The Sino-Indian-Vietnamese Triangle: Old Grudges, Hydrocarbons, And Geopolitical Gamesmanship Part 1

By Tim Daiss

Vietnam is a country that has seen its share of war, suffering and hardship. From its days of French colonial rule and the 1950s war to expel the French, to the destructive and costly war with the US in the 1960s, and 70s, that resulted in the defeat of the democratic US backed South unifying them with the communist North (forming modern day Vietnam), the country has bounced back and has become an Asian tiger with bragging rights, experiencing rapid economic growth for nearly two decades with a GDP of $123 billion in 2011. Its infrastructure is greatly improved and Foreign Direct Investment (FDI) has been expanding.

However the Southeast Asian country hasn’t just wrestled with and expelled Western powers. It has a much longer and checkered history with China. For a millennium China ruled Vietnam, often with an iron fist, finally being overthrown in the 10th Century AD. To this day there is still lingering resentment against China in Vietnam.

In Ho Chi Minh City (Saigon) a few months ago, I had a conversation with several university students at a coffee shop in the city’s upscale District One. Since it was my first trip to Vietnam I thought that talk would lead to the long-ago Vietnam War, which I dreaded getting into. But they would have none of that. The new generation of Vietnamese, with a median age of just 27, and with scant knowledge of that conflict except from history books, have other things on their minds: Fashion, Korean pop music, the best cappuccino to drink and China. One female student, age 19, said in surprisingly clear English: “Sir, I know nothing about war, what will I do if they draft me into the Army?” She was referring to her country’s recent tensions with China over the Paracel Islands, located approximately 200-nautical miles due east of Danang in the South China Sea. I assured her that the army would not draft women. But I had no idea if that was true or not, I just wanted help ease her stress.

Tensions over the Paracel Islands (Quan Dao Hoang Sa in Vietnamese – Xisha Qundao in pinyin Mandarin) do however have their roots in the Vietnam War. Toward the end of the war, after American troops departed, North Vietnam was gaining the upper hand over the South. Around the same time the South Vietnamese navy squared off with its Chinese counterpart over the Paracel Islands. Vietnam had claimed these uninhabited islands (approximately 130 small coral islands and reefs) for centuries and re-established that claim during French colonial rule, according to Naval Institute Press historian Thomas J. Cutler. But China disputed that claim based upon a proclamation made by them in September 1958, which ironically was acknowledged by then North Vietnamese Prime Minister Pham-Van-Dong. The South refuted this claim and maintained a small weather observation garrison on Pattle Island, the largest island in this group.

Fighting began on the morning of January 19, 1974 as South Vietnamese ships slugged it out with Chinese gunboats in a brief but intense gun battle. South Vietnam’s three frigates and a corvette [a small, maneuverable, lightly armed warship] engaged China’s four older and smaller corvettes, which were reinforced by two Chinese submarines toward the end of the battle. In the 35-minute battle ships from both sides took direct hits. However the smaller Chinese warships maneuvered into the blind spots of the main cannons on the larger Vietnamese warships and succeeded in damaging all four Vietnamese ships. One Vietnamese ship was disabled and her crew abandoned ship while her captain went down with his ship.

Vietnam’s other three ships were forced to retreat, eventually pulling back to their base at Danang. The next day, China sent an amphibious landing force, with support from Chinese jet fighters and attack aircraft, and captured Vietnamese Marines on three islands in the engagement area. Since that time China has held control over the Paracels but Vietnam still claims them as well.

Vietnam never lodged a formal protest over the incident since it was the South that suffered the loss. However, a unified Vietnam now vehemently lays claim to the Paracel Islands.

Yet, unlike the Philippine-Chinese dispute over the Spratly Islands which fall within the Philippines’ 200-nautical mile Exclusive Economic Zone (EEZ) and well outside China’s EEZ, the Paracel Islands are trickier. They fall on the disputed border between Vietnam and China’s EEZ, although China’s nine-doted line claim extends far beyond them and toward the Vietnamese coastline itself.

Current tensions between China and Vietnam are not merely over territory or historical claims this time. Like China’s dispute with other claimants in the South China Sea- it’s over hydrocarbons.

Vietnam becomes energy pro-active

According to the US Energy Information Agency (EIA), Vietnam now ranks third in terms of proven oil reserves for the Asia-Pacific region. Vietnam held 4.4 billion barrels (bbl) of proven oil reserves as of January 2012, a marked increase over its 0.6 bbl in 2011. The increase is in part a result of Vietnam’s exploration and development efforts of its offshore fields. Experts claim that as Vietnam intensifies its exploration activities the figure will increase since Vietnam’s waters remain largely under explored.

The country’s natural gas production has also risen rapidly since the late 1990s and is used entirely to support Vietnam’s expanding population and economy. According to the EIA, Vietnam held 24.7 trillion cubic feet (Tcf) of proven natural gas reserves as of January 2012. In 2010, Vietnam produced 290 billion cubic feet (Bcf) or 0.8 Bcf/d of natural gas, more than double 2005 production and it expects production will rise to 1.4 Bcf/d by 2015. Currently the country is self-sufficient in natural gas.

Nevertheless, all is not well for the country’s natural gas future. Vietnam’s Natural Gas Master Plan projects that gas consumption in the country will increase from 290 Bcf in 2010 to over 460 Bcf by 2015. Meanwhile, PetroVietnam forecasts that there will be a gas supply gap of 1.3 Bcf/d by 2025 as demand outstrips supply. Much of that increased gas demand comes from power generation. The country’s electricity demand has accelerated as its economy continues to grow. For the past 15 years, Vietnam’s GDP has increased by an average of 7% annually. In line with that economic growth, electricity demand has climbed by 15% per year since the mid-1990s, according to a 2010 World Bank report. As a result, Vietnam has been aggressive in efforts to attract investment and issue exploration contracts for its offshore acreage in the South China Sea.

South China Sea’s varying reserve figures

Oil reserve estimates for the South China Sea vary. One Chinese estimate places potential oil resources as high as 213 bbl. A 1993/1994 US Geological Survey (USGS) report estimated the sum total of discovered reserves and undiscovered resources in the offshore basins of the South China Sea at 28 bbl.

Natural gas, according to the USGS, is more abundant in the area than oil. The USGS estimates that about 60%-70% of the area’s hydrocarbon resources are natural gas and has placed the sum total of discovered reserves and undiscovered resources in the offshore basins of the South China Sea at 266 Tcf.

Part of Vietnam’s drive for oil and gas includes a wild card – India (which is actively exploring for oil and gas in waters off Vietnam’s coast, placing India squarely in the middle of the Vietnamese-Chinese standoff). Not as if Vietnamese-Chinese tensions weren’t strained already but Sino-Indian relations alone are complex enough to keep geopolitical pundits and college professors occupied for years. At stake is national pride, hydrocarbons and control of much of the South China Sea.

Next week part two will examine Sino-Indian relations and how they intersect with Vietnam’s and China’s hydrocarbon quest in the region.