisis
The Rise of Energy and Resource Nationalism     Strategic Asia 2002–03: Asian Aftershocks
in Asia
u Mikkal E. Herberg, University of
                                                Strategic Asia 2001–02: Power and Purpose
    California–San Diego and NBR

The Implications of Expanded Nuclear Energy     How to Order
in Asia
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