Great Powers, Grand Strategies: The New Game in the South China Sea

Introduction

Anders Corr¹

The South China Sea is disputed through international law by seven claimant countries: the People’s Republic of China (China), the Republic of China (Taiwan), Vietnam, the Philippines, Malaysia, Brunei, and Indonesia. ² These countries watch each other’s tactical and strategic choices, especially in the military, economic, diplomatic, and legal realms. Alliance decisions with great powers that operate in Southeast Asia often have more effect on the political dynamics of the South China Sea conflict than a country’s own military and economic capacity. For this reason, major powers globally take on great significance for what appears at first glance to be a purely local conflict. The nexus of major power grand strategies in the South China Sea is of interest to readers globally, especially among claimant countries. All interested parties try to assess and predict major power strategies and choices so as to optimize their own strategic choices in turn.

The South China Sea is simultaneously symbolic to broad segments of each claimant country’s citizens; home to potentially vast supplies of critical energy, fishing, and other natural resources; strategically sensitive for military forces, intelligence gathering, and coastal defense; a major transit area for international trade and communications; and a source of developing international case law. However, facts on the ground in the South China Sea are a function not just or even primarily of law, but rather of power. This volume distinguishes itself from the many books that primarily examine regional country legal claims and actions in the South China Sea. We examine the impact and grand strategies of major global powers in the conflict. For the purposes of this study, we define grand strategy as a set of plans to achieve a set of important state goals through the utilization of all its resources, including economic, diplomatic, and military means and interactions.³

Major powers with influence on the South China Sea dispute, for the purposes of this volume, are the top five military spenders that operate significant military forces in the region. The European Union, which is one of the top two global economies and some of whose member states operate militarily in the South China Sea, and the Association of Southeast Asian Nations (ASEAN), which is diplomatically influential in Asia, are also included. The grand strategies of major powers and international organizations included in this volume have as much, or more, joint impact on the evolution of the South China Sea conflict than does any other factor. Yet no single volume to date has viewed the South China Sea conflict through this optic. In this volume, the authors demonstrate how major power struggle is the crux of the conflict and how claimant country interests are subordinated to the grand strategies of great powers, including China. We use the phrase South China Sea conflict rather than dispute because it is highly militarized and has already resulted in scores if not hundreds of deaths. A widening of the conflict, which all parties hope to avoid, could lead to war.

As much as we would like to see the Philippines’ United Nations Convention on the Law of the Sea (UNCLOS) arbitration award more thoroughly determine the outcome of the conflict, China simply ignored the 2016 decision and is relying instead on its own military maneuvers, economic influence, and threatening diplomacy. China’s grand strategy in the South China Sea is redolent of what former U.S. secretary of defense Ashton Carter called a return to great power . . . competition . . . in the Asia-Pacific.⁴ China’s coordinated, measured, and highly strategic belligerency at the expense of international law forces the Philippines—and the rest of the world—to look first to China and the United States, but also to other major powers and their strategies in the South China Sea, to navigate the likely evolution of the conflict. By ignoring international law, China has raised the stakes above what any single claimant country can afford and has thrown the dispute into the ring of major power diplomacy, economic statecraft, and military brinkmanship. While international law is critical to the outcome of the South China Sea conflict, other authors have written much on the subject. Beijing’s refusal to abide by the law requires a volume that focuses on China’s choice of strategic endeavors in the South China Sea conflict (its military, diplomatic, and economic actions and influence) and how those tools interact with like endeavors by other major powers.

That the volume focuses on major powers does not mean that claimant countries such as Vietnam and the Philippines are left out. The Philippines is central to the conflict but is woven into the chapters, rather than having a chapter of its own. The same goes for Vietnam, Taiwan, and other claimant states. Given that South China Sea claimant countries that are members of ASEAN make efforts to resolve the conflict through changing major power grand strategies, we expect readers from those countries to welcome the focus of this volume.

This book is the first to focus on major power grand strategies, including economic, diplomatic, and military strategies, and their international interrelationships. The purpose of this focus is to explore the global nature of the South China Sea conflict and how global actors are interacting, contributing to the solution, and generating conflict. It draws on experts with regional knowledge of the major powers, as well as substantive and international experts to explicate interactions. Not all authors agree on all points, but all are eminently qualified and afforded the space to make their case.

THE SOUTH CHINA SEA IN GLOBAL PERSPECTIVE

China’s dramatic economic growth over the last three decades was not followed by political liberalization, as some theories from the late 1950s had predicted.⁵ Rather, realist scholarship better explains Chinese leadership’s turn toward deepening control internally, expansion of the scope of that control externally, territorial expansion in Asia, overt criticism of democratic forms of government, use of its economic influence to deepen and widen its alliances, and attempts to revise institutions of global governance to reflect its growing power.

While China’s increased military spending is largely consistent with a rise in its gross domestic product (GDP), in the context of its diplomatic, economic, and military coordination against the United States and attempts to revise post–World War II international organizations, China’s aggression in the South China Sea is consistent with its global activity and that of its allies Russia, Iran, and North Korea. As a percentage of GDP, China’s military spending has hovered around 2 percent, a global norm and the minimum for North Atlantic Treaty Organization members. As a point of comparison, U.S. military spending, both as a percentage of GDP and in total, far outstrips that of China. But the United States spends much more on personnel and benefits, and it is expected by allies and its own electorate to simultaneously provide security from Russia in Europe, China in Asia, and terrorists worldwide. This stretches U.S. defense dollars globally such that those dollars devoted to Asia are outstripped by China, especially when considering differences in purchasing power.

Unlike China, the United States and allies seek to support democratization and human rights globally. Granted, the United States sometimes fails spectacularly in the attempt (for example, in Vietnam, Afghanistan, and Iraq). At other times, though, the United States succeeded in democratizing autocratic regimes, such as in post–World War II Germany and Japan.

U.S. defense spending is further stretched by Asian and European allies that only occasionally meet the 2 percent defense spending threshold. Through free-riding and by taking advantage of moral hazard, European and Asian allies can effectively shunt the majority of the necessary defense spending to the United States. Consider worst-case scenarios. Were Russia to capture Europe or China to capture Japan, for example, it would be a disaster for these regions. Their economies and intellectual capital could then be used against the United States, making China and Russia much stronger adversaries than they are today. China and Russia are essentially competing for the human, intellectual, and financial capital of more peaceful countries worldwide. I am not being polemical or nationalist when I say that while China and Russia seek to exploit these countries through neomercantilist trade and resource extraction with the aid of economic influence and corruption, the United States seeks to remake the world in its liberal democratic image and extend the influence of liberal international law. The facts bear me out.

U.S. defense dollars are also stretched by asymmetric threats that could some day be enabled by Russia, China, or other U.S. adversaries. Were just three major U.S. cities, and thereby the nation’s economy, to be decimated by multiple nuclear terror events, for example, the United States would have to pull back from its globally forward-deployed position. China and Russia would have much greater operational latitude in Asia and Europe respectively, which they could ultimately use against the U.S. homeland. Thus, an effective U.S. defense of its own territory requires deterrence on three fronts: Asia, Europe, and globally against terrorism. Meanwhile, China, Russia, Iran, and North Korea have reason to support each other’s military development, territorial expansion, and endeavors in Asia and Europe. Their territorial goals are largely mutually exclusive and symbiotic. Indeed, there is extensive evidence of economic, diplomatic, and military cooperation between these autocratic regimes.

The United States is disadvantaged on multiple fronts when facing China and Russia. It must divide its forces for effective defense, contend with a public that is war weary after more than a quarter-century of conflict in Iraq and Afghanistan, and spend on costly asymmetric defense of the homeland against terrorists.

Thus, the forward-deployment advantage and the U.S. spending premia against China, Russia, and terrorists severally, and thought of in isolation as offensive, are illusory given the global and interlinked nature of U.S. security provision, alliance commitments, and territorial defense. What appears to some analysts as an offensive and large U.S. military force forward deployed to the South and East China Seas against China is in fact part of a global system of defense of not only the United States but also its allies and values, including international law, democracy, and human rights. To criticize the United States as offensive without this geographic and normative context is to ignore the global picture of which principles the United States is defending and where it is doing so.

Likewise, to view China’s actions in the South China Sea as defensive against U.S. forward deployment is to ignore China’s similar offensive territorial actions in the East China Sea and Himalayan region of India, its suppression of democracy, human rights, and international law in Asia and abroad (including within China, Hong Kong, and Taiwan), and its campaign to remake global governance to its own advantage rather than on principles of democracy. China’s South China Sea acts are most recognizable as offensive when viewed in this global context.

While China has offensive push factors that lead it to grow its military, it also has defensive and opportunistic pull factors. Three historic events preceded China’s increases in military expenditure starting in the 1990s and likely contributed to the decision to do so. First, the 1989 Tiananmen Square massacre led to a U.S. arms embargo that convinced many in China of the need for improved indigenous design, development, and production capabilities for military equipment.

Second, the Philippine senate voted to evict the United States from military bases adjacent to the South China Sea in 1991. Military, oil, fishing, and other interest groups in China likely saw this as an opportunity to extend their own roles in promoting Chinese influence and control over South China Sea resources. This strategy has largely failed to extract resources from Vietnamese claims in the South China Sea. However, it may have intimidated the Philippines, Malaysia, and Brunei into offering below-market rates on oil and gas to China in exchange for China allowing oil and gas development within those countries’ respective parts of the U-shaped line.

China reportedly has demanded joint development and sovereignty agreements, or what Xi Jinping calls a win-win solution, from claimant countries in the South China Sea region prior to allowing oil and gas development. For example, if development by Vietnam is being interfered with but development by Malaysia and Brunei is not, it stands to reason that the latter countries may have agreed to such deals, as was implied by two well-placed sources. Malaysia and Brunei may have done this privately to maintain the outward unity of ASEAN on the South China Sea issue. China’s demand in such joint development could be as much as 50 percent or more of resource royalties from petroleum output.⁶

Third, the ease with which the U.S. military deposed the Saddam Hussein regime in Iraq in 1991 alarmed the Chinese military. China needed a bigger and more modern military force, some military interests argued, to defend against a potential invasion by the United States and its allies in Asia.

It is clear that China started to substantially expand its previously flat defense budget in the early 1990s. As the United States mired itself in wars in the Middle East and Central Asia in the mid-1990s and after the September 11, 2001, attacks, China doubled down. Since the late 1990s, China has increased its real military expenditure by more than 10 percent every year except one.⁷ Overall since 1997, China’s defense budget has grown by more than 600 percent, positioning the country as the world’s second-largest defense spender in 2016, trailing only the United States.⁸ China vastly exceeds the military spending of its neighbors, as table 1 shows. The Chinese military budget has steadily outstripped those of other countries in the region over the last two decades and is likely to continue increasing until China’s leadership takes a less expansionist view of international relations. Between 2007 and 2016, China’s inflation-adjusted military budget increased by an annual average of 8.5 percent.⁹

Chinese military spending and activity are driving the region’s arms race. Together with spending and actions by Russia, the two countries are sustaining if not escalating military spending globally, to the detriment of development funding and innovation in peaceful technologies and with great potential risk of widening and deepening military conflict.

Note that accurate statistics on Chinese defense spending are difficult to find and vary greatly. China’s self-reported military budget for 2015 was $144 billion, the U.S. Department of Defense estimated it to exceed $180 billion, and the Stockholm International Peace Research Institute (SIPRI) estimated it at $215 billion.¹⁰ The Department of Defense report notes that lack of transparency makes judging the actual military expenditure difficult, and the official numbers do not include important categories such as purchases of foreign weapons¹¹ and equipment.¹² Given differences in relative purchasing power, even the SIPRI figure could understate Chinese defense spending, which, when adjusted for purchasing power, could be as high as $374 billion. One billion dollars goes about 1.74 times further in China than in the United States. China’s lack of transparency also applies to the technological quality of China’s weaponry, which experts expect is less than what China projects in the media.¹³

TABLE I-1. MILITARY EXPENDITURES AND GROSS DOMESTIC PRODUCT

Notes: Spending is a Stockholm International Peace Research Institute (SIPRI) estimate in 2016 U.S. dollars. Gross domestic product (GDP) is sourced from the World Bank. Chinese and Russian relative defense spending is significantly higher than these figures imply, given differences in purchasing power.

Source: Data for total military spending and military spending as a percent of GDP is from the SIPRI Military Expenditure Database, http://www.sipri.org/research/armaments/milex/milex_database/milex_database. Data for each country’s GDP came from the World Bank, GDP (current US$), http://data.worldbank.org/indicator/NY.GDP.MKTP.CD, with the exception of Taiwan, which came from the Central Intelligence Agency, The World Factbook: East & Southeast Asia: Taiwan, https://www.cia.gov/library/publications/the-world-factbook/geos/tw.html.

Increased defense spending and military modernization fuel a number of Chinese goals, including to 1) increase China’s hard power to complement its growing economic and diplomatic influence and thereby solidify its standing as a global power and its ability to reform institutions of global governance; 2) maintain pressure on Taiwan to not declare independence and eventually rejoin the mainland; 3) develop expeditionary military capabilities (for example, anti-piracy operations in Africa) to support China’s growing global trade, investment, and security interests; 4) expand control of sea lines of communication (SLOCs), hydrocarbon resources, and fishing in the South and East China Seas; 5) increase naval power projection, littoral security, and territorial claims; and 6) pressure U.S. military forces in the region to withdraw.¹⁴

By 2025, China’s rapidly developing military will make a preemptive but limited war by the United States against China prohibitively costly. This will decrease U.S. capacity to protect friends and allies in Asia and wherever else China might decide to intervene abroad.¹⁵ China will at that point be on a military par with the United States and could use its forces with impunity against relatively weak militaries or those with weak alliances, such as the Philippines and Vietnam.

CONFLICTED ALLIANCES: THE UNITED STATES IN ASIA, 1954 TO PRESENT

In 1954, the United States and allied nations in Asia formed the multilateral Southeast Asia Treaty Organization. However, it failed, in part due to lack of regional support for the United States and France in the Vietnam War. The lack of such an organization is one reason why China is as successful as it is in influencing and threatening its neighbors. Asian countries are insufficiently assured of U.S. defense and thereby are incentivized to pursue hedging strategies with China.

As an alternative, the United States formed a network of bilateral alliances in East Asia. One purpose of this hub-and-spoke approach was to restrain the more belligerent anticommunist allies and prevent them from dragging the United States into another war.¹⁶ The United States directed this policy toward Japan, South Korea, and Taiwan, where bilateral alliances allowed the United States to more directly discourage partners from using military action to domestically justify their regimes.¹⁷

Japan is one of the United States’ closest allies in the region. The two countries have regularly cooperated in a number of economic and security areas, which has important ramifications for the South China Sea conflict. The United States maintains a forward-deployed force of nearly 50,000 troops in Japan.¹⁸ Although Japan shelters under the U.S. nuclear umbrella that contributes to Japan’s security through extended deterrence, the alliance has transformed as Japan takes more military initiative abroad.¹⁹

The Japan Self-Defense Forces carried out their first mission abroad by providing noncombat support to U.S.-led efforts in Iraq and Afghanistan.²⁰ In July 2014, the Japanese government announced a new interpretation of its constitution to allow active contribution of forces to collective self-defense under certain conditions, which the parliament’s vote in September 2015 legalized.²¹ The two countries announced the revision of the Mutual Defense Guidelines in April 2015, which seek to provide a framework for continued cooperation in new areas of cybersecurity, ballistic missile defense, and the protection of Japan’s outlying islands and sea lanes.²²

The U.S.-Japan alliance has found a new importance in countering China’s actions in the South China Sea. Although U.S. policy historically had been not to take positions on territorial disputes, the 1960 U.S.-Japan Security Treaty states in Article 5 that the United States must protect the territories controlled by Japan. China, which also claims the Senkaku Islands, has attempted to test this alliance by increasing naval patrols nearby to discredit Japan’s administrative control over them. In response, the U.S. Congress added a resolution to the Fiscal Year 2013 National Defense Authorization Act that clarified that a third party’s unilateral action would not change the U.S. recognition of Japan’s control over the Senkakus.²³

South Korea is a major regional power that could have been included in this volume had there been space. Although it does not have any territorial claims in the South China Sea, its close security partnership with the United States, significant military, and oscillating security competition with China could lead it to have some influence on the outcome of the South China Sea dispute. Because China is its largest trade partner and leverages that trade for diplomatic purposes, South Korea will try to avoid tensions over the South China Sea, which concerns it less than the outcome of the North Korea dispute.²⁴ China also seeks to emphasize tensions between South Korea and Japan over historical grievances and competing claims to the Liancourt rocks (Dokdo or Takeshima Islands).²⁵ This complicates the U.S. position as an ally to both countries. The more South Korea integrates into the global security provided by the United States, the more it will weigh on the South China Sea issue, even indirectly in favor of claimants. At the very least, increased South Korean integration and defense spending could free U.S. troops for deployment to the South China Sea and environs.

Taiwan’s claim in the South China Sea is identical to that of China and is based on the same U-shaped line published in 1936 by the nationalist cartographer Bai Meichu.²⁶ Yet Taiwan’s relatively small military, hedging between China and the United States, and prioritization of at least de facto independence from China have led it to take a relatively quiescent approach to its claim. Arguably more important to Taiwan is freedom of navigation (FoN) in the South China Sea. FoN is critical to Taiwan’s navy, merchant marine, and allied navies, all of which need SLOCs to access the island.

Since the Mutual Defense Treaty between the United States and Taiwan ended in 1979, the United States has maintained what it calls an unofficial relationship with Taiwan, as enshrined in the Taiwan Relations Act of 1979. This act calls for the peaceful settlement of the Taiwan issue and explains that nonpeaceful means are considered of grave concern and a threat to peace and security.²⁷ The Taiwan Relations Act also allows the United States to sell arms to Taiwan to ensure a sufficient self-defense capability.²⁸ Since signing the act, the United States has continued to take a special interest in Taiwan’s security vis-à-vis Beijing, such as deploying two aircraft carrier battle groups from 1995 to 1996 during the Taiwan Strait crisis.²⁹ Access to the Taiwan Strait depends upon FoN in the South China Sea—one key reason the United States refuses to recognize the sovereignty claims of China’s U-shaped line.³⁰

Taiwan’s territorial claims have put the United States in an awkward position in relation to its other allies in the region. Taiwan has competing claims with Japan over the Senkaku Islands, which the U.S. Congress has stated are under the administration of Japan.³¹ Provocations by Taiwan concerning these islands, including a 2013 incident where Taiwan sent four coast guard ships to escort a ship in the area, have not helped. This dispute is particularly troubling to the United States, since the Treaty of Mutual Cooperation with Japan obligates the United States to protect land under Japanese administration.³² Taiwan has also had diplomatic issues and heightened military tensions with another U.S. regional ally, the Philippines, over an incident related to the death of two Taiwanese fishermen in the Luzon Strait.³³ In 2015, Taiwan’s president began using language redolent of China’s Xi Jinping—demanding joint development, win-win solutions, and an end to sovereignty disputes. Xi Jinping rejected the proposal, likely because it was not his own lead. Tension remains between China and Taiwan over their identical claim and verbiage, but Taiwan’s legal and public relations efforts do sometimes tangentially support the identical claims of China.³⁴

The United States also has a long-standing alliance with the Philippines.³⁵ Lawyers can argue over whether the 1951 Mutual Defense Treaty technically requires the United States to defend features such as Mischief Reef or Scarborough Shoal, occupied by China in 1995 and 2012 respectively, and within the Philippines’ exclusive economic zone (EEZ) but outside the territorial sea. What is certain is that if any of the Philippines’ main islands or its forces at sea are attacked, the treaty requires the United States to come to the defense of its ally. Regardless of the technicalities, though, it is in U.S. interests to take an expansive view of the treaty language in order to strengthen its reputation as a strong and resolute ally.³⁶

The Philippines, perhaps due to Chinese economic influence, has wavered over welcoming U.S. troops on its territory.³⁷ In 1991, the Philippines initiated the closure of U.S. military bases in its territories, including the Subic Naval Base and Clark Air Force Base. After China’s Mischief Reef occupation in 1995, however, the United States and the Philippines signed a number of agreements that reintroduced and increased the U.S. military presence there, including using Philippine ports and airports as a supply base for other military operations and hosting U.S. Marines to provide support to counterterrorism activities.³⁸ The Philippines again sought an increased U.S. military presence starting around 2005. In 2014, the two countries signed the Enhanced Defense Cooperation Agreement. Although not a formal treaty, this framework allows U.S. forces to utilize five bases in the Philippines on a more permanent but rotating basis.³⁹

The Philippines sought to increase the U.S. military presence due to China’s increasingly hostile activities in the South China Sea. This includes the Chinese-Philippines disagreement over control of the Spratly Islands and Scarborough Shoal.⁴⁰ Although relations between China and the Philippines started to improve under President Gloria Macapagal-Arroyo due to new economic agreements and China’s alleged corruption of the president’s family, disputes in the South China Sea, such as the Scarborough Shoal standoff and then occupation by China in 2012, significantly increased the importance of the U.S.-Philippine alliance.⁴¹ Although the formal U.S. policy is to remain neutral in this territorial dispute, the Barack Obama administration did highlight its commitment to its resolution through international law, the importance of land features to claims of maritime sovereignty, and its ironclad commitment to the Mutual Defense Treaty to assist the Philippines in case its armed forces are attacked.⁴² As a result, the United States and Japan are providing military assistance and training to help the Philippines create a stronger external military capacity. The Philippines has also purchased decommissioned U.S. ships, many of them Coast Guard vessels, to strengthen its navy.⁴³

Rodrigo Duterte was elected president of the Philippines in 2016. He has implied, in words and actions, that he is considering the option of not challenging Chinese military control of Scarborough Shoal and features in the Spratly Islands, at least for a time, in exchange for joint development of maritime oil fields such as Reed Bank, Philippine fishing access to Scarborough Shoal, and infrastructure development assistance, including light rail. If China continues to partially block Philippine fishermen’s access to the shoal and does not provide infrastructure assistance, it is unclear what the Philippines could do about China’s occupation, especially since Duterte does not trust the United States to go to war against China to defend the Philippines, and Duterte has made public statements that at least charred, if not burned, Obama-era diplomatic bridges to the United States.⁴⁴

President Donald Trump has tried to improve his personal relationship with Duterte, but the Philippine president will pay close attention to U.S. actions as well. In 2015, the United States provided $225 million in development and military aid to the Philippines. In 2016, China roundly beat that figure by pledging $24 billion in development aid, though much if not most of that would likely be in loans at undetermined interest rates and for work done by Chinese companies. Japan pledged almost $9 billion in early 2017.⁴⁵

China’s development funding is not free and often comes with political conditionality. China provided $600 million to Cambodia in 2016 in exchange for diplomatic support in international fora, including on ASEAN decisions regarding the South China Sea.⁴⁶ Such competing China-Japan-U.S. development funding for political influence would not necessarily be in the interest of the United States. While the United States engaged in foreign aid competitions with the Soviet Union in the 1950s and 1960s, this frequently resulted in nonaligned countries playing the superpowers against each other for extended periods. Both China and the United States have been accused of direct payments to heads of state, their offices, or their families to influence policy.⁴⁷

The bilateral relationship between the United States and China—the two largest powers in the Asia-Pacific region—has the strongest effect on international crises in the area, including the South China Sea. Since the normalization of relations and the formal U.S. recognition of China in 1979, the two countries have had a complicated relationship, oscillating between periods of tension, including the Tiananmen Square massacre in 1989 and the accidental bombing of China’s Belgrade embassy in 1999, and increasingly strong economic relations. In 2016, U.S.-China trade amounted to $578 billion, and China held more than $1 trillion in U.S. debt.⁴⁸

Such economic links make the United States wary of deteriorating relations with China because of potentially deleterious effects on U.S. business interests exporting to China and on the U.S. interest rate in case China were to unload debt. But the opposite is even more true. China exports about four times more to the United States than the United States exports to China, and in the event of heightened hostilities, the United States could selectively default on Chinese debt for national security reasons. China’s exports to the United States are far greater as a percentage of its economy than vice versa.

In 2011, the United States announced its Pivot to Asia aimed at curtailing the growing political and military influence of China within the region.⁴⁹ This policy, which included promotion of the Trans-Pacific Partnership trade alliance in Asia that excludes China, bolster of U.S. alliances, and unilateral military patrols of the South China Sea, led to increasing tensions between the two major players in recent years. The United States has been very clear that it desires the best for China’s economy. It simply wants China to stop breaking international law, especially against U.S. allies. That message grew louder with the advent of the Trump administration. But the scuttling of the Trans-Pacific Partnership and the administration’s attempt to enlist Chinese assistance on North Korean denuclearization took priority and thus weakened the U.S. bargaining position on the South China Sea.⁵⁰

CHINA’S INTERESTS IN THE SOUTH CHINA SEA: NATIONALISM, OIL, GAS, SHIPPING, AND FISHING

China’s interests in the South China Sea stem from a set of interacting factors. First, a sense of nationalism among its population is produced, mirrored, and remanufactured by the leadership. This is done through historical arguments, maintenance of local and regional animosities against major democratic powers, and hyper-nationalism that promotes the Communist Party and its increasingly authoritarian leader, Xi Jinping. Once nationalist momentum starts, party leadership can keep the ball rolling relatively easily through occasional conflicts with military forces operational in the region, especially the United States and Japan.

National pride, fully stoked by the government, drives the South China Sea dispute. In China, government leaders and the media purposely exploit the country’s Century of Humiliation as a rallying cry to support the ends of particular interest groups such as the military, oil industry, and large fishing operations.⁵¹ Creating this nationalistic sentiment by playing the victim emboldens and enables bureaucratic and industrial elites to use government resources to make aggressive gains in the South China Sea. Nationalism leads regular Chinese citizens to demand the territory claimed by the U-shaped line and teach the Vietnamese, the Filipinos and the Malaysians a good lesson.⁵² It increases support for centralization of power under Xi and the government’s expanding budget, since Chinese citizens perceive such centralization and power to be necessary to achieve something as significant as overcoming U.S. efforts in Asia.⁵³

Based on an imagined history of sovereignty over the South China Sea, China argues that a Western reading of modern international law, in particular compulsory arbitration under UNCLOS, should not determine China’s ostensibly ancient historical claims in the region.⁵⁴ The counterargument is ably made by a contributor to this book, Bill Hayton. In The South China Sea: The Struggle for Power in Asia, Hayton notes that the Chinese name for the Paracel Island group in the South China Sea, the Xisha Islands, is derivative of the English given name of one of the islands, West Sand. In Chinese, West Sand translates as or in the pinyin, Xīshā-zhōu. These translations resulted from Chinese duplication of earlier British maps of the region.⁵⁵

In more recent times, China has laid claim to the vast majority of the South China Sea through its U-shaped line. In 2009, it circulated a map in the United Nations that used nine dashes to outline the part of the South China Sea that it claimed as sovereign territory.⁵⁶ This map is based on one that China’s Nationalist government created in 1947, which used eleven dashes to outline the claimed territory.⁵⁷ On these maps, China claims the Paracel Islands in the west, Scarborough Shoal in the east, and the Spratlys in the south—along with part of the exclusive economic zone drawn from Indonesia’s Natuna Islands in the southwest. The claimed area within China’s U-shaped line is larger in square hectares than the entirety of India and has created an immense territorial dispute truly unequaled in the modern era.⁵⁸

China has a number of economic interests in the South China Sea, the most important being access to potentially vast supplies of oil and natural gas. A May 2015 article by the China Institute of International Studies cited remarkably high hydrocarbon reserves in the South China Sea, including 70.78 billion tons of reserves, of which 29.19 billion tons are petroleum deposits and 58 trillion cubic meters are natural gas deposits.⁵⁹ The quantity of 29.19 billion tons of oil, multiplied by 7.32 barrels per ton, is equal to 213.67 billion barrels of oil.⁶⁰ This would make the South China Sea the third largest reserve in the world after Venezuela and Saudi Arabia. This quantity of oil and gas could supply China for sixty years.

Separately, the Chinese Ministry of Land and Resources estimates that the area China claims in the South China Sea has 23 to 30 billion tons (89 to 115 trillion cubic feet) of natural gas. The study claims that the South China Sea has about one-third of China’s total petroleum and natural gas resources and 12 percent of the world’s total.⁶¹

The United States Energy Information Administration (EIA) also estimates large quantities of oil and gas in the South China Sea, including approximately 28 to 213 billion barrels of oil (the larger figure is from the Chinese estimate), plus 190 trillion cubic feet of proved and probable natural gas (which is greater than the Chinese estimate). The EIA estimate of natural gas in the South China Sea is approximately 3 percent of proved global natural gas reserves.⁶²

South China Sea hydrocarbon resource valuation varies over two main metrics: the estimated number of barrels of oil, which ranges from 28 to 213 billion barrels, and the price of oil, which since 2005 has mostly ranged between $50 and $100 per barrel. Thus, the lower-bound value of oil is 28 billion barrels at $50 per barrel, or $1.4 trillion. The upper bound is 213 billion barrels at $100 per barrel, or $21.3 trillion.

The range of the gas estimates is between 58 and 190 trillion cubic feet, or about $580 billion to $2 trillion more at $10 per thousand cubic feet of natural gas. The total value of oil and gas in the South China Sea, therefore, could be anywhere between $2 trillion and $23 trillion, depending on the price and quantity of hydrocarbons ultimately extracted.

The perceived tangible value of the oil and gas to China, however, probably tended toward the upper range of these dollar figures, in addition to its unquantifiable strategic value. First, China likely more heavily weights its own higher estimate of oil reserves, rather than the lower estimate from the United States, in its calculations.

Second, China made key decisions about occupying and defending remote points of the South China Sea between 2009 and 2014 when oil was trending toward $100 per barrel, meaning that at the time the dollar value of its own estimate was closer to $23 trillion, or more than double China’s GDP in 2015. Once China’s leadership made the decision to very publicly assert sovereignty, including with its population—by printing the claim on all Chinese passports, for example—it was harder for them to back away from the claim without loss of reputation. Xi Jinping does not seem to have taken the face-saving opportunity to relinquish claims to the U-shaped line provided by the 2016 Permanent Court of Arbitration award; rather, he doubled down through various People’s Liberation Army (PLA) naval and air force actions in the South China Sea that militarily underlined China’s refusal to recognize the court’s jurisdiction. Perhaps China’s strong diplomatic voice on the South China Sea is meant more for domestic audiences than for the concerned global public.

Third, China seeks to defend the South China Sea, within the First Island Chain formed by the Philippines, to ensure ingress and egress of naval ships and the Chinese merchant marine and to forestall naval blockade during wartime. In the event of such a blockade, China could require a strategic reserve of oil and gas to maintain its economy and war production. Just as the United States has a strategic petroleum reserve of up to 727 million barrels of oil in case of extreme circumstances, China seeks to claim what could be a strategic reserve of hydrocarbons in the South China Sea.

This gives a hint as to why China’s regional claims are so persistent. The loss in reputation and soft power from threatening naval and air activity in the South China Sea may be worth the economic gain from oil alone, especially since it is a relative gain at the loss of strategic competitors. Yielding control of this strategic resource to the Philippines or Vietnam, for example, could strengthen them militarily and economically, to the point where dominating Asia would simply be too costly for China to consider. China would thereby be relegated to a medium-power status in perpetuity,