An alternative perspective

16 May 2016

Geopolitical Tensions in Asia

Ian Bremmer, President, Eurasia Group

The South China Sea has seen provocation, sometimes confrontation, for hundreds of years. Recent tensions have provoked anxiety around the world, because this is now the main arena in which warships of the world’s sole superpower and its emerging rival track one another’s moves every hour.

The South China Sea has seen provocation, sometimes confrontation, for hundreds of years. Recent tensions have provoked anxiety around the world, because this is now the main arena in which warships of the world’s sole superpower and its emerging rival track one another’s moves every hour.

Rising China claims exclusive rights to more than 80 per cent of the South China Sea, and it has become more assertive in recent years at the expense of smaller neighbours and their competing territorial claims. The most important of these other players are Vietnam and the Philippines, which have long contested China’s push, and Taiwan, Malaysia and Brunei, which have claims of their own.

At issue is control of a pair of island chains, the Paracels and Spratlys, reefs such as the Scarborough Shoal, and nearby sea lines through which pass trillions of dollars in trade each year. In addition, the seabed underneath these waters could contain substantial deposits of oil, gas and minerals. The United Nations Convention on the Law of the Sea (‘UNCLOS’) has established maritime boundaries that overrule China’s claims, and the US has responded to China’s expansion with carefully choreographed shows of naval strength to assert universal freedom of navigation on the high seas.

Over the past several decades, tensions have flared. At times, lives have been lost. But disputes have heated up substantially with China’s progress last year in building artificial islands in disputed waters and defending them with naval power. Last October, the US pushed a missile-armed destroyer past the new islands to demonstrate Washington’s refusal to recognise Beijing’s version of the sea’s maritime boundaries.

Confrontations between Chinese and Vietnamese or Philippine vessels have become much more common, and China also finds itself in conflict with Indonesia, which is not directly involved in the South China Sea disputes. In March, two Chinese coastguard ships overpowered an Indonesian coastal patrol craft that had detained a Chinese fishing boat caught operating in Indonesia’s exclusive economic zone. The angry reaction from Indonesian officials and media was uncharacteristically intense, forcing President Joko Widodo to adopt a hard line against a country that remains a crucial source of badly needed infrastructure investment.

Why It’s About to Get Worse

There are several reasons why tensions have increased sharply this spring. First, the US, some of China’s neighbours, and others are moving closer to finalising the Trans-Pacific Partnership (‘TPP’), an enormous trade deal that does not include China. In addition, in February, President Barack Obama hosted leaders from the Association of Southeast Asian Nations (‘ASEAN’), a group that includes several TPP partners and most of those who dispute China’s maritime boundaries, for the first-ever standalone meeting of US and ASEAN heads of state. Climate change and counter-terrorism were on the agenda, but the summit was also intended as a step towards deeper economic and security ties. Following the meeting, US and ASEAN leaders issued a joint statement that called on all parties to respect international law, the authority of UNCLOS, and the rights of freedom of navigation and overflight – and to avoid militarisation of the South China Sea.

China responded with deployment of surface-to-air missiles on an island in the Paracels, one that Vietnam and Taiwan consider part of their territory. The deployment undoubtedly took months of planning and coordination, but it’s very unlikely that the timing was purely coincidental. Chinese naval officials say they do not intend to militarise the islands, but that China will defend them whenever it feels they are threatened – for example, when a US warship passes close by or Chinese vessels come into conflict with ships flying other flags.

The other reason tensions are rising is that the Hague-based Permanent Court of Arbitration is expected to rule in May or June on a case brought against China by the Philippines in 2013 over territorial control of the Scarborough Shoal. The area in question is about 500 miles from China but less than 200 miles from Philippine shores, and therefore part of that country’s Unrecognised ‘exclusive economic zone’. The court ruling will likely favour the Philippines, and the US, Britain and Australia have called on all sides to accept the decision as binding.

China’s response to the ruling will be telling. It can accept the decision and back down, though there are many reasons why that would not be an easy choice. The need to carefully manage a leadership transition next year requires that President Xi Jinping protects his popularity with hardliners within government and the military. This climb-down might also undermine Xi’s public popularity, since much of China’s foreign policy is built on Beijing’s assertion that China has long been victimised by Western powers. How could he justify a decision to accept the authority of a Western-dominated court that denies China’s territorial claims in Asia? He calculates, correctly, that China cares much more about this issue than Americans or Europeans do. He appears to believe that the expansion of China’s sphere of influence is a crucial part of his political legacy. He may also believe that China is in the right.

This is why China could also respond to an unfavourable ruling with defiance, deepening Beijing’s international isolation on this issue and pushing its neighbours closer to the US. The introduction of missiles in the Paracels – and recent photographs of Xi in army fatigues assuming the position of military commander in chief – probably gives us a good indication of which choice he is likely to make.

The Obama administration has taken a reasonably hard line on the issue; the President reportedly warned Xi during the latter’s recent visit to the US that he will continue to authorise ‘freedom of navigation’ patrols that implicitly challenge China’s claims.

Keeping the Trouble Under Control

Tensions in the South China Sea will rise, but probably in a manageable way. None of the players in the region, including the US, can afford a fight. Obama doesn’t believe the US or its allies would profit from direct confrontation, since all are economically dependent on economic stability in China. For his part, Xi is focused on managing the pace of China’s economic slowdown and can’t afford a market-shaking crisis, and while the demands of China’s political transition prevent him from any action that might look like he is backing down, he cannot afford a military crisis that might distract him from the horse-trading and deal-making needed to ensure that his political allies secure soon-to-be vacated seats at the highest levels of China’s government. Finally, Xi understands that China’s military cannot (yet) win a confrontation with the US. A determination to avoid conflict isn’t nearly as politically dangerous as a military defeat would be. For all these reasons, though tensions in the South China Sea will continue to simmer, they are unlikely to boil over.

The results will create both opportunities and risks on all sides. First, China’s hardline approach will help Washington and China’s neighbours deepen their trade and investment ties and create opportunities for closer defence cooperation between Washington and traditional US allies (the Philippines) and others that would like to hedge their bets on China’s long-term intentions (Vietnam and Malaysia). Strengthened US commercial relations in the region will also benefit China’s neighbours by giving Beijing greater incentive to invest more heavily in the region – even as tensions continue in the South China Sea.

Through its ‘One Belt One Road’ investment project, its leadership of the new Asia Infrastructure Investment Bank, and bilateral investment plans, China will try to strengthen its influence with ASEAN governments that badly need the investment. There is also an opportunity for Washington and Beijing to improve their relations by building on recent gains in bilateral communication.

A heightened risk of stumbling into conflict that neither side wants gives both greater incentive to keep communication channels open, including on other issues like climate change and nuclear security.

There are still risks. What if the Court of Arbitration rules for the Philippines, China refuses to accept the verdict, both sides assert their rights in disputed territory, and an incident occurs that costs lives and generates headlines?

The Philippines and the US have had a ‘mutual defence treaty’ since 1951, and Manila would quickly call on Washington to intervene. Inside China, escalation might galvanise nationalist anger towards the US, and if the trouble arose at a time when some level of confrontation might provide China’s leaders with a useful distraction, during a painful economic slowdown, for example, the resulting conflict could spin beyond the control of either side. A surge of ships and planes into the arena could trigger a chain reaction. Improved communications might help mitigate this risk, but there is no guarantee that a future US and/or Chinese president will keep these lines open. These are risks that militaries on both sides must manage every day.

The stakes remain high because a fragile global economy cannot afford a market-moving security crisis in Southeast Asia. This is, after all, the world’s most economically dynamic region. But it is also one that lacks multinational organisations capable of arbitrating disputes among powerful states.

Ian Bremmer is president of Eurasia Group, the world’s largest political risk consultancy. He is also a columnist for Slate, a contributing editor at The National Interest, and a political commentator on CNN, Fox News and CNBC.

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