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China Builds an "Unsinkable Aircraft Carrier" in the South China Sea

By Rich Smith

Published May 17, 2015

China appears to be turning Fiery Cross Reef into an unsinkable aircraft carrier. This and subsequent photos: Google Earth.
In World War II, U.S. admirals often referred to the string of islands and atolls they were capturing as "unsinkable aircraft carriers" to be used in the war against Japan. In World War III, will islands be used this way again?
That's the fear keeping Pentagon planners up at night, as China embarks on a months-long project to dredge up oceanic coral and sand, pile it above water atop half-flooded reefs in the Spratly Island chain -- and turn them into military bases for the Chinese navy and air force. But why is China doing this? Who will benefit? And what will it cost?
Middle (of the ocean) Kingdom
As described in multiple articles in The Wall Street Journal this week, China is bolstering claims to absolute sovereignty over the South China Sea by building military bases atop seven reefs spread across the Spratly Islands. In fact, these islands are located closer to Vietnam, Malaysia, and the Philippines. But China government spokesman Zhu Haiquan calls them essential to, as the Journal paraphrased, "safeguarding territorial sovereignty and maritime rights and helping China fulfill international responsibilities in a number of areas, such as maritime search and rescue."
The United States acknowledges Chinese claims to certain "legitimate," already-above-water islands within the South China Sea. But it disputes China's right to build entirely new islands -- and then claim them as sovereign Chinese territory.

Naval base under construction on Cuarteron Reef.
But if China's claims to the Spratlys are so tenuous, why make them?
Methods to the madness
Several reasons. For one, much of the world's seagoing commerce traverses the South China Sea -- and the Spratly Islands. As an export-driven economy, China has an interest in keeping an eye on this commerce. Constructing a chain of unsinkable aircraft carriers in the South China Sea is one way to do that.

Chinese fleet occupying Subi Reef, with dredging/building work in progress.
Ongoing territorial disputes with its southeast Asian neighbors are another reason for China building its territorial claims into literal "facts on the ground." In Vietnamese waters, in the Philippines, and even right next door in Japan, tempers are flaring over everything from jurisdictional disputes to fishing rights.
But once China gets a foothold in the South China Sea, it will become dreadfully difficult to kick it back out. As retired U.S. Army Col. David Hunt explained to me in an interview on Russia's moves in the Arctic, once someone has "put a flag on" an island, anyone else who wants that island has two choices: "negotiate, or shoot him off it."

Viewed from above, the Chinese military base at Hughes Reef already looks like a walled fortress.
Gee, that doesn't sound good...
Which brings us to what many experts think is the most important motivator behind China's land grab in the South China Sea: oil.
According to the United States Energy Information Agency, while no one has confirmed the presence of actual "proved or probable" oil reserves on the ocean floor beneath the Spratlys, the area "may contain significant deposits of undiscovered hydrocarbons." The U.S. Geological Survey estimates there could be "anywherebetween 0.8 and 5.4 (mean 2.5) billion barrels of oil and between 7.6 and 55.1 (mean 25.5) Tcf of natural gasin undiscovered resources" in the area.
And China wants it all.

China's island-building mischief is just getting started at Mischief Reef.
What price oil wealth?
Now, that works out to an average guess of 6.9 billion "barrels of oil equivalent" located under the Spratlys. (Hat tip to kylesconverter.com for the conversion calculator.) At today's price of roughly $60 a barrel, that's roughly $414 billion in oil wealth that could soon be added to the reserves of China's CNOOCoil company -- which is already drilling in disputed waters off Vietnam. To control it, ]China aims to create roughly 2,000 acres of new islands, turning each one into the epicenter of an exclusive economic zone,scatttered all over the South China Sea.
How much will that cost?
About a decade ago, Dubai spent $14 billion to build 12,800 acres of new land in its "The World" island-building project.That works out to about $1.4 million per acrein today's dollars. Multiply that by 2,000 acres, and it could cost China as little as $2.8 billion to build its islands -- a bargain considering the amount of oil the country will then control.
Closer to the Spratlys both chronologically and geographically, Malaysia is building a "Forest City" island in the straits off Johor today. That project will cost a reported $86.4 billion to reclaim 4,050 acres -- about $21.3 million per acre. At that price per acre, China's unsinkable aircraft carriers could cost it $42.6 billion. Pricier, but still arguably a bargain with 10 times as much oil wealth at stake.
Either way, while U.S. forces are contesting China's claims, the Journal quotes senior U.S. officials as saying, "We're just not going within the 12 miles -- yet" of territorial waters that China would be entitled to under international law, if its islands are deemed legitimate Chinese territory. For the time being, China's claims to the oil -- like the islands it's building -- are only growing stronger.

What might China's islands look like once completed? Check out the Royal Malaysian Naval Station at Layang-Layang Airport on Swallow Reef, to the south of where most of this brouhaha is brewing.
The article China Builds an "Unsinkable Aircraft Carrier" in the South China Sea originally appeared on Fool.com.

Rich Smithdoes not own shares of, nor is he short, any company named above. You can find him on CAPS, publicly pontificating under the handleTMFDitty, where he's currently ranked No. 327 out of more than 75,000 rated members.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Roland San Juan

Sunday, May 24, 2015