1
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 1
Carlyle A. Thayer
July 15, 2014
[client name deleted]
Regarding the latest development in South China Sea we request your assessment of the
following issues:
Q1. Typhoon Rammasun is now strengthening in the South China Sea. Will the typhoon have
an impact on the operations of China’s HD-981 oil rig?
ANSWER: When China first announced that the HD-981 oil rig would conduct commercial
operations until August 15, it was likely that China had the typhoon season in mind. China
has put itself in a risky situation by deploying the mega drilling platform and so many
surface ships in one area. Not all of them are designed to withstand a major storm. It is
impossible to know the precise trajectory of Typhoon Rammasun or its intensity at the
moment. It must cross over the Philippines, which usually causes a typhoon to loose
strength. Current estimates place Hong Kong and adjacent waters at risk. The typhoon will
bring worsening weather and this is like to impact on all ships operating around the oil rig.
At a minimum, China will have to re-evaluate the risks involved to their armada of ships
during the typhoon season. The coming typhoon season should see the Chinese depart the
area.
Q2. Do you think that China will move the oil rig to other place to avoid this typhoon or
withdraw from Vietnam's continental shelf and Exclusive Economic Zone?
ANSWER: The current typhoon does not appear to present a direct threat to the oil rig given
current projections of its course and intensity. These estimates, however, will be constantly
updated. The oil rig itself should be able to withstand severe weather. But small Chinese
vessels and fishing boats will have to seek shelter; so will Vietnamese Coast Guard and
Fishery Surveillance ships.
Q3. The annual storm season is now commencing, can we expect that the ongoing tensions
in South China Sea, especially the tensions between Vietnam and China, will deescalate?
ANSWER: Yes, because when China first announced the deployment of HD-981 it said that it
would end commercial operations around August 15. This announcement may be read in
two ways. First, China did not want to commit itself to a permanent deployment during the
typhoon season. Second, China also was signally that its actions is deploying the rig were
limited in time. Both Vietnam and China will have to withdraw their ships and vessels in the
face of serious storms. This should provide a face saving way of de-escalating the current
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crisis. China cannot risk having a storm cause damage to its large number of ships because
this would expose China’s lack of concern for the safety of the ships and their crews.
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3
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 2
Carlyle A. Thayer
July 16, 2014
[client name deleted]
QUESTION: What is your assessment of the latest move by China in relocating the 981 oil rig
back to Hainan? Is this because of Typhoon Rammasun or is it due to pressure from the
international community? How will the situation will evolve from here?
ANSWER: The announcement that the HD-981 drilling platform had completed commercial
operations and is returning to Hainan Island is good news. This should defuse current
tensions and create conditions for China and Vietnam to begin high-level discussions.
When China first deployed the HD-981 it announced it would cease operations by August
15. There were two reasons for this: to remove the drilling platform before the typhoon
season and to avoid an open ended confrontation with Vietnam. The timing of the current
announcement may be linked to Typhoon Rammasun. Although the typhoon does not
appear to be heading directly to the area where the rig is operating, the typhoon will bring
bad weather. This will affect the smaller ships in China’s current armada. China is showing
itself risk adverse. There is also another likely explanation for the early withdrawal of the
drilling platform. China may be seeking to lower tensions with Vietnam in order to pre-empt
criticism at the forthcoming meeting of the ASEAN Regional Forum scheduled for next
month.
ADDITIONAL QUESTIONS:
Q1 From you point of view, how damaging was the oil rig to China thus far?
ANSWER: China’s placement of the HD-981 in Vietnam’s Exclusive Economic Zone was a
costly political and diplomatic exercise for China. ASEAN Foreign Ministers issued a stand
along unanimous statement expressing serious concern. The US, Japan and Australia all
criticized China for acting unilaterally to upset the status quo. Malaysia and Indonesia are
showing signs of increased misgivings about China’s behaviour. Vietnam and the Philippines
have demonstrated solidarity. The G-7 also issued a statement. And Vietnam retains the
threat to take legal action. China’s information warfare campaign to sell its case did not go
down well with the international community.
To balance this assessment, it is likely that President Xi Jinping enhanced his reputation
within China for acting to defend China’s “indisputable sovereignty.”
Q2 What can we learn from this oil-rig crisis?
ANSWER: This crisis demonstrated that China has developed a sophisticated strategy to use
oil drilling platforms, civilian law enforcement ships, military ships and aircraft to assert its
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sovereignty claims. This strategy is unlikely to be abandoned in future. Vietnam must
prepare for similar actions in the future.
Vietnam was correct not to rise to the provocations offered by China. Vietnam was correct
to keep its naval warships away from the confrontation around the oil drilling platform.
While Vietnam Coast Guard and Fishery Surveillance Force ships did an admirable job in
protesting China’s actions, it is clear that both these forces will need to be modernized and
expanded in future years. The National Assembly has provided funds but a longer term
program must be drawn up. Vietnam will need bigger and heavier ships to confront China
and better aerial surveillance.
Q3 Any important lessons?
ANSWER: For Vietnam, the main lesson is that no matter how good relations with China are,
Vietnam must always prepare for the unexpected. Vietnam can take satisfaction about how
it conducted it campaign to provide information to the world community. This should be
reviewed to make it better and more efficient the next time a provocation like the drilling
platform occurs.
Vietnamese scholars and specialists must be mobilized to counter the propaganda effort by
Chinese academics. There was a very good Vietnamese response this time. A network needs
to be formed to react instantly to Chinese propaganda. A study should be made of the key
media and internet outlets that need to be approached in the future.
Vietnam needs to heighten its maritime domain awareness to give itself early warning time
of future Chinese actions. This means cooperating with other maritime powers and keeping
a close watch on all of China’s oil rigs and any unusual movement in port cities near the
South China Sea, such as Sanya on Hainan Island or at Woody Island.
China will review its actions and try to come up with better tactics to thwart Vietnam in the
future. Vietnam must study this episode carefully and anticipate China’s new tactics.
Vietnam should redouble its efforts to monitor the boundaries of its EEZ and continental
shelf as part of developing better domain awareness.
Suggested citation: Carlyle A. Thayer, “South China Sea: China Withdraws Oil Rig - 2,” Thayer
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5
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 3
Carlyle A. Thayer
July 16, 2014
[client name deleted
QUESTION: China has started to withdraw the oil rig out of Vietnam’s Exclusive Economic
Zone. Could you please provide an assessment of this development? Why did China
withdraw the rig before mid-August?
ANSWER: When China first announced the deployment of the oil drilling platform it said it
would end its operations on August 15. This statement had two purposes. First, it was
designed give China a plausible way of ending the crisis without having to make an openended
commitment. Second, August 15 was chosen to take into account the typhoon
season and the risk this would pose to the drilling platform and its armada of ships and
vessels.
There are three reasons why China decided to end the operations of the oil rig so early.
First, as China has claimed, the oil drilling platform completed its commercial activities.
Second, China wanted to minimise the risk posed by Typhoon Rammasun to the armada of
over one hundred ships protecting the oil rig. Third, China wanted to influence the political
atmosphere in advance of the annual ASEAN Regional Forum (ARF) ministerial meeting. By
removing the oil rig and lowering tensions, China has set the stage for bilateral talks with
Vietnam. This means that Vietnam is unlikely to take legal action against China. And China’s
actions also undercut any possibility of alignment with the United States and Japan against
China.
China’s actions will also undermine the impact of the diplomatic offensive that the United
States will launch at the ARF to condemn China’s provocative actions and to freeze its
assertive actions. China will argue the matter is purely a bilateral one with Vietnam and that
the United States should not make matters more complicated by intervening. In other
words, China has shifted the focus of regional attention from confrontation at sea to
diplomacy. No country in Southeast Asia will want to take action critical of China and risk
jeopardizing the opportunity of using peaceful negotiations to settle the current crisis.
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Background Briefing:
South China Sea: China Withdraws
Oil Rig - 4
Carlyle A. Thayer
July 16, 2014
[client name deleted]
Today Xinhua reported that China has withdrawn the Haiyang Shiyou oil rig from disputed
waters. We request your assessment.
ANSWER: China’s withdrawal of its oil rig from Vietnam’s Exclusive Economic Zone will result
in the withdrawal of China’s armada of over one hundred ships, vessels and boats. This in
turn will create the conditions for Vietnam to withdraw its Coast Guard and Fisheries
Surveillance Force presence. Tension will lower and China and Vietnam will be drawn into
bilateral discussions in due course.
The shift from confrontation at sea to diplomacy will constrain Vietnam from taking legal
action against China. It will also undercut the efforts of those in the leadership who seek to
align more closely with the US and Japan. The decrease in tensions will make it more
difficult for the United State to conduct its planned diplomatic offensive at this year’s ASEAN
Regional Forum ministerial meeting. The US is all set to argue for China to comply with
international law and to freeze its provocative actions. China will argue that the oil rig crisis
is a bilateral affair with Vietnam and that the US should not intervene. Most members of
ASEAN will be so relieved to see the lowering of tensions that they will mute criticism of
China.
Suggested citation: Carlyle A. Thayer, “South China Sea: China Withdraws Oil Rig - 4,” Thayer
Consultancy Background Brief, July 16, 2014. All background briefs are posted on Scribd.com
(search for Thayer). To remove yourself from the mailing list type UNSUBSCRIBE in the
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Thayer Consultancy provides political analysis of current regional security issues and other
research support to selected clients. Thayer Consultancy was officially registered as a small
business in Australia in 2002.
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7
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 5
Carlyle A. Thayer
July 16, 2014
[client name deleted]
China Oilfield Services Ltd., a unit of state-owned China National Offshore Oil Corp., said its
deep water HYSY 981 drilling rig had completed exploration. A Vietnam Coast Guard official
confirmed that the rig started moving last night towards Hainan.
What is behind this development and how will it affect current tensions between China and
Vietnam?
ANSWER: Recall than when China deployed the rig it said it would conduct operations until
August 15th. This was to avoid the risk of conducting operations during the typhoon season
and to avoid an open ended commitment. There are at least three main reasons for the
withdrawal of the oil rig. First, the oil drilling platform has completed its exploratory
activities. Second, China seeks to minimise the risks posed by Typhoon Rammasun and the
coming typhoon season. A major storm could cause extensive damage to a fleet of over one
hundred ships and crafts gathered in a small area. Third, China is seeking to shift from
confrontation at sea to diplomacy. The reduction in tension should lead to talks between
Beijing and Hanoi about how to get their bilateral relationship back on track. A lowering of
tensions coupled with the prospect of high-level talks will lead Vietnam to decide not to
proceed with threatened legal action. A lowering of tensions will take the wind out of the
sails of those seeking to align with the US and China. Vietnam's accommodationists will
press for talks with China.
A lowering of tensions and the initiation of talks between China and Vietnam will alter the
current political dynamics. China's actions will undercut US efforts to push strongly at the
annual ministerial meeting of the ASEAN Regional Forum for China to follow international
law and freeze its provocative actions in the South China Sea, such as land reclamation.
China will argue that its discussions with Vietnam are a bilateral matter and that US
diplomatic intervention will only complicate the situation.
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Background Briefing:
South China Sea: China Withdraws
Oil Rig - 6
Carlyle A. Thayer
July 16, 2014
[client name deleted]
We request your assessment about the withdrawal of the Chinese oil rig? For reference see
news report below:
http://www.thanhniennews.com/politics/chinese-oil-rig-finishes-exploration-in-waters-offvietnam-
xinhua-28631.html
Q1. What do you make of this move?
ANSWER: The removal of China’s mega oil drilling platform from Vietnam’s Exclusive
Economic Zone will cause tensions between the two countries to lessen. Now that the rig
has departed there is no need for the Chinese armada of more than one hundred ships to
remain on station. Once the Chinese depart, Vietnam will not have a reason to keep its
Coast Guard and Fisheries Surveillance vessels in the area.
A lowering of tensions opens up the possibility that China and Vietnam may be able to
commence diplomatic discussions to repair their bilateral relations. The prospects of
discussions will constrain Vietnam from taking legal action against China, and it will also
constrain Vietnam from seeking to align with the United States and Japan. Finally, a
lowering of tensions will undercut planned U.S. diplomatic intervention at the annual
meeting of the ASEAN Regional Forum to pressure China to adhere to international law.
China will now be able to argue that its dispute with Vietnam is bilateral and that the United
States should refrain from involving itself.
Q2. Why do you think China has decided to withdraw the rig one month ahead of schedule?
Does it have anything to do with the brewing storm – Typhoon Rammasun?
ANSWER: There are several likely explanations why China moved the oil drilling platform.
First, China moved the rig because present commercial operations have come to an end.
Second, China moved the rig to lower the risk to the armada of protective ships surrounding
it as Typhoon Rasmussen brings bad weather to the area. Third, China always indicated that
it was not making an open-ended commitment but was keeping its options open to
withdraw. China’s first announcement about the drilling platform indicated it would cease
operations on August 15.
But the bottom line is that tensions will now dissipate and confrontation at sea will turn to
diplomacy between Beijing and Vietnam.
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Q3. Will two-month deployment of the oil rig play any role in helping China create facts on
the grounds in waters over which it claims sovereignty?
ANSWER: China is changing “facts on the ground” by its on-going land reclamation activities
in the Spratly islands. The deployment of the oil drilling platform indicates that China is
willing to deploy considerable mixed assets in order to assert sovereign jurisdiction over
disputed maritime zones. China, having used the gambit of deploying an oil rig in contested
waters, leaves open the possibility that it will do so again. China’s efforts to assert sovereign
jurisdiction, however, have been nullified by Vietnam’s vociferous protest using Coast Guard
and Fisheries Surveillance ships to protest China’s actions.
Q4. What do you expect China to do next?
ANSWER: China will eventually open the door for discussions with Vietnam thus defusing
the crisis. China will counter-attack on the diplomatic front to capitalize on regional relief
that tensions have abated. China will attempt to pressure ASEAN countries to fall back in
line and continue interminable discussions on a Code of Conduct in the South China Sea.
Chinese efforts will be aimed at isolating the United States and Japan and constraining
Vietnam. China will continue to reclaim land in the South China Sea. And China will keep
occupying Scarborough Shoal and mount pressure on the Philippines at Second Thomas
Shoal.
Suggested citation: Carlyle A. Thayer, “South China Sea: China Withdraws Oil Rig - 6,” Thayer
Consultancy Background Brief, July 16, 2014. All background briefs are posted on Scribd.com
(search for Thayer). To remove yourself from the mailing list type UNSUBSCRIBE in the
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Thayer Consultancy provides political analysis of current regional security issues and other
research support to selected clients. Thayer Consultancy was officially registered as a small
business in Australia in 2002.
10
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 7
Carlyle A. Thayer
July 16, 2014
[client name deleted]
Could you please as assessment of the withdrawal of the Chinese HD-981 rig from the
disputed waters in South China Sea.
QUESTIONS: What do you think is the real reason behind this latest move? What do you
think the South China Sea tension will be like in the coming months following the rig’s
withdrawal?
ANSWER: When China first deployed its oil drilling platform it announced it would operate
until August 15th. This was for two reasons: to end operations before the typhoon season
and to avoid an open-ended commitment. By settling a limit on the deployment of the
drilling platform China left itself with room to maneuver. The early announcement that the
drilling platform had completed commercial operations was made for the same two
reasons. First, China wants to lower the risk to its armada of hundred plus vessels that
surround the oil rig during the current Typhoon Rammasun. China also wants to deflect US
political pressure that is building up in advance of the annual meeting of the ASEAN
Regional Forum. Now that the oil rig has departed from Vietnam's EEZ current tensions will
abate. Confrontation at sea will turn to bilateral diplomacy between Beijing and Hanoi. This
will have two benefits for China. First, Hanoi's leaders will be constrained from taking legal
action against China that they have threatened. And Vietnam's leaders will be constrained
from aligning with the US. Vietnamese Foreign Minister Pham Binh Minh, is due to visit
Washington in September. His visit was put off initially due to its sensitive nature.
Once China entices Vietnam into discussions on repairing their bilateral relations, Beijing will
continue to argue that the matter is bilateral and the US and other countries should not get
involved. The US has signaled that it is preparing a major political offensive against China
designed to pressure Beijing into adhering to international law and rules-based behaviour.
Most of the countries in Southeast Asia will be glad to see tensions end and will be
constrained from undertaking any criticism of China,
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Background Briefing:
South China Sea: China Withdraws
Oil Rig - 8
Carlyle A. Thayer
July 16, 2014
[client name deleted]
Last night China announced that they withdrew the oil rig 981 out of the Paracel Islands.
Could you please provide an assessment of this event. Did China move the oil rig to avoid
Typhoon Rammasun? Will HD 981 come back? In your opinion, what will China do after the
withdrawal? Will China deploy another oil rig for example?
ANSWER: When China first deployed the oil drilling platform HD-981 China said it would
cease operations by August 15. This was for two reasons. First, China wanted to complete
operations before the typhoon season. Second, China did not want to commit itself
indefinitely so it provided an opportunity to withdraw the rig citing commercial reasons.
This decision to withdraw the oil rig early reflects these two initial calculations. China wants
to avoid the risks involved of keeping one hundred or more ships at sea during a tropical
storm. Now that the oil rig is gone there will be no need for China to keep its ships on
station. When they withdraw, Vietnam will no longer have a reason to deploy its Coast
Guard and Fisheries Surveillance Force ships. The current crisis will be over.
China will use the withdrawal of the oil rig to go on the political offensive. At some point
China and Vietnam will commence discussions on how to improve their bilateral relations.
This will mean that Vietnam will be constrained from taking any legal action. And it will
mean that Vietnam also will be constrained from aligning with the US and Japan. In short,
China's move reinforces the bilateral nature of the dispute and undercuts any role for
external powers. China's action is designed to forestall efforts by the United States and its
allies to pres the matter at the ASEAN Regional Forum.
China can be expected to resume its efforts to control the South China Sea within its ninedash
line. China built oil drilling platforms to find oil and gas to be exploited for China's
economy. China's HD-981 will return to the South China Sea after the typhoon season. The
key question is where? China will also continue its land reclamation activities, and China will
keep up its pressure on the Philippines. China has a window of opportunity from now until
the first half of 2016 when the decision by the Arbitral Tribunal is expected to be delivered.
China will want to consolidate its presence as much as possible before then.
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Consultancy Background Brief, July 16, 2014.
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Background Briefing:
South China Sea: China Withdraws
Oil Rig - 9
Carlyle A. Thayer
July 16, 2014
[client name deleted]
We request your assessment of the following:
Q1 Why do you think China withdrew its oil rig at this time? Is there anything related to the
telephone conversation between President Obama and Chinese leader Xi Jiping on Tuesday?
ANSWER: When China first deployed the oil drilling platform they left open the option of
withdrawing it by August 15th, thus avoiding an open ended commitment. But China also
set this deadline to avoid risks during the typhoon season. The recent announcement now
diffuses the crisis for the moment. China has used commercial reasons for withdrawing the
rig, thus preserving its face. China also had two other calculations in mind: avoid risks to the
armada of ships around the rig during the typhoon season and deflecting political pressure
on China in advance of the annual meeting of the ASEAN Regional Forum. The US has
become more proactive in pushing for adherence to the rule of law and has made its views
clear to China privately and at the recent Strategic and Economic Dialogue. President
Obama's call only added to this pressure. By withdrawing the rig China has changed the
nature of the game. It is no longer about confrontation but about taking advantage of the
lowering of tensions to initiate political discussions. China is signalling that there is nothing
to discuss, in its view, now that the rig is back in Chinese waters.
Q2 Will China bring oil rig to re-locate at another position? To Spratly Islands for instance
after the storm season?
ANSWER: China built the HD-981 for deep water operations so it would not have to rely on
western technology. China also has built other oil exploration rigs. China will return to the
South China Sea again next year to press its claims for "indisputable sovereignty" over the
South China Sea. China will study its recent experiences and devise new tactics in deploying
its oil rigs. For the moment it would appear that Chinese commercial activities around the
Paracels will come to an end during the typhoon season. The Chinese armada of ships will
return to port and Vietnam will no longer have a reason to keep its Coast Guard ships on
station. Tensions will lower. China will now set the conditions for receiving a Vietnamese
diplomatic envoy. China's actions also will undercut those in the Hanoi leadership who want
to align with Japan and the United States.
Q3 Are there any chances for Hanoi to take the case to the court now?
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ANSWER: It is unclear what legal issues Vietnam is considering - sovereignty over the
Paracels, the illegality of China's nine-dash line, or compensation for its fishermen. A legal
case on sovereignty over the Paracels would need China's agreement. China will not agree.
All Vietnam would achieve is to demonstrate to the world community that it was committed
to the rule of law. As for the nine-dash line, Vietnam could submit a letter to the Arbitral
Tribunal stating that it had an interest in the case. This would raise the importance of the
case in the eyes of the judges. Or Vietnam could (a) join the Philippines or (b) make its own
separate case.
Prime Minister Nguyen Tan Dung said a legal case was pending the correct timing. Defence
Minister Phung Quang Thanh said it was a last resort. If China conveys to Vietnam it is
willing to open discussions, Vietnam will have to refrain from making a legal claim.
That leaves the matter of compensation for the fishermen. Any legal case against China
would undermine prospective negotiations. China's actions in withdrawing the rig have
snookered Vietnam. Vietnam has little option but to wait to see if China will open
discussions.
Suggested citation: Carlyle A. Thayer, “South China Sea: China Withdraws Oil Rig - 9,” Thayer
Consultancy Background Brief, July 16, 2014. All background briefs are posted on Scribd.com
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business in Australia in 2002.
14
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 10
Carlyle A. Thayer
July 16, 2014
[client name deleted]
We are preparing an urgent report. As far as you know, China has announced that its oil rig
Haiyang 981 is coming back to China (Hainan), starting on July 15, after completing its
drilling missions. We request your assessment.
ANSWER: China's announcement that commercial operation involving HD-981 are over will
defuse tensions and end the maritime confrontation with Vietnam at sea. China's armada of
ships will depart with the rig and go back to their ports. Vietnam will no longer have to
mobilise its Coast Guard and Fisheries Surveillance Force to confront China. As tensions
decline it is likely that China and Vietnam will enter into discussions about how to pick up
the pieces and put their bilateral relations back on track.
China's actions in moving the oil rig will undercut any attempt by Vietnam to make a legal
submission and it will undercut those in Vietnam seeking to align with the US and Japan.
China's actions will also undermine efforts by the US and its partners to raise the issue at
the forthcoming meeting of the ASEAN Regional Forum. China's strategy is to say "we are
handling the matter bilaterally" and there is no need for outside interference.
China did not construct mega oil rigs for political purposes. So China will resume oil
exploration activities when the time is ripe. This may provide another challenge for Vietnam
or it may provide an opportunity for "cooperation for mutual development" or joint
development in the future. Clearly China has the strategic goal of controlling the South
China Sea within the nine dash line by any means - putting an oil rig in Vietnam EEZ, building
bases on reclaimed land, and declaring an Air Defence Identification Zone in the northern
South China Sea (from Hainan to Paracels then west to Da Nang and central Vietnam.
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business in Australia in 2002.
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15
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 11
Carlyle A. Thayer
July 16, 2014
[client name deleted]
China just announced that it is withdrawing oil rig 981 a month earlier than previously
announced. What is your assessment of how this will be perceived in Vietnam? Will this
change the internal balance between the pro-China and pro-US camps? Will this give the
pro-China camp more ground to maintain the status quo? Will this delay the proposed legal
action?
ANSWER: The announcement that China is withdrawing the oil drilling platform for
commercial reasons will immediately reduce tensions. China will no longer have to keep an
armada of ships present to protect the rig and Vietnam will have no reason to deploy its
ships to confront the Chinese. The dynamics of the oil rig crisis has changed from physical
confrontation at sea to political and diplomatic contestation. China's actions have effectively
snookered Vietnam. As tensions dissipate, the focus will turn to possible discussion between
Hanoi and Beijing. Vietnam will refrain from pursuing a legal case in order to prevent
undermining diplomacy. China's actions will undercut those leaders in Vietnam who favour
moving closer to the United States and Japan. The conservatives will argue there is no need
to shift alignments because Vietnam can work at restoring its comprehensive strategic
partnership with China. And efforts to raise Chinese assertiveness at the ASEAN Regional
Forum will be overtaken by China deft change of direction. In summary, the confrontation at
sea quickly has become yesterday's issue and the focus will now turn to diplomacy. China's
move has given it space to deal with the likely political-diplomatic offensive that the US and
its allies are now preparing for the coming ASEAN Regional Forum meeting.
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Background Briefing:
South China Sea: China Withdraws
Oil Rig - 12
Carlyle A. Thayer
July 16, 2014
[client name deleted]
We are preparing a short brief about the Chinese rig. Do you think this will make Vietnam
less likely to pursue arbitration over the South China Sea, and/or less likely to
internationalize the dispute in general? In other words: does Hanoi plan to quietly return to
the status quo, or is it fed up enough by the fiasco to continuing racheting up its anti-China
rhetoric? We very much appreciate your assessment of these issues.
ANSWER: China’s withdrawal of the oil rig will mean that its armada of ships is no longer
necessary. When they depart Vietnam will no longer have to keep its ships in the area.
Tensions will reduce. As a consequence the stage is being set for talks between Beijing and
Hanoi over how to repair bilateral relations. The consequences of this are at least twofold:
(1) Vietnam will not proceed with legal action against China and (2) leaders who seek to
align Vietnam more closely with the US and Japan will also be constrained. The balance will
return to those who seek accommodation with China in the hopes that this will relieve
pressure on Hanoi.
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Background Briefing:
South China Sea: China Withdraws
Oil Rig - 13
Carlyle A. Thayer
July 16, 2014
[client name deleted]
China seems to be pulling its oil rig out of Vietnam's waters. Could you please provide your
assessment of the following:
Q1- Why has China decided to remove the oil rig from Vietnam's Exclusive Economic Zone
(EEZ) and continental shelf now?
ANSWER: Recall that when the oil rig was first deployed China said it would conduct
commercial operations until August 15. There were two reasons for this: (1) China wanted
to avoid keeping the oil rig at sea during the typhoon season and (2) China wanted to
preclude an open ended commitment.
China has decided to remove the oil rig from Vietnam’s EEZ for three reasons. First, as China
has announced, the oil rig has completed its commercial operations. Second, China wanted
to reduce the risks to the oil rig and it protective armada from the impact of the
approaching Typhoon Rammasun. Third, China wanted to shift confrontation at sea to
diplomacy. By withdrawing the oil rig and reducing tensions, China is setting the stage for
high-level bilateral discussions with Vietnam. China is seeking to influence the political
atmosphere prior to the annual ministerial meeting of the ASEAN Regional Forum where it
would come under political attack by the United States. China’s actions mean that Vietnam
is unlikely to undertake legal action against China. And it means that Vietnam is unlikely to
align with the United States and Japan to balance China.
Q2- What will China be able to do in the near future in Vietnam's waters?
ANSWER: China will carefully study the oil rig crisis so it can improve its ability to place the
HD-981 in Vietnam’s Exclusive Economic Zone in the future. China built the mega oil rig and
other exploration platforms in order to find and produce oil and gas. If China has found
commercial reserves of oil and gas, as some reports indicate, China will return to claim these
resources.
Q3- What can Vietnam do in the long term to protect its sovereignty?
ANSWER: Vietnam must continue defence and security self-help, that is, continue to build
up and modernize its Navy, Coast Guard and Fisheries Surveillance Force. Vietnam must also
work to strengthen ASEAN’s solidarity and commitment to international law including the
implementation of the UN Convention on the Law of the Sea. And Vietnam should
independently build up its defence and security relations with Japan, the United States and
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other extra regional states. At the same time, Vietnam must continue to engage with China
in order to convince Beijing the benefits of cooperation outweigh the costs of conflict.
Q4- Many Vietnamese argue that Vietnqam should gradually build a self-reliant economy
and reduce dependence on China. What is your view about this?
ANSWER: In this era of globalization it is probably impossible to build a self-reliant economy
without substantial economic relations with China at the same time. Vietnam must strive to
reduce dependency on China. Vietnam must set energy self-reliance at a top priortiy.
Vietnam should also join the Trans-Pacific Partnership (TPP) and carry out substantial
economic reforms to increase its competiveness.
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Background Briefing:
South China Sea: China Withdraws
Oil Rig - 1
Carlyle A. Thayer
July 15, 2014
[client name deleted]
Regarding the latest development in South China Sea we request your assessment of the
following issues:
Q1. Typhoon Rammasun is now strengthening in the South China Sea. Will the typhoon have
an impact on the operations of China’s HD-981 oil rig?
ANSWER: When China first announced that the HD-981 oil rig would conduct commercial
operations until August 15, it was likely that China had the typhoon season in mind. China
has put itself in a risky situation by deploying the mega drilling platform and so many
surface ships in one area. Not all of them are designed to withstand a major storm. It is
impossible to know the precise trajectory of Typhoon Rammasun or its intensity at the
moment. It must cross over the Philippines, which usually causes a typhoon to loose
strength. Current estimates place Hong Kong and adjacent waters at risk. The typhoon will
bring worsening weather and this is like to impact on all ships operating around the oil rig.
At a minimum, China will have to re-evaluate the risks involved to their armada of ships
during the typhoon season. The coming typhoon season should see the Chinese depart the
area.
Q2. Do you think that China will move the oil rig to other place to avoid this typhoon or
withdraw from Vietnam's continental shelf and Exclusive Economic Zone?
ANSWER: The current typhoon does not appear to present a direct threat to the oil rig given
current projections of its course and intensity. These estimates, however, will be constantly
updated. The oil rig itself should be able to withstand severe weather. But small Chinese
vessels and fishing boats will have to seek shelter; so will Vietnamese Coast Guard and
Fishery Surveillance ships.
Q3. The annual storm season is now commencing, can we expect that the ongoing tensions
in South China Sea, especially the tensions between Vietnam and China, will deescalate?
ANSWER: Yes, because when China first announced the deployment of HD-981 it said that it
would end commercial operations around August 15. This announcement may be read in
two ways. First, China did not want to commit itself to a permanent deployment during the
typhoon season. Second, China also was signally that its actions is deploying the rig were
limited in time. Both Vietnam and China will have to withdraw their ships and vessels in the
face of serious storms. This should provide a face saving way of de-escalating the current
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crisis. China cannot risk having a storm cause damage to its large number of ships because
this would expose China’s lack of concern for the safety of the ships and their crews.
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3
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 2
Carlyle A. Thayer
July 16, 2014
[client name deleted]
QUESTION: What is your assessment of the latest move by China in relocating the 981 oil rig
back to Hainan? Is this because of Typhoon Rammasun or is it due to pressure from the
international community? How will the situation will evolve from here?
ANSWER: The announcement that the HD-981 drilling platform had completed commercial
operations and is returning to Hainan Island is good news. This should defuse current
tensions and create conditions for China and Vietnam to begin high-level discussions.
When China first deployed the HD-981 it announced it would cease operations by August
15. There were two reasons for this: to remove the drilling platform before the typhoon
season and to avoid an open ended confrontation with Vietnam. The timing of the current
announcement may be linked to Typhoon Rammasun. Although the typhoon does not
appear to be heading directly to the area where the rig is operating, the typhoon will bring
bad weather. This will affect the smaller ships in China’s current armada. China is showing
itself risk adverse. There is also another likely explanation for the early withdrawal of the
drilling platform. China may be seeking to lower tensions with Vietnam in order to pre-empt
criticism at the forthcoming meeting of the ASEAN Regional Forum scheduled for next
month.
ADDITIONAL QUESTIONS:
Q1 From you point of view, how damaging was the oil rig to China thus far?
ANSWER: China’s placement of the HD-981 in Vietnam’s Exclusive Economic Zone was a
costly political and diplomatic exercise for China. ASEAN Foreign Ministers issued a stand
along unanimous statement expressing serious concern. The US, Japan and Australia all
criticized China for acting unilaterally to upset the status quo. Malaysia and Indonesia are
showing signs of increased misgivings about China’s behaviour. Vietnam and the Philippines
have demonstrated solidarity. The G-7 also issued a statement. And Vietnam retains the
threat to take legal action. China’s information warfare campaign to sell its case did not go
down well with the international community.
To balance this assessment, it is likely that President Xi Jinping enhanced his reputation
within China for acting to defend China’s “indisputable sovereignty.”
Q2 What can we learn from this oil-rig crisis?
ANSWER: This crisis demonstrated that China has developed a sophisticated strategy to use
oil drilling platforms, civilian law enforcement ships, military ships and aircraft to assert its
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sovereignty claims. This strategy is unlikely to be abandoned in future. Vietnam must
prepare for similar actions in the future.
Vietnam was correct not to rise to the provocations offered by China. Vietnam was correct
to keep its naval warships away from the confrontation around the oil drilling platform.
While Vietnam Coast Guard and Fishery Surveillance Force ships did an admirable job in
protesting China’s actions, it is clear that both these forces will need to be modernized and
expanded in future years. The National Assembly has provided funds but a longer term
program must be drawn up. Vietnam will need bigger and heavier ships to confront China
and better aerial surveillance.
Q3 Any important lessons?
ANSWER: For Vietnam, the main lesson is that no matter how good relations with China are,
Vietnam must always prepare for the unexpected. Vietnam can take satisfaction about how
it conducted it campaign to provide information to the world community. This should be
reviewed to make it better and more efficient the next time a provocation like the drilling
platform occurs.
Vietnamese scholars and specialists must be mobilized to counter the propaganda effort by
Chinese academics. There was a very good Vietnamese response this time. A network needs
to be formed to react instantly to Chinese propaganda. A study should be made of the key
media and internet outlets that need to be approached in the future.
Vietnam needs to heighten its maritime domain awareness to give itself early warning time
of future Chinese actions. This means cooperating with other maritime powers and keeping
a close watch on all of China’s oil rigs and any unusual movement in port cities near the
South China Sea, such as Sanya on Hainan Island or at Woody Island.
China will review its actions and try to come up with better tactics to thwart Vietnam in the
future. Vietnam must study this episode carefully and anticipate China’s new tactics.
Vietnam should redouble its efforts to monitor the boundaries of its EEZ and continental
shelf as part of developing better domain awareness.
Suggested citation: Carlyle A. Thayer, “South China Sea: China Withdraws Oil Rig - 2,” Thayer
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business in Australia in 2002.
5
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 3
Carlyle A. Thayer
July 16, 2014
[client name deleted
QUESTION: China has started to withdraw the oil rig out of Vietnam’s Exclusive Economic
Zone. Could you please provide an assessment of this development? Why did China
withdraw the rig before mid-August?
ANSWER: When China first announced the deployment of the oil drilling platform it said it
would end its operations on August 15. This statement had two purposes. First, it was
designed give China a plausible way of ending the crisis without having to make an openended
commitment. Second, August 15 was chosen to take into account the typhoon
season and the risk this would pose to the drilling platform and its armada of ships and
vessels.
There are three reasons why China decided to end the operations of the oil rig so early.
First, as China has claimed, the oil drilling platform completed its commercial activities.
Second, China wanted to minimise the risk posed by Typhoon Rammasun to the armada of
over one hundred ships protecting the oil rig. Third, China wanted to influence the political
atmosphere in advance of the annual ASEAN Regional Forum (ARF) ministerial meeting. By
removing the oil rig and lowering tensions, China has set the stage for bilateral talks with
Vietnam. This means that Vietnam is unlikely to take legal action against China. And China’s
actions also undercut any possibility of alignment with the United States and Japan against
China.
China’s actions will also undermine the impact of the diplomatic offensive that the United
States will launch at the ARF to condemn China’s provocative actions and to freeze its
assertive actions. China will argue the matter is purely a bilateral one with Vietnam and that
the United States should not make matters more complicated by intervening. In other
words, China has shifted the focus of regional attention from confrontation at sea to
diplomacy. No country in Southeast Asia will want to take action critical of China and risk
jeopardizing the opportunity of using peaceful negotiations to settle the current crisis.
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Background Briefing:
South China Sea: China Withdraws
Oil Rig - 4
Carlyle A. Thayer
July 16, 2014
[client name deleted]
Today Xinhua reported that China has withdrawn the Haiyang Shiyou oil rig from disputed
waters. We request your assessment.
ANSWER: China’s withdrawal of its oil rig from Vietnam’s Exclusive Economic Zone will result
in the withdrawal of China’s armada of over one hundred ships, vessels and boats. This in
turn will create the conditions for Vietnam to withdraw its Coast Guard and Fisheries
Surveillance Force presence. Tension will lower and China and Vietnam will be drawn into
bilateral discussions in due course.
The shift from confrontation at sea to diplomacy will constrain Vietnam from taking legal
action against China. It will also undercut the efforts of those in the leadership who seek to
align more closely with the US and Japan. The decrease in tensions will make it more
difficult for the United State to conduct its planned diplomatic offensive at this year’s ASEAN
Regional Forum ministerial meeting. The US is all set to argue for China to comply with
international law and to freeze its provocative actions. China will argue that the oil rig crisis
is a bilateral affair with Vietnam and that the US should not intervene. Most members of
ASEAN will be so relieved to see the lowering of tensions that they will mute criticism of
China.
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Background Briefing:
South China Sea: China Withdraws
Oil Rig - 5
Carlyle A. Thayer
July 16, 2014
[client name deleted]
China Oilfield Services Ltd., a unit of state-owned China National Offshore Oil Corp., said its
deep water HYSY 981 drilling rig had completed exploration. A Vietnam Coast Guard official
confirmed that the rig started moving last night towards Hainan.
What is behind this development and how will it affect current tensions between China and
Vietnam?
ANSWER: Recall than when China deployed the rig it said it would conduct operations until
August 15th. This was to avoid the risk of conducting operations during the typhoon season
and to avoid an open ended commitment. There are at least three main reasons for the
withdrawal of the oil rig. First, the oil drilling platform has completed its exploratory
activities. Second, China seeks to minimise the risks posed by Typhoon Rammasun and the
coming typhoon season. A major storm could cause extensive damage to a fleet of over one
hundred ships and crafts gathered in a small area. Third, China is seeking to shift from
confrontation at sea to diplomacy. The reduction in tension should lead to talks between
Beijing and Hanoi about how to get their bilateral relationship back on track. A lowering of
tensions coupled with the prospect of high-level talks will lead Vietnam to decide not to
proceed with threatened legal action. A lowering of tensions will take the wind out of the
sails of those seeking to align with the US and China. Vietnam's accommodationists will
press for talks with China.
A lowering of tensions and the initiation of talks between China and Vietnam will alter the
current political dynamics. China's actions will undercut US efforts to push strongly at the
annual ministerial meeting of the ASEAN Regional Forum for China to follow international
law and freeze its provocative actions in the South China Sea, such as land reclamation.
China will argue that its discussions with Vietnam are a bilateral matter and that US
diplomatic intervention will only complicate the situation.
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Background Briefing:
South China Sea: China Withdraws
Oil Rig - 6
Carlyle A. Thayer
July 16, 2014
[client name deleted]
We request your assessment about the withdrawal of the Chinese oil rig? For reference see
news report below:
http://www.thanhniennews.com/politics/chinese-oil-rig-finishes-exploration-in-waters-offvietnam-
xinhua-28631.html
Q1. What do you make of this move?
ANSWER: The removal of China’s mega oil drilling platform from Vietnam’s Exclusive
Economic Zone will cause tensions between the two countries to lessen. Now that the rig
has departed there is no need for the Chinese armada of more than one hundred ships to
remain on station. Once the Chinese depart, Vietnam will not have a reason to keep its
Coast Guard and Fisheries Surveillance vessels in the area.
A lowering of tensions opens up the possibility that China and Vietnam may be able to
commence diplomatic discussions to repair their bilateral relations. The prospects of
discussions will constrain Vietnam from taking legal action against China, and it will also
constrain Vietnam from seeking to align with the United States and Japan. Finally, a
lowering of tensions will undercut planned U.S. diplomatic intervention at the annual
meeting of the ASEAN Regional Forum to pressure China to adhere to international law.
China will now be able to argue that its dispute with Vietnam is bilateral and that the United
States should refrain from involving itself.
Q2. Why do you think China has decided to withdraw the rig one month ahead of schedule?
Does it have anything to do with the brewing storm – Typhoon Rammasun?
ANSWER: There are several likely explanations why China moved the oil drilling platform.
First, China moved the rig because present commercial operations have come to an end.
Second, China moved the rig to lower the risk to the armada of protective ships surrounding
it as Typhoon Rasmussen brings bad weather to the area. Third, China always indicated that
it was not making an open-ended commitment but was keeping its options open to
withdraw. China’s first announcement about the drilling platform indicated it would cease
operations on August 15.
But the bottom line is that tensions will now dissipate and confrontation at sea will turn to
diplomacy between Beijing and Vietnam.
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Q3. Will two-month deployment of the oil rig play any role in helping China create facts on
the grounds in waters over which it claims sovereignty?
ANSWER: China is changing “facts on the ground” by its on-going land reclamation activities
in the Spratly islands. The deployment of the oil drilling platform indicates that China is
willing to deploy considerable mixed assets in order to assert sovereign jurisdiction over
disputed maritime zones. China, having used the gambit of deploying an oil rig in contested
waters, leaves open the possibility that it will do so again. China’s efforts to assert sovereign
jurisdiction, however, have been nullified by Vietnam’s vociferous protest using Coast Guard
and Fisheries Surveillance ships to protest China’s actions.
Q4. What do you expect China to do next?
ANSWER: China will eventually open the door for discussions with Vietnam thus defusing
the crisis. China will counter-attack on the diplomatic front to capitalize on regional relief
that tensions have abated. China will attempt to pressure ASEAN countries to fall back in
line and continue interminable discussions on a Code of Conduct in the South China Sea.
Chinese efforts will be aimed at isolating the United States and Japan and constraining
Vietnam. China will continue to reclaim land in the South China Sea. And China will keep
occupying Scarborough Shoal and mount pressure on the Philippines at Second Thomas
Shoal.
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business in Australia in 2002.
10
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 7
Carlyle A. Thayer
July 16, 2014
[client name deleted]
Could you please as assessment of the withdrawal of the Chinese HD-981 rig from the
disputed waters in South China Sea.
QUESTIONS: What do you think is the real reason behind this latest move? What do you
think the South China Sea tension will be like in the coming months following the rig’s
withdrawal?
ANSWER: When China first deployed its oil drilling platform it announced it would operate
until August 15th. This was for two reasons: to end operations before the typhoon season
and to avoid an open-ended commitment. By settling a limit on the deployment of the
drilling platform China left itself with room to maneuver. The early announcement that the
drilling platform had completed commercial operations was made for the same two
reasons. First, China wants to lower the risk to its armada of hundred plus vessels that
surround the oil rig during the current Typhoon Rammasun. China also wants to deflect US
political pressure that is building up in advance of the annual meeting of the ASEAN
Regional Forum. Now that the oil rig has departed from Vietnam's EEZ current tensions will
abate. Confrontation at sea will turn to bilateral diplomacy between Beijing and Hanoi. This
will have two benefits for China. First, Hanoi's leaders will be constrained from taking legal
action against China that they have threatened. And Vietnam's leaders will be constrained
from aligning with the US. Vietnamese Foreign Minister Pham Binh Minh, is due to visit
Washington in September. His visit was put off initially due to its sensitive nature.
Once China entices Vietnam into discussions on repairing their bilateral relations, Beijing will
continue to argue that the matter is bilateral and the US and other countries should not get
involved. The US has signaled that it is preparing a major political offensive against China
designed to pressure Beijing into adhering to international law and rules-based behaviour.
Most of the countries in Southeast Asia will be glad to see tensions end and will be
constrained from undertaking any criticism of China,
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Background Briefing:
South China Sea: China Withdraws
Oil Rig - 8
Carlyle A. Thayer
July 16, 2014
[client name deleted]
Last night China announced that they withdrew the oil rig 981 out of the Paracel Islands.
Could you please provide an assessment of this event. Did China move the oil rig to avoid
Typhoon Rammasun? Will HD 981 come back? In your opinion, what will China do after the
withdrawal? Will China deploy another oil rig for example?
ANSWER: When China first deployed the oil drilling platform HD-981 China said it would
cease operations by August 15. This was for two reasons. First, China wanted to complete
operations before the typhoon season. Second, China did not want to commit itself
indefinitely so it provided an opportunity to withdraw the rig citing commercial reasons.
This decision to withdraw the oil rig early reflects these two initial calculations. China wants
to avoid the risks involved of keeping one hundred or more ships at sea during a tropical
storm. Now that the oil rig is gone there will be no need for China to keep its ships on
station. When they withdraw, Vietnam will no longer have a reason to deploy its Coast
Guard and Fisheries Surveillance Force ships. The current crisis will be over.
China will use the withdrawal of the oil rig to go on the political offensive. At some point
China and Vietnam will commence discussions on how to improve their bilateral relations.
This will mean that Vietnam will be constrained from taking any legal action. And it will
mean that Vietnam also will be constrained from aligning with the US and Japan. In short,
China's move reinforces the bilateral nature of the dispute and undercuts any role for
external powers. China's action is designed to forestall efforts by the United States and its
allies to pres the matter at the ASEAN Regional Forum.
China can be expected to resume its efforts to control the South China Sea within its ninedash
line. China built oil drilling platforms to find oil and gas to be exploited for China's
economy. China's HD-981 will return to the South China Sea after the typhoon season. The
key question is where? China will also continue its land reclamation activities, and China will
keep up its pressure on the Philippines. China has a window of opportunity from now until
the first half of 2016 when the decision by the Arbitral Tribunal is expected to be delivered.
China will want to consolidate its presence as much as possible before then.
Suggested citation: Carlyle A. Thayer, “South China Sea: China Withdraws Oil Rig - 8,” Thayer
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Background Briefing:
South China Sea: China Withdraws
Oil Rig - 9
Carlyle A. Thayer
July 16, 2014
[client name deleted]
We request your assessment of the following:
Q1 Why do you think China withdrew its oil rig at this time? Is there anything related to the
telephone conversation between President Obama and Chinese leader Xi Jiping on Tuesday?
ANSWER: When China first deployed the oil drilling platform they left open the option of
withdrawing it by August 15th, thus avoiding an open ended commitment. But China also
set this deadline to avoid risks during the typhoon season. The recent announcement now
diffuses the crisis for the moment. China has used commercial reasons for withdrawing the
rig, thus preserving its face. China also had two other calculations in mind: avoid risks to the
armada of ships around the rig during the typhoon season and deflecting political pressure
on China in advance of the annual meeting of the ASEAN Regional Forum. The US has
become more proactive in pushing for adherence to the rule of law and has made its views
clear to China privately and at the recent Strategic and Economic Dialogue. President
Obama's call only added to this pressure. By withdrawing the rig China has changed the
nature of the game. It is no longer about confrontation but about taking advantage of the
lowering of tensions to initiate political discussions. China is signalling that there is nothing
to discuss, in its view, now that the rig is back in Chinese waters.
Q2 Will China bring oil rig to re-locate at another position? To Spratly Islands for instance
after the storm season?
ANSWER: China built the HD-981 for deep water operations so it would not have to rely on
western technology. China also has built other oil exploration rigs. China will return to the
South China Sea again next year to press its claims for "indisputable sovereignty" over the
South China Sea. China will study its recent experiences and devise new tactics in deploying
its oil rigs. For the moment it would appear that Chinese commercial activities around the
Paracels will come to an end during the typhoon season. The Chinese armada of ships will
return to port and Vietnam will no longer have a reason to keep its Coast Guard ships on
station. Tensions will lower. China will now set the conditions for receiving a Vietnamese
diplomatic envoy. China's actions also will undercut those in the Hanoi leadership who want
to align with Japan and the United States.
Q3 Are there any chances for Hanoi to take the case to the court now?
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ANSWER: It is unclear what legal issues Vietnam is considering - sovereignty over the
Paracels, the illegality of China's nine-dash line, or compensation for its fishermen. A legal
case on sovereignty over the Paracels would need China's agreement. China will not agree.
All Vietnam would achieve is to demonstrate to the world community that it was committed
to the rule of law. As for the nine-dash line, Vietnam could submit a letter to the Arbitral
Tribunal stating that it had an interest in the case. This would raise the importance of the
case in the eyes of the judges. Or Vietnam could (a) join the Philippines or (b) make its own
separate case.
Prime Minister Nguyen Tan Dung said a legal case was pending the correct timing. Defence
Minister Phung Quang Thanh said it was a last resort. If China conveys to Vietnam it is
willing to open discussions, Vietnam will have to refrain from making a legal claim.
That leaves the matter of compensation for the fishermen. Any legal case against China
would undermine prospective negotiations. China's actions in withdrawing the rig have
snookered Vietnam. Vietnam has little option but to wait to see if China will open
discussions.
Suggested citation: Carlyle A. Thayer, “South China Sea: China Withdraws Oil Rig - 9,” Thayer
Consultancy Background Brief, July 16, 2014. All background briefs are posted on Scribd.com
(search for Thayer). To remove yourself from the mailing list type UNSUBSCRIBE in the
Subject heading and hit the Reply key.
Thayer Consultancy provides political analysis of current regional security issues and other
research support to selected clients. Thayer Consultancy was officially registered as a small
business in Australia in 2002.
14
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 10
Carlyle A. Thayer
July 16, 2014
[client name deleted]
We are preparing an urgent report. As far as you know, China has announced that its oil rig
Haiyang 981 is coming back to China (Hainan), starting on July 15, after completing its
drilling missions. We request your assessment.
ANSWER: China's announcement that commercial operation involving HD-981 are over will
defuse tensions and end the maritime confrontation with Vietnam at sea. China's armada of
ships will depart with the rig and go back to their ports. Vietnam will no longer have to
mobilise its Coast Guard and Fisheries Surveillance Force to confront China. As tensions
decline it is likely that China and Vietnam will enter into discussions about how to pick up
the pieces and put their bilateral relations back on track.
China's actions in moving the oil rig will undercut any attempt by Vietnam to make a legal
submission and it will undercut those in Vietnam seeking to align with the US and Japan.
China's actions will also undermine efforts by the US and its partners to raise the issue at
the forthcoming meeting of the ASEAN Regional Forum. China's strategy is to say "we are
handling the matter bilaterally" and there is no need for outside interference.
China did not construct mega oil rigs for political purposes. So China will resume oil
exploration activities when the time is ripe. This may provide another challenge for Vietnam
or it may provide an opportunity for "cooperation for mutual development" or joint
development in the future. Clearly China has the strategic goal of controlling the South
China Sea within the nine dash line by any means - putting an oil rig in Vietnam EEZ, building
bases on reclaimed land, and declaring an Air Defence Identification Zone in the northern
South China Sea (from Hainan to Paracels then west to Da Nang and central Vietnam.
Suggested citation: Carlyle A. Thayer, “South China Sea: China Withdraws Oil Rig - 10,”
Thayer Consultancy Background Brief, July 16, 2014. All background briefs are posted on
Scribd.com (search for Thayer). To remove yourself from the mailing list type UNSUBSCRIBE
in the Subject heading and hit the Reply key.
Thayer Consultancy provides political analysis of current regional security issues and other
research support to selected clients. Thayer Consultancy was officially registered as a small
business in Australia in 2002.
Thayer Consultancy
ABN # 65 648 097 123
15
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 11
Carlyle A. Thayer
July 16, 2014
[client name deleted]
China just announced that it is withdrawing oil rig 981 a month earlier than previously
announced. What is your assessment of how this will be perceived in Vietnam? Will this
change the internal balance between the pro-China and pro-US camps? Will this give the
pro-China camp more ground to maintain the status quo? Will this delay the proposed legal
action?
ANSWER: The announcement that China is withdrawing the oil drilling platform for
commercial reasons will immediately reduce tensions. China will no longer have to keep an
armada of ships present to protect the rig and Vietnam will have no reason to deploy its
ships to confront the Chinese. The dynamics of the oil rig crisis has changed from physical
confrontation at sea to political and diplomatic contestation. China's actions have effectively
snookered Vietnam. As tensions dissipate, the focus will turn to possible discussion between
Hanoi and Beijing. Vietnam will refrain from pursuing a legal case in order to prevent
undermining diplomacy. China's actions will undercut those leaders in Vietnam who favour
moving closer to the United States and Japan. The conservatives will argue there is no need
to shift alignments because Vietnam can work at restoring its comprehensive strategic
partnership with China. And efforts to raise Chinese assertiveness at the ASEAN Regional
Forum will be overtaken by China deft change of direction. In summary, the confrontation at
sea quickly has become yesterday's issue and the focus will now turn to diplomacy. China's
move has given it space to deal with the likely political-diplomatic offensive that the US and
its allies are now preparing for the coming ASEAN Regional Forum meeting.
Suggested citation: Carlyle A. Thayer, “South China Sea: China Withdraws Oil Rig - 11,”
Thayer Consultancy Background Brief, July 16, 2014. All background briefs are posted on
Scribd.com (search for Thayer). To remove yourself from the mailing list type UNSUBSCRIBE
in the Subject heading and hit the Reply key.
Thayer Consultancy provides political analysis of current regional security issues and other
research support to selected clients. Thayer Consultancy was officially registered as a small
business in Australia in 2002.
Thayer Consultancy
ABN # 65 648 097 123
16
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 12
Carlyle A. Thayer
July 16, 2014
[client name deleted]
We are preparing a short brief about the Chinese rig. Do you think this will make Vietnam
less likely to pursue arbitration over the South China Sea, and/or less likely to
internationalize the dispute in general? In other words: does Hanoi plan to quietly return to
the status quo, or is it fed up enough by the fiasco to continuing racheting up its anti-China
rhetoric? We very much appreciate your assessment of these issues.
ANSWER: China’s withdrawal of the oil rig will mean that its armada of ships is no longer
necessary. When they depart Vietnam will no longer have to keep its ships in the area.
Tensions will reduce. As a consequence the stage is being set for talks between Beijing and
Hanoi over how to repair bilateral relations. The consequences of this are at least twofold:
(1) Vietnam will not proceed with legal action against China and (2) leaders who seek to
align Vietnam more closely with the US and Japan will also be constrained. The balance will
return to those who seek accommodation with China in the hopes that this will relieve
pressure on Hanoi.
Suggested citation: Carlyle A. Thayer, “South China Sea: China Withdraws Oil Rig - 12,”
Thayer Consultancy Background Brief, July 16, 2014. All background briefs are posted on
Scribd.com (search for Thayer). To remove yourself from the mailing list type UNSUBSCRIBE
in the Subject heading and hit the Reply key.
Thayer Consultancy provides political analysis of current regional security issues and other
research support to selected clients. Thayer Consultancy was officially registered as a small
business in Australia in 2002.
Thayer Consultancy
ABN # 65 648 097 123
17
Background Briefing:
South China Sea: China Withdraws
Oil Rig - 13
Carlyle A. Thayer
July 16, 2014
[client name deleted]
China seems to be pulling its oil rig out of Vietnam's waters. Could you please provide your
assessment of the following:
Q1- Why has China decided to remove the oil rig from Vietnam's Exclusive Economic Zone
(EEZ) and continental shelf now?
ANSWER: Recall that when the oil rig was first deployed China said it would conduct
commercial operations until August 15. There were two reasons for this: (1) China wanted
to avoid keeping the oil rig at sea during the typhoon season and (2) China wanted to
preclude an open ended commitment.
China has decided to remove the oil rig from Vietnam’s EEZ for three reasons. First, as China
has announced, the oil rig has completed its commercial operations. Second, China wanted
to reduce the risks to the oil rig and it protective armada from the impact of the
approaching Typhoon Rammasun. Third, China wanted to shift confrontation at sea to
diplomacy. By withdrawing the oil rig and reducing tensions, China is setting the stage for
high-level bilateral discussions with Vietnam. China is seeking to influence the political
atmosphere prior to the annual ministerial meeting of the ASEAN Regional Forum where it
would come under political attack by the United States. China’s actions mean that Vietnam
is unlikely to undertake legal action against China. And it means that Vietnam is unlikely to
align with the United States and Japan to balance China.
Q2- What will China be able to do in the near future in Vietnam's waters?
ANSWER: China will carefully study the oil rig crisis so it can improve its ability to place the
HD-981 in Vietnam’s Exclusive Economic Zone in the future. China built the mega oil rig and
other exploration platforms in order to find and produce oil and gas. If China has found
commercial reserves of oil and gas, as some reports indicate, China will return to claim these
resources.
Q3- What can Vietnam do in the long term to protect its sovereignty?
ANSWER: Vietnam must continue defence and security self-help, that is, continue to build
up and modernize its Navy, Coast Guard and Fisheries Surveillance Force. Vietnam must also
work to strengthen ASEAN’s solidarity and commitment to international law including the
implementation of the UN Convention on the Law of the Sea. And Vietnam should
independently build up its defence and security relations with Japan, the United States and
Thayer Consultancy
ABN # 65 648 097 123
18
other extra regional states. At the same time, Vietnam must continue to engage with China
in order to convince Beijing the benefits of cooperation outweigh the costs of conflict.
Q4- Many Vietnamese argue that Vietnqam should gradually build a self-reliant economy
and reduce dependence on China. What is your view about this?
ANSWER: In this era of globalization it is probably impossible to build a self-reliant economy
without substantial economic relations with China at the same time. Vietnam must strive to
reduce dependency on China. Vietnam must set energy self-reliance at a top priortiy.
Vietnam should also join the Trans-Pacific Partnership (TPP) and carry out substantial
economic reforms to increase its competiveness.
Suggested citation: Carlyle A. Thayer, “South China Sea: China Withdraws Oil Rig - 13,”
Thayer Consultancy Background Brief, July 16, 2014. All background briefs are posted on
Scribd.com (search for Thayer). To remove yourself from the mailing list type UNSUBSCRIBE
in the Subject heading and hit the Reply key.
Thayer Consultancy provides political analysis of current regional security issues and other
research support to selected clients. Thayer Consultancy was officially registered as a small
business in Australia in 2002.
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