Anyone who thinks gas doesn’t has a global future hasn’t been paying much attention to the gradually escalating geopolitical tensions arising in the South China Sea. Since 2014 China has been building seven artificial islands around reefs it claims as its own territory in the middle of the Sea.
The reason for this is simple: energy. The South China Sea holds an estimated 200,000 petajoules of natural gas and 11 billion barrels of oil. To give some sense of context, the east coast of Australia produces around 2000 PJ of gas each year, most of it for export.
Ownership of those reserves is nominally determined first by their proximity to the coastline of nearby countries, and also by the territorial rights of islands in the sea. Countries like China, the Phillipines, Vietnam, Indonesia and Taiwan have been laying claim to islands in the South China Sea since the 1970s when these energy riches were first identified.
since 2014 China has been busy expanding the physical size of islands in the Paracel and Spratly Islands in the middle of the sea, installing military facilities on these artificial islands and sending its expanding navy out to police the waters it claims belongs to it.
It’s created a multi-dimensional type of brinkmanship. The US has disagreed with China’s claims but has been only half-hearted in its diplomatic and military response as it does not stand to benefit from a more equitable outcome.
Australia has sent warships to the region to reinforce the independence of the region only to enrage China. Recent warnings that China may attack Australian warships in the region may help explain broadening hostilities towards Australian imports like wine and meat.
China is trying to using is economic and military might to encourage its much smaller Asian neighbours to cut deals which allow them much smaller shares of the energy reserves, without the harassment. Brunei and the Phillipines have signed memorandums of understanding with China signifying a willingness to accept a smaller share of the pie of they are left alone.
China has threatened use of force against Vietnam for attempting to explore parts of the sea it claims are its own. Its new islands are basically military installations reflecting the Chinese intent to pressure anyone who wants to challenge its claims.
the big question is how a Biden Administration will handle the situation. Biden may be less likely to seek confrontation with China like the Trump administration did, but it may also be more strategic in its approach.
Australia’s escalating trade war with China is almost certainly rooted in this increasingly heated contest. It appears to be being “warned off” by a Chinese Government which is under increasing pressure to sustain economic growth and decarbonisation at such a critical stage in its economic development.