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Vanguard Bank: Two
Frameworks for Analysis
Carlyle A. Thayer
July 21, 2019

Vietnam is currently facing new challenge to its sovereign jurisdiction over the marine
and seabed resources in its Exclusive Economic Zone (EEZ) in the South China Sea. On
3rd July a Chinese survey vessel, escorted by two China Coast Guard ships, commenced
seismic surveys in the waters near Vanguard Bank. China’s actions were illegal under
international law because they were undertaken without prior approval of the
Vietnamese government.
This incident raises many questions and the lack of information poses difficulties for
analysts trying to understand China’s motivation.
During this year, bilateral relations between Vietnam and China appeared to have
recovered from the 2014 Hai Yang Shi You 981 crisis. For example, this year bilateral
friendly border exchanges were held and the two Coast Guards conducted joint
patrols in the Gulf of Tonkin. In addition, two Vietnam Navy warships attended a fleet
review in China to mark the seventieth anniversary of the People’s Liberation Army
Navy. No less a figure than Mrs. Nguyen Thi Kim Ngan, a senior member of the
Politburo and Chair of the National Assembly, visited China as events unfolded.
What explains the timing and the motivations behind China’s actions that run counter
to the improvement in Vietnam-China relations during this year?
This article explores these questions by using two frameworks of analysis. The first
framework focuses on Chinese internal or domestic factors as one way of explaining
these events. The second framework focuses on the broader strategic rivalry between
China and the United States.
Domestic Factors
Beijing’s policy towards the South China Sea is a product of Chinese hyper-nationalism
promoted by General Secretary and President Xi Jinping. China insists that it has
“indisputable sovereignty” over the South China Sea because it was the first to
discover, name, and occupy its land features. China’s claim to historic rights took the
form of the “nine-dash line” map claiming most of the land features and adjacent
waters in the South China Sea.
As a result of state-sponsored patriotic education campaigns Chinese citizens of all
walks of life have come to believe in these expansive claims to the South China Sea.
All Chinese national and provincial organisations have adopted this view. This has led
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to very powerful domestic lobby groups that to seek to push their interests under the
banner of historic rights. These interest groups include deep sea fishing communities,
maritime militia, local and provincial governments, state-owned national oil
companies, maritime law enforcement agencies at all levels including the China Coast
Guard, and the People’s Liberation Army Navy.
Three years ago, the Arbitral Tribunal that heard the case brought by the Philippines
against China ruled that China’s nine-dash line claim to the South China Sea was
without foundation in international law. China reacted angrily and in a fit of hyper-
nationalism denounced the Tribunal and exerted strong political pressure on
Southeast Asian states to ignore the Tribunal’s Award. China was abetted by the newly
elected president of the Philippines, Rodrigo Duterte, who decided to put the Award
to one side.
China then pressed the members of the Association of Southeast Asian Nations
(ASEAN) to move forward and conclude a South China Sea Code of Conduct.
In August last year, China and the ASEAN member states adopted a Single Draft
Negotiating Text. China’s submission declared that cooperation on the marine
economy is to be carried out by the littoral states “and shall not be conducted in
cooperation with companies from countries outside the region.” In other words,
Beijing wants to exert hegemony over the South China Sea by binding Vietnam,
Malaysia, the Philippines and other countries to joint ventures with China’s national
oil companies.
The domestic framework of analysis suggests that the China Geological Survey, a state-
owned company, dispatched the Haiyang Dizhi 8 to conduct seismic surveys in blocks
that been announced by the China National Offshore Oil Company seven years ago.
In 2014, the mega-oil drilling rig HYSY 981 was initially escorted by eighty or more
ships and vessels. The Haiyang Dizhi 8 was only accompanied by two China Coast
Guard ships. The fact that one of the China Coast Guard vessels left the area while four
Vietnam Coast Guard vessels remained on station suggests that the decision to deploy
the Haiyang Dizhi 8 was a routine bureaucratic decision to conduct a survey in what is
regarded as “Chinese waters.”
In July 2017, Vietnam ceased oil exploration activities in one bloc in the Vanguard Bank
after China reportedly threatened force. In March 2018, under pressure from China,
Vietnam suspended oil operations in a second bloc in Vanguard Bank. Vietnam’s
backdown may have led China to conclude that its heavy-handed tactics were
effective.
An initial report by the Asia Maritime Transparency Initiative (AMTI) argued that the
dispatch of the Haiyang Dizhi 8 was designed to punish Vietnam for permitting
Russia’s Rosneft Vietnam BV to resume oil exploration in nearby bloc 06-01 in May. It
later emerged that China Coast Guard ship 35111 harassed two service vessels
operating with the semi-submersible oil rig Hakuryu-5 in bloc 06-01.
The operational framework of analysis suggests that China views hydrocarbon
resources in the South China Sea as its own, insists on joint development with
Southeast Asian states, and opposes foreign involvement. For example, China has
successfully pressured the Philippines to stand down from oil exploration/exploitation
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in Reed (Recto) Bank. China has continually maintained a presence at Malaysia’s

Luconia Breakers and continually challenges the commercial operations of Malaysian
service vessels support off-shore oil production. And China has been active for the
past three years in pressuring Vietnam from developing resources in the Vanguard
Bank area.
Strategic Factors
This framework of analysis suggests that growing rivalry between China and the
United States accounts for the rise of recent Chinese assertiveness involving the
Philippines, Vietnam and Malaysia. This strategic rivalry goes beyond the current tariff
war.
Under the Trump Administration, the U.S. Navy has increased the number of Freedom
of Navigation Operational Patrols (FONOPS) in the South China Sea including in the
Paracel and Spratly islands. The U.S. has also conducted what China views as
provocative continuous bomber presence patrols by B-52 and stealth bombers flown
from Nebraska in the continental United States, Guam and Diego Garcia, as well as
naval presence patrols over and on the South China Sea, respectively.
The United States has begun to shape the strategic environment after the release of
its Indo-Pacific Strategy. China is clearly identified as America’s main adversary and
strategic rival. Regional states – Vietnam, Indonesia, Malaysia, and Singapore – are
targeted as potential strategic partners in a security network led by the U.S.
The United States has recently conduced naval exercises with its allies in the South
China Sea. The Trump Administration has approved arms sales to Taiwan. Secretary of
State Mike Pompeo gave explicit assurances to the Philippines that their bilateral 1951
Mutual Defense Treaty, includes the South China Sea within its geographic scope. The
retiring Chief of Naval Operations broke new ground by stating that any attack by
China’s maritime militia would be viewed as an armed military attack.
Washington has singled out Vietnam as a potential strategic partner in its U.S. National
Security Strategy, National Defense Strategy of the United States and most recently in
its Indo-Pacific Strategy. Military sources report that the U.S. is seeking Vietnam’s
approval for annual port visits by an aircraft carrier. Diplomats report that the United
States is seeking to raise bilateral relations with Vietnam from a comprehensive to a
strategic partnership.
On 17 July, Le Thi Thu Hang, spokesperson for the Ministry of Foreign Affairs, offered
a new twist on Vietnam’s policy. She said:
Maintaining order, peace and security in the South China Sea is a common
interest of countries inside and outside the region as well as the international
community. Therefore, Vietnam expects related countries and the international
community to work together to contribute to the protection and maintenance
of this common interest.
In other words, Vietnam has now linked the resolution of the Vanguard Bank standoff
to assistance from the international community to uphold a rules-based free and open
Indo-Pacific region.
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The strategic framework of analysis suggests that China is responding to U.S. actions
by orchestrating political, diplomatic and low-level pressure – or grey area tactics –
on regional states to undercut U.S. efforts to reshape the regional environment. At
the same time, China is sending signals to the U.S. and regional states by firing anti-
ship ballistic missiles into the South China Sea that it is a power to be reckoned with.
..

Media Identification: The University of New South Wales, Canberra or The University
of New South Wales at the Australian Defence Force Academy, Canberra.

Suggested citation: Carlyle A. Thayer, “Vanguard Bank: Two Frameworks for Analysis,”
Thayer Consultancy Background Brief, July 21, 2019. All background briefs are posted
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