Monday, July 24, 2017

China Threatens Force to Stop Vietnam from Oil Drilling

Background Briefing:
China Threatens Force to Stop
Vietnam from Oil Drilling
Carlyle A. Thayer
July 24, 2017
[client name deleted]
The BBC is reporting that Việtnam has suspended drilling in block 136-03. We request
your assessment of the significance of this development.
ANSWER: The BBC report by Bill Hayden, quoting industry sources, confirms a
Background Brief that Thayer Consultancy issued on July 15. The Brief concluded:
 This is a test of Vietnam’s policy of cooperation and struggle (doi tac, doi tuong).
If Vietnam forgoes oil exploration it will sets back its energy program. If Vietnam
takes this course it is because of the fear of Chinese retribution and because it
cannot yet count on the Trump Administration to provide support.
 Vietnam usually offers some guarantee of support for oil companies operating in
its Exclusive Economic Zone… [At the moment, July 15] China is only applying
political and diplomatic pressure on either or both Repsol and Vietnam. China is
more likely to take some punitive economic action before resorting to any
confrontation at sea.
 Vietnam would need to make public that China was interfering in oil exploration
in Block 136 in order to lay the ground work for diplomatic support from
ASEAN, the U.S. and Japan and other countries.
 Obviously, ExxonMobil would be following this reported incident carefully in order
to assess risks to its activities in the Blue Whale project. If China put pressure on
ExxonMobil the United States likely would have greater reason to become
involved than the Repsol case.
 There is a larger context: this year President Duterte said China would act
aggressively (go to war) if the Philippines restarted oil exploration in Recto Bank.
Then China abruptly cancelled the 4th friendly border defense exchange activities
when Vietnam’s leaders rebuffed General Fan’s request that Vietnam stop oil
exploration. Finally, China protested when Vietnam extended ONGC’s lease in
Block 128. If these dots are connected it appears that China is reasserting its ninedotted
map claim on the first anniversary of the Arbitral Tribunal’s Award.
The BBC reported that Vietnamese officials told Repsol executives that China
threatened to attack Vietnamese bases in the South China Sea if the drilling did not
stop. This is a major escalation in China’s posture. It raises a nightmare scenario for
Hanoi’s leaders because any attack on a Vietnamese-occupied feature in the South
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China Sea would result is a massive eruption of anti-Chinese sentiment in Vietnam.
This could seriously undermine the political authority of the current leadership. In the
midst of the HD 981 crisis in 2014, for example, sixty-one retired senior Vietnamese
officials called on their leadership to take legal action against China, to exit China’s
orbit (thoat Trung) and to abandon the policy of three no’s (no foreign alliances, no
foreign bases, and no use of Vietnam to harm the interests of a third country).
If Chinese threats result in a stepping down by Vietnam, this would have grave
ramifications for all of Vietnam other oil exploration contracts with foreign oil
companies and, more significantly, Vietnam’s future energy security.
Suggested citation: Carlyle A. Thayer, “China Threatens Force to Stop Vietnam From
Oil Drilling,” Thayer Consultancy Background Brief, July 24, 2017. All background briefs
are posted on (search for Thayer). To remove yourself from the mailing list
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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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