Diplomatic balancing act for oil exploration
In a little noticed press conference in Hanoi this week, the US left little doubt about what it thought about China's protests over ExxonMobil's oil ambitions in Vietnam.
'Well we certainly don't like anybody interfering in the commercial operations of companies that are trying to carry out commercial contracts,' said US ambassador to Vietnam Michael Michalak. 'I think that it is up to the companies where they would like to work and with whom they would like to work.'
The comments on Wednesday have yet to receive much public attention. The state-controlled Vietnamese press has little appetite at the moment for riling Beijing while the foreign media based in Hanoi was off down south chasing the release from prison and extradition of paedophile rock star Gary Glitter.
Yet Mr Michalak's remarks will certainly be noted in oil capitals across Asia, Europe and the US as companies weigh the intent and seriousness of China's concerns directed at Texas-based ExxonMobil, the world's largest oil company.
The South China Morning Post reported last month that Chinese envoys in Washington had repeatedly told Exxon executives that future mainland business could be jeopardised if it pursued an oil exploration deal with Vietnam's state-owned oil giant, PetroVietnam.
The deal, a preliminary co-operation agreement signed in June, involves exploration blocks off Vietnam's southern and central coasts - part of waters China includes as part of its historic claims to large swathes of the South China Sea. While Vietnam publicly reasserted its sovereignty at the time, the Foreign Ministry in Beijing also confirmed its objections.
'China's position on the South China Sea is clear and consistent,' said Foreign Ministry spokesman Liu Jianchao. 'On the specific case, we have stated our position to relevant parties.'
In recent weeks sources in British, French and Russian oil giants BP, Total and Gazprom have all confirmed that they are well aware of China's concerns about Vietnam's potentially rich southern fields.
While all say they are keen to push ahead with existing and future deals in Vietnam, they also echo internal ExxonMobil concerns that China's objections could complicate future business decisions, given the importance of the mainland market.
'China's actions have raised the risk profile on what on paper are entirely legal deals with Vietnam, no question,' said one foreign oil executive. 'We are keen on these projects, so we are all still trying to figure out just how far China is going to push these threats. At the moment, it is still business as usual.'
Like ExxonMobil, they say they are confident of the legal basis of Vietnam's claims, under the United Nations Convention on the Law of the Sea - a claim strengthened by Vietnam's extensive continental shelf.
Mr Michalak's remarks also suggest Washington is satisfied with the legality of Exxon's moves, a possible reflection of the company's strong lines of communication to the White House and across the US government. Significantly, he also directed local reporters to a recent statement between US President George W. Bush and Vietnamese Prime Minister Nguyen Tan Dung that asserted Washington's support of Vietnam's territorial integrity and national sovereignty.
The joint statement reflects in part a discreet diplomatic dance under way between the former bitter enemies, a courtship fuelled by both commercial realities and an eagerness on both sides to balance ties with a fast-rising China.
The price of oil is highlighting regional tensions that have long been pushed aside in the spirit of regional engagement. Any sense of complacency is eroding given the rising stakes.
China has asserted its sovereignty but, it seems, has yet to get everything its own way. This issue is far from over.
