China’s concept of setting side sovereignty dispute for joint exploration of Spratlys

Asked during his press conference last Wednesday when the talks about the joint exploration in Philippine territory that is also being claimed by China and other countries started, Foreign Secretary Alan Peter Cayetano recalled the meeting of the late Deng Xiaoping with then President Corazon Aquino.

In that meeting, Deng suggested to set aside the issue of sovereignty on the Spratlys because that won’t be resolved in their lifetime. He suggested joint development.

Cayetano assured the public that the joint exploration they would be entering with the Chinese will not violate the Constitution and cited the Malampaya oil project in Palawan which is being operated by Shell, a British–Dutch multinational oil and gas company.

Cayetano’s narration of the Deng Xiaoping talk with Cory Aquino on setting aside sovereignty and pursuing development sounds benign but China’s Foreign Ministry’s explanation should banish any delusion that the Chinese will allow any of their state oil company to be just a contractor to a Philippine government just like Shell in Malampaya.

China’s Foreign Ministry said: “The concept of ‘setting aside dispute and pursuing joint development’ advanced by Deng Xiaoping carries a distinct feature of the contemporary time and provides a new approach for peaceful settlement of territorial disputes.”

The article touched on two unsettled territorial issues: Diaoyu Island with Japan and the Nansha Islands (Spratlys) with Southeast Asian countries namely the Philippines, Vietnam, Malaysia, and Brunei. Taiwan, which China considers still part of their territory, has the same all-encompassing claim and occupies the largest feature in Spratlys – Itu Aba.

The article gave more details about the Deng’s meeting with Cory Aquino. It also mentioned a meeting with then Vice President Salvador Laurel:

“When China entered into diplomatic relations with the Southeast Asian countries in the 1970s and 1980s, during talks with the leaders of these countries, Deng Xiaoping made the following reasonable proposal for resolving disputes over the Nansha Islands: The Nansha Islands have been an integral part of China’s territory since the ancient times. But disputes have occurred over the islands since the 1970s.

“Considering the fact that China has good relations with the countries concerned, we would like to set aside this issue now and explore later a solution acceptable to both sides. We should avoid military conflict over this and should pursue an approach of joint development.

“In June, 1986, Deng said to visiting Filipino Vice President Laurel: “We should leave aside the issue of the Nansha Islands for a while. We should not let this issue stand in the way of China’s friendship with the Philippines and with other countries.” Deng Xiaoping once again brought up this idea when he met visiting Filipino President Aquino in April, 1988. Deng said: “In view of the friendly relations between our two countries, we can set aside this issue for the time being and take the approach of pursuing joint development.”

“Both President Aquino and Vice President Laurel responded positively to Deng Xiaoping’s initiative.

“In addition to proposing the approach of ‘setting aside difference and pursuing joint development’, Deng Xiaoping also explained China’s stand that it has sovereignty over the Nansha Islands. He explicitly pointed out that ‘the Nansha Islands have always been marked as part of China on the maps of the world. The Nansha Islands belong to China. We have many evidences. The maps of the world in many countries also prove this.” He also said to President Aquino that China is in a most authoritative position to address the issue of the Nansha Islands since they have always been a part of China’s territory.”

The article explained that the concept of “setting aside dispute and pursuing joint development” has the following four elements:

1. The sovereignty of the territories concerned belongs to China.

2. When conditions are not ripe to bring about a thorough solution to territorial dispute, discussion on the issue of sovereignty may be postponed so that the dispute is set aside. To set aside dispute does not mean giving up sovereignty. It is just to leave the dispute aside for the time being.

3. The territories under dispute may be developed in a joint way.

4. The purpose of joint development is to enhance mutual understanding through cooperation and create conditions for the eventual resolution of territorial ownership.

These principles adhered to by China got in the way of the proposal by businessman Manuel V,.Pangilinan, whose company Philex Petroleum Corp owns 64.45 percent of Forum Energy Plc, which was awarded Service Contract 72, the exploration rights within Reed Bank, to the State-owned China National Offshore Oil Corp. (CNOOC) in May 2012.

Pangilinan offered CNOOC a farm-in agreement into SC 72.

A farm-in agreement is a contract signed between the owner of the “farm” and its exploration partner. Accepting such an arrangement could be interpreted as CNOOC accepting the Philippines as “owner” of Reed Bank.

In a memorandum for President Benigno Aquino III, Pangilinan said CNOOC President Yang Hua told him that CNOOC has been awarded by the Chinese government exploration right over an area which includes SC72.

“A farm-in agreement into SC72 (which Philex previously suggested to them) is not acceptable given the sovereignty issue,” Pangilinan told Aquino.

Senior Associate Justice Antonio T. Carpio, who has done extensive research on the South China Sea and advised the Philippine team in the case against China at the Arbitral Court said, “What is allowed by the Constitution is, we can attract foreign companies like Shell to drill and we will pay them in kind. But it cannot be joint development of state to state because that is our sovereign territory.”

Philippine Constitution mandates the “State shall protect the nation’s marine wealth in its xxx exclusive economic zone, and reserve its use and enjoyment exclusively to Filipino citizens.”