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South China Sea trade routes safe despite rows

/ 12:30 PM June 15, 2014

This undated photo handout released by the Kayalaan Municipal office on July 13, 2011 shows the island of Kalayaan, which means “Freedom” in the Filipino language, that was created in 1978 mainly to assert the Philippines’ claim to the disputed territory in the Spratlys, a chain of islets in the South China Sea. AFP FILE PHOTO

MANILA, Philippines—Despite territorial stand-offs between China and other nations bordering the South China Sea (West Philippine Sea), analysts say governments know better than to choke off the trade shipping routes that are the lifeblood of their economies.

The escalating disputes this year between China and some of its neighbours over their rival territorial claims in the sea have led to water cannons being fired in one hotspot area and deadly anti-Chinese riots in Vietnam.

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The Philippines has also sought military help from the United States in the face of what it calls “bullying” Chinese tactics, signing a pact that will soon allow thousands of US troops onto Filipino bases facing the sea.

The worsening rows have inevitably raised questions over whether they will impact the sea’s shipping lanes, which are among the busiest in the world and see more than half of all oil tanker trade flow through them.

But analysts believe all nations involved, particularly China, will ensure that the diplomatic and military maneuverings do not jeopardise such an important economic lifeline.

“It’s not in China’s interests, and it’s not in the interests of Japan, South Korea or Taiwan, to have some sort of blockade or disruption,” said Jayendu Krishna, a Singapore-based analyst with industry consultancy firm Drewry Maritime Services.

“I’m not worried. I don’t think it will happen.”

The Philippines, Vietnam and other regional powers believe China is the instigator in the fresh eruptions in the disputes, which have been going on for decades but have been managed without confrontation for much of the time.

Asia’s most populous nation claims nearly all of the sea, even waters approaching the coasts of its neighbours.

Taiwan has a replica claim, while Vietnam, the Philippines, Malaysia and Brunei insist they have sovereign rights to areas closer to their coasts.

Vietnam’s trigger for fury was China’s deployment last month of an oil rig in waters near the Paracel islands.

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Anti-Chinese riots promptly broke out in the Southeast Asian nation, leading to at least three deaths and a number of arson attacks against factories that were either Chinese-owned or perceived to be. Beijing says four Chinese citizens died in the unrest.

The Philippines has been the most vocal critic in recent years, accusing China of a multitude of aggressive acts, including the takeover in 2012 of a shoal that had been a rich fishing ground for Filipinos.

The Philippines has expressed fresh alarm in recent months after photos emerged showing Chinese land reclamation activities on tiny islets in the Spratlys archipelago.

The photos have led to speculation that China intends to build military installations on new artificial islands within the Philippines’ exclusive economic zone.

However, Krishna said China would be careful to ensure its actions did not lead to a military conflict that would disrupt shipping lanes, pointing out it had the most to lose.

“A large fraction of the trade flowing through the South China Sea is destined to, or originating from, China,” he said.

“They need that for their economy.”

‘Only war’ will disrupt trade routes

Shivaji Das, a Singapore-based senior vice president with global consultancy firm Frost and Sullivan, said only a war would lead to a disruption of the South China Sea trade routes.

“And I don’t see that happening. All the countries have an immense stake (in keeping the trade routes open),” he said.

Das also said the rules of “freedom of navigation” in the sea had rarely been broken by governments anywhere in the world in recent history, with those threats coming more from piracy.

“When it comes to commerce, all the countries have their exclusive economic zones but they still allow for freedom of navigation of merchant ships. And that won’t be affected unless there’s an actual conflict in the zone,” he said.

Meanwhile, commodities traders have looked at the political and military posturing with ambivalence.

The stunningly successful offensives by Islamic militants in recent days to take control of cities in Iraq have driven up global oil prices.

But tensions in the South China Sea have not been a factor for oil prices, according to Victor Shum, the Singapore-based vice president of IHS Energy Insight, an industry consultancy.

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TAGS: China, Philippines, South China Sea, Southeast Asia, territorial row, trade routes, Vietnam, West Philippine Sea
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