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[The American Secretary of State is now completing the Chinese finale to her first Asian tour, during which the expected theater of cautious mutual warnings over North Korea has been somewhat sidelined by cautious mutual warnings over Taiwan. These don't feel quite so theatrical. Perhaps the last time the U.S. seemed this genuinely concerned about the Taiwan issue was in 1960, when the tiny islands of Kimoy and Matsu in the Formosa Strait were seen as potential dominoes in the Communist game. Now it's no longer about the Cold War's territorial obsessions. It's no longer about the fact, explained by Peter Dale Scott in Drugs, Oil, and War, that Taiwan has served for 60 years as the nerve center for right-wing parties and players all over Southeast Asia. It isn't the money, either: though Taiwan has become the 14th largest trading entity in the world, that wealth only means anything in the context of a stable international economy with consumers and producers safely interdependent on one another. But if mainland China were to find itself in a global scramble for the remaining scraps of hydrocarbon energy, it could be that Taiwan's huge manufacturing capacity and per-capita energy consumption might not be very appealing. Instead, Dale Allen Pfeiffer explains, the current contest over Taiwan has everything to do with oil and natural gas exploration in the coastal waters of China's continental shelf. If these waters are reckoned to include Taiwan, they will also include several key groups of islands known to have unexploited fossil fuel resources. - JAH]

China's Offshore Claims

Dale Allen Pfeiffer

March 21, 2005 1200 PST (FTW)Have you ever wondered why China is willing to go to war with the United States over an island located a little over 100 miles off the coast, perched between the South China Sea and the East China Sea? Certainly, Taiwan has been a thorn in China's side since the remaining nationalists fled there following the rise of the People's Army. But China has tolerated the island's de facto independence - with a certain amount of saber rattling - until recently. Now China's demands for the return of Taiwan to the People's Republic are becoming more strident, and the world's most populous country appears prepared to back up its threats with force.

Why is this? Is it because of Taiwan's strategic position, so close to mainland China? But China tolerates other US protectorates within its vicinity (including Japan and South Korea). Is it because of Taiwan's industrial might? Mainland China no longer has any reason to envy Taiwan's industrial riches. Is China suddenly ready to go to war over principles, following Taiwan's refusal to join with the mainland and its insistence (backed by the US) upon sovereignty? Is this really worth risking a war which might very well go nuclear?

Or is there a more vital reason for China's bellicose insistence that Taiwan give up its claims of sovereignty? Could the answer lie in China's growing energy demands and the dwindling hydrocarbon reserves which once powered the mainland without imports?

In the past few years, China has suffered a series of brownouts and blackouts caused by increased energy demand and diminishing supplies. Mainland China has been thoroughly probed for previously undiscovered deposits of hydrocarbons. Those which have been found are either small or too distant to be of practical importance. In particular, China is making plans to drill the large deposits found in the Tarim Basin, but it will take many years before this oil brings relief to the industrialized east. And the output of the Tarim Basin will always be limited by the capacity of the pipeline that will bring this oil to market. Finally, the cost of oil from the Tarim Basin will be a stiff price for Chinese industry to pay.

So China must look elsewhere for deposits which can be developed quickly, and more economically. And the areas where it would like to concentrate its search are the East China Sea and the South China Sea, where it is believed that there are several smaller but still worthwhile deposits which could quickly be brought online.

Image from EIA-South China Sea Region

According to the EIA, the South China Sea has proven oil reserves of around 7.0 billion barrels. China claims the potential for oil discovery in the South China Sea could be as high as 213 billion barrels. Most of this undiscovered oil is expected to lie in the regions of the Spratly Islands and the Paracel Islands, both of which are the subject of contention between China and neighboring countries. But this geological optimism is not shared by non-Chinese analysts. In 1993-1994, the USGS estimated the total sum of proven and undiscovered reserves in the South China Sea to be around 28 billion barrels. The situation for natural gas reserves is similar.1

Image from EIA-China Country Analysis Brief

In the Bohai Sea, east of Beijing, oil has been found in several locations. When added up, the newly discovered reserves will probably total around 3.5 to 4 billion barrels, certainly no more than 5 billion barrels.2 Natural gas deposits in the Xihu Trough of the East China Sea present another area of contention. The Xihu Trough lies about 250 miles east of Shanghai and about 250 miles northwest of Okinawa, somewhere on the border between the two nations. China and Japan have not agreed upon the exact location of their maritime border. Japan fears that Chinese natural gas production will siphon gas from areas which Japan considers to be within its territory.3

A longstanding geopolitical convention gives each nation a zone of exclusive economic control extended for 100 miles from its coast. As the sea floor was accurately mapped out, the US took the lead in extending this zone to the average length of the continental shelf as it extends from the shoreline to the outer edge of the continental margin. As a general rule, the exclusive economic zone has been extended to a distance of 200 miles from the coast. However, where the continental shelf extends farther than 200 miles, convention has allowed nations to extend their claim as far as 350 miles from the baseline.4

As a part of the worldwide move to extend sovereignty over the entire continental shelf, in 1998 the Ninth National People's Congress of China adopted the Exclusive Economic Zone and Continental Shelf Act.5 In this act, China claimed sovereignty over the entire adjoining continental shelf, and proclaimed that this territory was to be held for the exclusive economic use of China. Article 4 of this act proclaimed the People's Republic of China's exclusive right to authorize and regulate drilling on the continental shelf for all purposes. Incidentally, Taiwan also claims an exclusive economic zone of 200 nautical miles.6

The following image helps us to locate Taiwan (black) in relation to mainland China. Remember, Taiwan lies only a little over 100 miles off the coast of mainland China.

Image from Wikapedia-the free encyclopedia

Now let's look at an image of the continental shelf in the region of China and Taiwan.

Image from Rice University UNIX site

Clearly there is a conflict between the territorial claims of The People's Republic of China and Taiwan. If Taiwan is recognized as sovereign and its claim to a 200 mile exclusive economic zone is granted, then it will cut out a significant chunk of China's exclusive economic zone.

While the disputed zone does not appear to be a likely area for oil exploration, it would set a dangerous precedent with regard to China's other territorial claims if it ceded to Taiwan on this issue. Specifically, it would damage China's position with regard to the Spratly and Paracel Islands in the South China Sea, and with regard to the Xihu Trough in the East China Sea. China cannot afford to lose these resources, and for this reason it might be prepared to use force if Taiwan insists on sovereignty.

1 EIA-South China Sea Region; http://www.eia.doe.gov/emeu/cabs/schina.html

2 EIA-China Country Analysis Brief; http://www.eia.doe.gov/emeu/cabs/china.html

3 Bloomberg.com. Nakagawa Wants to Avoid Empty Japan-China Talks on Gas Dispute; http://quote.bloomberg.com/apps/news?pid=10000080&sid=aPclqC7p5LOI

4 UN: Oceans and the Law of the Sea; http://www.un.org/Depts/los/index.htm

5 Exclusive Economic Zone and Continental Shelf Act. http://www.un.org/Depts/los/LEGISLATIONANDTREATIES/PDFFILES/chn_1998_eez_act.pdf

6 The CIA World Factbook; http://www.cia.gov/cia/publications/factbook/geos/tw.htm

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