Thayer Consultancy Background Briefing:

ABN # 65 648 097 123

South China Sea: New China-
Vietnam Standoff?
Carlyle A. Thayer
July 14, 2019

We are receiving reports of a standoff between the China and Vietnam Coast Guards
in the South China Sea. These reports are contradictory. Some reports say the
confrontation is in the vicinity of Vanguard Bank, while other reports say it is further
to the north and an area where China’s nine-dotted line overlaps with Vietnam’s
Exclusive Economic Zone and where the China National Offshore Oil Company has
declared oil exploration blocks. Irrespective, there is definitely something going on
between Vietnam and China in the area and Vietnam seems to have reacted strongly.
Our questions are:
Q1. Why now, how do you explain the timing? Are current developments consistent
with what China has been doing in the South China Sea? Or is something different
occurring at the present time? What does China seek to gain from this confrontation?
ANSWER: At present information is scarce. It appears that in early July China
dispatched two Coast Guard ships (the 12,000 tonne 3901 and the 2,200 tonne 37111)
to escort the Haiyang Dizhi 8 (Marine Geology 8) survey vessel to carry out seismic
tests in waters to the west of Spratly Islands (Trường Sa Lớn) and to the northeast of
Vanguard Bank (Bãi Tư Chính). Media reports indicate that four Vietnam Coast Guard
vessels are on the scene. As atthis writing, neither China nor Vietnam has commented
officially on these developments.
The area in question remains ambiguous but could be close to where a Japanese
offshore rig, Hakuryu 5, began drilling for Russia’s Rosneft Vietnam BV in May. The
area of China’s seismic survey also appears to overlap with the Wan’an Bei concession
area given by China to the Crestone Energy Corporation of Boulder, Colorado in May
1992. If so, this would mark an overlap with Vietnamese blocks 133-156 and blocks
RJ03 and RJ27 issued by the China National Offshore Oil Company.
Some media reports suggest the area in question is near Vanguard Bank where
PetroVietnam and Mubadala Development (United Arab Emirates) jointly held an
exploration lease for Block 136-03. Repsol of Spain was contracted as the lease
operator for the deep water drilling ship Deepsea Metro I. In mid-2017, Vietnam was
forced to stand down operations under Chinese pressure; and in March 2018 Vietnam
suspended oil exploration in Block 07/03 (Red Emperor or Cá Rồng Đỏ) also in
response to Chinese pressure.
 2

Q2. Why has Vietnam reacted so strongly at this time? What is the possibility that this
can spiral into something big like the Hai Yang Shi You 981 crisis in 2014, or even
worse? Why?
ANSWER: If the area where the Haiyang Dizhi 8 is conducting seismic surveys for
hydrocarbons lies to the west of Spratly Island, this would be a very sensitive area for
Vietnam. Spratly Island is Vietnam’s largest and most populous offshore island in the
Spratly archipelago. In 2017 and 2018, China charged that Vietnam had violated
understandings reached by high-level leaders; now in 2019 the “shoe” would be on
China’s foot.
If developments this month are confirmed, it would indicate that China is prepared to
push its maritime claims as a result of a Vietnamese backdown the previous year. As
noted above, Vietnam cancelled oil exploration activities at Vanguard Bank in July
2017 and suspended (if not cancelled) similar activities at the Red Emperor block in
March 2018.
If the reports of a standoff between Chinese and Vietnamese Coast Guard ships are
confirmed by the Vietnamese government and news media, they will likely provoke
widespread anti-China protests similar in scale to the anti-China protests that broke
out last year when the National Assembly considered the draft Law on Special
Administrative and Economic Zones. Vietnamese protested after social media
reported the rumour that Chinese commercial interests would be granted ninety-nine
year leases in sensitive areas.
Q3. The Chair of Vietnam’s National Assembly just visited China when these events
took place. Is this a coincidence? Why have both governments kept quiet about this?
ANSWER: Until more information becomes available, it would be unwise to jump to
conclusions. It seems unlikely that China would want to embarrass Nguyễn Thị Kim
Ngân, Chair of Vietnam’s National Assembly and one of Vietnam’s top party leaders,
by staging an incident in the Spratly archipelago during her visit. Nevertheless,
President Xi Jinping reiterated to her China’s long-standing policy that the two
countries should “safeguard maritime peace and stability with concrete actions.”
Q4. If we learn that the incident took place in the vicinity of Vanguard Bank, why this
particular location? How important is Vanguard Bank to Vietnam and China? Who
controls this bank presentlyt?
ANSWER: Vanguard Bank, a submerged reef, lies 200 nautical miles southeast off the
port of Vũng Tàu at the southern end of the South China Sea where large amounts of
gas are said to be located.
The waters around Vanguard Bank fall within Vietnam’s 200 nautical mile Exclusive
Economic Zone. They contain reserves estimated at 45 million barrels of oil and 172
billion cubic feet of gas. Oil and gas is expected to be commercially viable for ten years
after production starts.
Vietnam initially constructed two economic-science-technology service support
structures (dịch vụ kinh tế-khoa học-kỹ thuật or DV for short), DK1/1 and DK1/5,
mounted on steel trusses in 1989. They are no longer serviceable. Vietnam now
controls the area through three service support structures, DK1/11, DK1/12 and
 3

DK1/14, erected in 1994-95; each is equipped with a helipad mounted on a steel base.
These are isolated features and difficult to protect.

Suggested citation: Carlyle A. Thayer, “South China Sea: New China-Vietnam

Standoff?” Thayer Consultancy Background Brief, July 14, 2019. All background briefs
are posted on Scribd.com (search for Thayer). To remove yourself from the mailing list
type, UNSUBSCRIBE in the Subject heading and hit the Reply key.
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.
Survey Operations of Haiyang Dizhi 8 (July 3-11, 2019)*

*Courtesy Ryan Martinson.

 4

Vietnam’s and China National Offshore Oil Company’s

Overlapping Oil Exploration Blocks