June 28, 2014 A South China Sea Peace Plan BY MAREX

June 28, 2014

A South China Sea Peace Plan

BY MAREX

Op-Ed by Stewart Taggart

Arbitration, joint development, shared infrastructure and coordinated investment offer an all-around face-saving solution to territorial tensions in the South China Sea. None of the proposals are novel. All are already on the table or represent logical extensions to existing initiatives. Joint Development Areas linked by multilaterally-funded network infrastructure could solve South China Sea territorial tensions. 

#1: Arbitration 
The Philippines has appealed to the United Nations Conference on the Law of the Sea Permanent Court of Arbitration over China’s claim to waters near the Philippines. Vietnam’s likely to do something similar. China rejects the idea. Even so, international arbitration looks like the best choice on a menu of second-bests.

#2: Joint Development Areas
While arbitration is pursued, bilateral negotiation, China’s favored strategy, should also be tried. This could focus on agreeing Joint Development Areas (JDAs). This is an idea China, the Philippines and Vietnam have all expressed support for in principal.

JDAs have pedigree. They’ve been around for decades. A number exist all around the world. JDAs enable countries to indefinitely postpone resolution of disputing claims while they jointly develop oil and gas resources within them. 

Several disputed Chinese-Vietnam, Chinese-Philippine offshore areas look suitable for JDAs. These could lead to others. If JDAs were established in the South China Sea (admittedly, a big if), multilateral investment could follow. 

#3. Multilateral Infrastructure
As China’s domestic infrastructure needs wind down, China’s infrastructure state champions need new markets. These commercial needs may be part of what's stoking South China Sea territorial tension.

With Joint Development Areas, Chinese state champions like State Grid and China National Offshore Oil Company could build the infrastructure. This would be operated on an ‘open access, common-carrier’ basis and multilaterally managed, eliminating the risk of one country (read China) using it to squeeze the neighbors. 

#4: Coordinated Investment
China has proposed creation of a US$50 billion Asian Infrastructure Investment Bank. 
Were JDAs established in the South China Sea between China, Vietnam and the Philippines, China’s AIIB could provide funding to develop the South China Sea’s offshore energy resources and bring them to market. 

By investing in interconnected infrastructure in Asia, the AIIB could develop common technical standards and interconnection protocols.  The result would be an interconnected energy infrastructure that could last a century or more.

Flexible, future-proof energy infrastructure is the key to simultaneously solving the interlinked global challenges of climate change, territorial tensions, the rise of China, energy market innovation and development of low-emission energy technologies. Seen this way, the ‘crisis’ in the South China Sea should really be seen as an ‘opportunity.’ Handled right, it could be a turning point in history.

Stewart Taggart, a former energy market journalist, is principal of Grenatec, a research organization studying the viability of a Pan-Asian Energy Infrastructure. This infrastructure would include inter-connected power lines, natural gas pipelines and fiber optic cables stretching from China, Japan and South Korea to Australia. Stewart has published peer-reviewed research on the concept as well as written trade, specialist and general interest press articles on the ‘Pan-Asian Energy Infrastructure’ concept. Stewart is also an active conference speaker.