Government News Analysis

Scarborough Shoal – now for the real business

As expected, the UN’s Permanent Court of Arbitration has ruled that the Philippines has sovereignty over Scarborough Shoal, the long-disputed, mostly submerged South China Sea rock outcrops. In condensed form, the tribunal found that China has no legitimate claim to the area of the shoal.

This, however, will not change the reality on the sea where China continues to develop the islets for strategic and exploration purposes. Beijing has never recognised the Court’s authority and the Court has no means of implementing its ruling. Tricky affairs in the neighbourhood

At best, the tribunal’s decision has been an exercise in maritime law. At worst it will flare tensions between China and the Philippines – not at government level, both Beijing and Manila have intimated that they would discuss the future of the region, irrespective of any court decision. The inference being that the two governments can find a formula for exploiting the shoal and its waters for mutual benefit. Banking on offshore assets

Any tension that might arise would be from within the respective populations. Both Chinese and Filipinos regard sovereignty over Scarborough Shoal as a matter of national pride. Indeed, this can be seen in the ways the two nations greeted the news of the court’s decision. Filipinos were dancing in the street; Chinese took to the Internet to blog their disapproval.

We expect those tensions to die down fairly quickly as the two sides signal their readiness to sit down and negotiate a way out of the impasse. And the willingness to do just that it already clear. Certainly, there is more to play for here than a pile of inhospitable rocks. The shoal, which sits along one of the world’s busiest shipping routes – about a third of all maritime trade passes the area, including one third of all crude-oil cargoes – is, for that reason, of prime strategic importance. Control of that amount of shipping brings untold economic power.

Then there are mineral reserves – primarily, oil, natural gas and phosphor – which are in abundance in the disputed Spratley Islands to the south west. A survey conducted by China as far back as 1989, estimated that the Spratleys region contain 105 billion barrels of oil, 25 billion cubic meters of natural gas, and 370,000 tons of phosphor.

But this will be very much a bilateral discussion. Neither the UN nor the United States will have any function in deciding the real future of Scarborough Shoal. Political differences will be set aside in favour of pragmatic economic arguments. The aim, for both sides, will be to arrive at a solution that both Beijing and Manila can sell to their people. And from the Philippines’ perspective that will mean large inflows of investment renminbi.

The US, then, despite its Philippine presence under the April 2014 Enhanced Defense Cooperation Agreement – ostensibly signed for the US Navy to provide strengthened security around Scarborough Shoal – would not simply be unable to have a deal-broking role, it’s hard to see what its purpose would be in that area of the South China Sea going forward.

The case was filed with the arbitration court by former President Benigno Aquino in January 2013, following an abortive attempt by the Philippine Navy to apprehend Chinese fishermen in the vicinity of Scarborough Shoal. He ratcheted up the rhetoric over the disputed outcrop of rocks, creating an international incident and sparking nationalist feelings.

China, meanwhile, has pursued its large-scale reclamation projects in the are, building the rocks and reefs into artificial islands which now contain a landing strip and a number of military structures.

The day in court has now come and gone. Now, it seems, it’s time to get down to business.