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Thayer Consultancy Background Briefing:

ABN # 65 648 097 123

South China Sea: Is China
Reasserting its 9 Dotted Line
Carlyle A. Thayer
July 15, 2017
[client name deleted]
Q1. We have heard Vietnam and Repsol have suspended drilling oil in block 136-03
under pressure from China. These reports have yet to be confirmed. What is your
assessment of this issue?
ANSWER: My sources told me a week ago that General Fan Changlong raised Repsols
drilling activities in Block 136 when he visited Spain before coming to Vietnam. So
there are three possibilities. First, Repsol took note of the warning and suspended
exploration. Second, Vietnam is being cautious and asked Repsol to stop activities for
the moment. Third, the report has not yet been verified.
Q2. Has Hanoi miscalculated in restarting oil activities in the South China Sea? Why
did it do so and why has in stepped back?
ANSWER: It appears that Hanoi was cautious about oil exploration in the period from
the HYSY 981 crisis in 2014 to early this year. Vietnam then went ahead with
ExxonMobil and removed its restrictions on Repsols activities. The former was given
much publicity while the latter was kept quiet. China nonetheless detected this
activity and made its displeasure known during General Fans visit.
This is a test of Vietnams policy of cooperation and struggle (doi tac, doi tuong). If
Vietnam forgoes oil exploration it will sets back its energy program. If Vietnam takes
this course it is because of the fear of Chinese retribution and because it cannot yet
count on the Trump Administration to provide support.
Q3. Will China put pressure on Vietnam to stop drilling in any area within its 9 dotted
line map?
ANSWER: There is a larger contect: this year President Duterte said China would act
aggressively (go to war) if the Philippines restarted oil exploration in Recto Bank. Then
China abruptly cancelled the 4th friendly border defense exchange activities when
Vietnams leaders rebuffed General Fans request that Vietnam stop oil exploration.
Finally, China protested when Vietnam extended ONGCs lease in Block 128. If these
dots are connected it appears that China is reasserting its nine-dotted map claim on
the first anniversary of the Arbitral Tribunals Award.
Q4. Is this a victory for China in dealing with Vietnam?

ANSWER: It is too early to make a definitive assessment. Information is speculative. If

Vietnam does back down it will be a marked change from its struggle against China
during the HD 981 crisis. And Vietnams leaders will quickly come to learn that giving
in to China on one point will lead China to press on another. Vietnam will need to
lobby fellow ASEAN members for support.
Q5. How will the U.S., Japan and other countries view this move by Hanoi? How will it
influence to other partners like ExxonMobil? Is Hanoi failing to protect the interests
of these commercial partners?
ANSWER: When Prime Minister Nguyen Xuan Phuc met President Donald Trump at
The White House on 31 May, they issued a joint statement that included a long
paragraph on the South China Sea. This joint statement did not explicitly address the
issue of Repsol oil exploration. The Joint Statement said, inter alia:
The two leaders underscored the importance of freedom of navigation and overflight and other
lawful uses of the seas, and noted with concern the destabilizing impacts that unlawful restrictions
to the freedom of the seas have on peace and prosperity in the AsiaPacific region. The two sides
also affirmed full support for the peaceful resolution of disputes without the threat or use of force
or coercion, in accordance with international law, including full respect for diplomatic and legal
processes, and called upon all parties concerned to implement their international legal obligations
in good faith in any resolution to these disputes. They highlighted the importance that parties
refrain from actions that would escalate tensions, such as the militarization of disputed features.
President Trump stressed that the United States will continue to fly, sail, and operate anywhere
international law allows.

Vietnam would need to make public that China was interfering in oil exploration in
Block 136 in order to lay the ground work for diplomatic support from the U.S. and
Obviously, ExxonMobil would be following this reported incident carefully in order to
assess risks to its activities in the Blue Whale project. This is Vietnams largest natural
gas deal. Prime Minister Phuc has already approved the construction of gas power
plants on shore. If China put pressure on ExxonMobil the United States likely would
have greater reason to become involved than the Repsol case.
Vietnam usually offers some guarantee of support for oil companies operating in its
Exclusive Economic Zone. At the moment, if the speculative reports are correct, China
is only applying political and diplomatic pressure on either or both Repsol and
Vietnam. China is more likely to take some punitive economic action before resorting
to any confrontation at sea. China will likely use its fishing fleet, fishing militia and
Coast Guard ships before it has to rely on the Peoples Liberation Army Navy.
It would be prudent to suspend any judgment about whether or not Vietnam is
protecting its commercial partners until more information comes to hand. In other
words, wait and see.

Suggested citation: Carlyle A. Thayer, South China Sea: Is China Reasserting its 9
Dotted Line Claim? Thayer Consultancy Background Brief, July 15, 2017. All

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