Energy Concerns and China’s Unresolved Territorial Disputes

Publication: China Brief Volume: 4 Issue: 24

While much of the world is fixated on China’s booming economic growth and its ravenous appetite for energy, untidy diplomatic loose ends in the form of territorial disputes with neighbors have many of the countries bordering the Asian giant nervous. Though Beijing’s claims over Taiwan remain the focus of world attention, China is embroiled in unresolved territorial maritime and land issues with no less than thirteen of its neighbors. Given that China’s military capability is growing apace with its economy, the potential for military conflict over the disputed regions is similarly on the rise. While China up to now has attempted to address these issues diplomatically, the fact that many of the unresolved border disputes involve potential energy reserves might prompt China to use military force to resolve issues of strategic economic interest.

In the South China Sea, China is involved in a dispute with Malaysia, the Philippines, Taiwan, Vietnam, and Brunei over the Spratly (Nansha) and Paracel Islands. Chinese forces seized the Paracels in 1974, but Vietnam still disputes their ownership. While the signing of the 2002 “Declaration on the Conduct of Parties in the South China Sea” reduced tensions, it failed to provide the legally binding “code of conduct” that several of the signatories wanted. In 1988 and 1992, the Chinese and Vietnamese navies clashed briefly over the reefs; and on October 21 of this year, Chinese Foreign Ministry spokesman Zhang Qiyue asserted that China has “indisputable sovereignty” over the islands, claiming that the South China Sea has been a “Chinese lake” for “centuries.” [1] China currently has about 450 soldiers on the Spratleys, Vietnam about 1,500, the Philippines about 100 and Malaysia 70-90 troops. Moreover, in the Paracels, China has established port facilities on Woody and Duncan islands and established a small airport.

Despite Chinese assertions of control, tensions over the South China Sea’s waters have continued to rise. On October 26, a partnership of Malaysia’s Petronas Carigali Overseas, American Technology Inc. Petroleum, Singapore Petroleum Co. and Petrovietnam’s Petroleum Investment and Development Co. announced it had discovered oil at its offshore Yen Tu oilfield, 43 miles off Haiphong, with a preliminary estimate of reserves at 181 million barrels. [2] The same day, Chinese Foreign Ministry spokesman Zhang Qiyue immediately noted, “China is seriously concerned and strongly dissatisfied.” [3]

China is also embroiled in a territorial dispute with Indonesia over the 272-island Natuna archipelago in the South China Sea, 150 miles northwest of Borneo. The islands have been in dispute for over a decade; in 1993, China presented a map of its “historic claims” on the Spratleys during a workshop in Surabaya, Indonesia, which included not only nearly the entire South China Sea but a portion of Indonesia’s Exclusive Economic Zone (EEZ) off the Natuna islands. [4] The Natuna’s natural gas reserves are among the largest in the world, estimated at 210 trillion cubic feet. [5]

China’s third maritime dispute is with Japan over the Senkaku (Diaoyu Tai) islands, which Japan currently administers. In a significant partnering with its “renegade province,” China, together with Taiwan, have asserted their claims to the Senkakus, stating that they have been under Chinese sovereignty for the last 500 years. The five small volcanic islands and three rocky outcroppings total only 2.7 square miles, but once again, the dispute is about the surrounding EEZ. None of the islands, which lie 105 miles northeast of Taiwan and 254 miles west of Okinawa, are inhabited. While Japan claims that it discovered the islands and incorporated them in 1895, China and Taiwan maintain that Chinese discovered the islets in 1372.

The Director General of Japan’s Foreign Ministry Asian and Oceanian Affairs Bureau, Mitoji Yabunaka, and the head of the Agency for Natural Resources and Energy, Nobuyori Kodaira, met on October 26 with China’s Foreign Ministry Asian Affairs Department Director General Cui Tiankai to discuss the disputed boundaries and natural gas reserves in the East China Sea. [6] At issue is each country’s claim to its EEZ under the Third United Nations Convention on the Law of the Sea (UNCLOS), which came into force in November 1994. Under UNCLOS III, a country can claim an EEZ of 200 nautical miles from its coast, but the East China Sea is too narrow for such an arrangement to be feasible. China wants a demarcation line drawn from the end of the continental shelf, while Japan supports a median line. The talks yielded so little that Nakagawa later said, “I don’t know why these talks were even held.”

China also has unresolved territorial issues with its neighbor India. While most of the boundary with India is in dispute, the two sides are committed to begin resolution with discussions on the Middle Sector, comprising China’s approximately 20 percent portion of Kashmir, including Aksai Chin. India retains possession of Jammu and Kashmir while Pakistan controls Azad Kashmir. India does not recognize Pakistan’s ceding a portion of Kashmir and the Aksai Chin Ladakh region to China in a 1964 boundary agreement. [7] China also claims large parts of the northeastern Indian states of Sikkim and Arunachal Pradesh.

China has been more successful in its territorial disputes with the former nations of the USSR, making significant concessions to its Central Asian neighbors after the collapse of Communism in December 1991. China has kept 20 percent of the land disputed with Kazakhstan, and the two countries are working to demarcate their large open borders to control population migration, illegal activities, and trade. In its unresolved territorial claims with Kyrgyzstan, China has retained about 30 percent of the contested area, while it has dropped most of its claims to Tajikistan’s Pamir Mountains. In 2002, China signed boundary delimitation agreements whereby Tajikistan ceded 386 square miles of the Pamir mountain range to China in return for China’s relinquishing claims to 10,810 square miles, but the demarcation has yet to begin. In the case of Kazakhstan, China’s interest in the country’s vast energy reserves produced a strong inclination towards conciliation.

Oil is also a major consideration in the growing Chinese-Russian rapprochement. China continues to press for an agreement on disputed islands in the Amur and Ussuri rivers and a small island in the Argun River, and progress has been made. In 2001, the two countries signed a Treaty of Good Neighborliness, Friendship, and Cooperation in an attempt to ease tensions; and on October 14 they signed a Supplementary Agreement on the Eastern Section of the China-Russia Boundary Line, effectively resolving issues regarding the 2,670-mile land frontier. [8] The main result of Russian President Vladimir Putin’s visit to China in October was the signing of a number of important documents. Besides oil, the most important agreement delineated a section of the Russian-Chinese border along the Amur River, while China gave up its claims to exclusive ownership of the islands outside Khabarovsk, leaving the details to be hammered out in the future. [9] Putin’s concessions angered many in Russia’s Far Eastern provinces, however. A senior official in the Khabarovsk Territory speaking on condition of anonymity said, “Over the years, we spent huge sums on reinforcing the border, deepening the river and populating the islands. It now transpires that Russia is sacrificing part of its indigenous territory for the sake of transitory economic interest.” [10]

Finally, though oil does not influence China’s dispute over islands claimed by North Korea in the Yalu and Tumen, along with territory around Mount Paektu, the issue of stemming mass illegal migration of North Koreans escaping famine and oppression into northern China is likely to impel Beijing to modify its claims.

For the moment, China has attempted diplomatic solutions to its territorial claims with its Southeast Asian neighbors: on November 2, 2002, it signed a Code of Conduct in the South China Sea with the Association of South East Asian Nations (ASEAN), committing all signatories to peaceful resolutions of outstanding issues. While predicting future Chinese actions is difficult, it would seem that China is willing to modify its historic claims in return for increased access to indigenous energy reserves. Energy security now seems to be the driving force behind much of Beijing’s foreign policy, much to the consternation of its energy-poor neighbors. In addition to the cases enumerated above, groups in Burma and Thailand have expressed concerns over China’s construction of 13 hydroelectric dams on the Salween River in Yunnan province. The only certainty for China’s East Asian neighbors is that as its economy continues to grow, so will Beijing’s need for energy. In the final analysis, the best bargaining position for countries affected by the growing Chinese appetite for energy would be to develop an “energy for land” policy, the sooner the better.


1. China Daily, Oct. 22, 2004.

2. Collective Bellacio, Oct. 27 2004.

3. Inter Press Service News Agency, Oct. 26, 2004.

4. Asian Affairs, Sept. 22, 1997

5. News and View Indonesia [official publication] Sept. 1994

6. Kyodo News, 26 October 2004.

7. ANI news agency, Oct. 20, 2004.

8. Asia Times, 2 Nov. 2004.

9. Komsomolskaia Pravda, Oct. 21, 2004

10. Novye Izvestia, Oct. 22, 2004