The South China Sea’s energy dimension

Map of the competing territorial claims in the South China Sea
The PCA rejected China’s “nine-dash line” claim to the South China Sea. Nevertheless, Beijing is continuing its infrastructure development in the region (source: macpixxel for GIS)
  • The global energy paradigm has changed, making “deepwater” investments less profitable
  • Nevertheless, China is still pursuing oil and gas projects in the South China Sea
  • It uses these projects to justify territorial claims
  • If Beijing succeeds, nearly all its neighbors’ oil and LNG imports will become dependent on Chinese policy

The world has entered a new era of oil and gas oversupply, reducing competition for energy resources and making many deepwater projects in the South China Sea unprofitable. But China remains committed to asserting its territorial claims in the region by expanding civilian and military infrastructure and promoting deepwater projects, regardless of profitability or international law. The result could be a regional order increasingly defined by Beijing. In July 2016, the Permanent Court of Arbitration (PCA) in The Hague rejected China’s “historical” territorial claims in the South China Sea. That posed a critical question to Chinese maritime policy, which is reexamining long-held principles over the country’s military presence abroad, spheres of influence, buffer zones and security alliances.

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