Pursue joint development in disputed areas of SCS

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Second of 3 parts

FOLLOWING is a slightly edited discussion on the second of three initiatives I had proposed in my 2022 book “Debacle: The Aquino Regime’s Scarborough Fiasco and the South China Sea Arbitration Deception,” which I think would send us on the path of resolving our disputes with China and other claimants in the South China Sea. Time to move on.

“Debacle” excerpt starts here:

On Nov. 20, 2018, the Philippines and China signed an agreement titled “Memorandum of Understanding on Cooperation on Oil and Gas Development” between the governments of the two countries. The committee consisting of representatives of the two countries which would implement the agreement met for the first and last time in October 2019.

While the pandemic had put on hold further meetings, the agreement opened a way for settling the disputes in the South China Sea (SCS): Joint development of the resources even in the disputed areas of the SCS. That could make the South China Sea, as even a vociferous critic of China, retired magistrate Carpio, surprisingly wrote, a “zone of peace.”

The agreement’s intent, as its text put it, is to “negotiate on an accelerated basis arrangement to facilitate oil and gas exploration and exploitation in relevant maritime areas.” This, it said, “will be without prejudice to the respective legal positions of both governments.”

Deliberately, the agreement made no mention at all of the territorial and maritime area disputes between the two countries in the Spratlys. By contrast, the past Aquino 3rd regime had been foolishly obsessed with getting China to give up its claims, even portraying it as “a creeping invader.”

Duterte reversed that hostile policy, undertook a non-confrontational policy toward China, developed friendship with it, and shelved the arbitration award. For years during his term, the Spratlys were peaceful; fishermen from all claimant countries were free to fish in disputed waters.

Memorandum

The 2018 memorandum between China and the Philippines on joint development would not have been possible if Duterte had not reversed Aquino’s foreign policy of belligerence toward China. The memorandum proposed that the two governments undertake arrangements — to be determined after “accelerated” talks — that would facilitate “oil and gas exploration in relevant maritime areas consistent with applicable rules of international law.”

Significantly, the agreement declared that these arrangements are “hereinafter referred to as ‘cooperation arrangements’.”

While the agreement did not mention at all the term “joint exploration” by the two countries, the use of the term “cooperation arrangements” indubitably referred to such partnerships. Such arrangements would be formulated by working groups to consist of China National Offshore Oil Corp., and representing the Philippines, the “enterprise(s) that has/have entered into a service contract with its government” to explore and develop oil and gas in a particular area.

The memorandum was signed by Chinese Foreign Affairs Minister Wang Yi and Philippine Foreign Affairs Secretary Teodoro Locsin Jr. as representatives of their governments.

While the memorandum does not authorize these two firms to undertake the actual exploration and development of hydrocarbon resources in disputed areas, any reading of the document would conclude that such is its vision, and intent.

JMSU

The extremely careful wording of the agreement was necessary in order to distance itself as far as possible from the first attempt at such collaboration in the Spratlys, the Joint Marine Seismic Undertaking (JMSU) entered into by the Philippines, China and Vietnam in 2005 during the term of President Gloria Macapagal Arroyo.

The 2005 agreement was shot dead in the water by the Yellow opposition and its communist allies as they joined forces against President Arroyo. It was part of their campaign to demonize her in order to undertake a “People Power” kind of uprising to topple her.

They filed a suit in the Supreme Court claiming the JMSU was unconstitutional, claiming it would mean the Philippines giving up its exclusive rights to explore and extract hydrocarbons in the Kalayaan Island Group.

The Court ruled on July 10, 2023 that the JMSU was unconstitutional, that it violated Section 2, Article XIII, of the Constitution. This section’s most relevant provision reads: “The State may directly undertake [the exploration, development, and utilization of natural resources] activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens.” (Itals mine)

Muted

While Arroyo’s 2005 JMSU was heavily criticized by the Yellow bloc, saying that it violates the Philippine Constitution, there has surprisingly been muted criticism of the 2018 memorandum, especially from those known to be vehement anti-China critics. There is also little coverage of the agreement from the media.

Former justice Carpio, a strident anti-China critic, suddenly paused his continuous harangue against the Asian superpower in his newspaper columns, and suddenly oozed with optimism in his November 2020 piece titled, “South China Sea as zone of peace.” Why was Carpio suddenly agreeable toward China?

For the first time ever in his voluminous, nearly delirious anti-China writings on the South China Sea dispute, Carpio mentioned Forum Energy. This is the lead firm of the oligarchic trio led by First Pacific, whose survey ship was driven away by the Chinese on March 2, 2011 and ignited the Aquino regime’s hostile policy toward China.

“Once the Chinese firm enters into a commercial agreement with Forum Energy to extract gas from the Reed Bank, authorized by the memorandum,” Carpio wrote in his piece, “the formula for a peaceful settlement of the intractable South China Sea maritime dispute would have been found.”

Recto Bank

Carpio’s column points to the likelihood that the oligarchic trio that has invested billions to extract natural gas in the Reed (Recto Bank) is backing the agreement since the arbitration award, five years after it was handed down, proved to be useless and ignored by most countries of the world except for the United States. In this country, nothing moves if not pushed by an elite group.

What should be a source of confidence over the memorandum, that China is serious and aboveboard over it, is that it reflects China’s decades-old declared policy for its disputes with other countries over territorial and maritime claims. Chinese scholars even have a term for this: “Shelving disputes and pursuing joint development” — with its acronym SDPJD commonly used — which is “China’s premier policy for resolving territorial disputes, especially those in the SCS.”

The biggest reason why this principle has been nearly a dogma for China is that it was Deng Xiaoping himself, China’s most revered leader after Mao Zedong, who first declared it as policy in addressing territorial disputes.

It was in October 1978 during his state visit to Japan when Deng was asked to comment on China’s disputes with Japan over the sovereignty of the Diaoyu Islands (Senkaku Islands to the Japanese).

Wisdom

Deng replied: “We believe that we should set the issue aside for a while if we cannot reach agreement on it. It is not an urgent issue and can wait for a while. If our generation do not have enough wisdom to resolve this issue, the next generation will have more wisdom, and I am sure that they can find a way acceptable to both sides to settle this issue.”

In a similar vein, Deng in June 1986 told then Vice President Salvador 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 once again brought up this idea when he met visiting President Corazon Aquino in April 1988. He 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.”

Deng himself presented the other unattractive alternative to the shelving-disputes approach in October 1984 in a top-level conference of the Communist Party of China:

“There are two solutions to counter the encroachment of Malaysia and the Philippines [in the Spratlys]. One is to reclaim the islands by force; the other is to shelve the issue of sovereignty and jointly exploit the resources of the South China Sea with these countries, which can ease the conflicts that China has accumulated with these countries in the South China Sea over the years.”

Superpower

Deng made that comment 39 years ago, when China was economically and militarily impoverished. China is now a superpower, and yet it still champions that peaceful solution.

There is just no other option for the Philippines but to adopt Deng’s view. Either it gets a part of the natural resources, such as natural gas, in the SCS or it gets 100 percent of nothing.

The implementation of the memorandum on cooperation in the disputed areas could transform what some analysts fear is a possible theater for war between China and the US into a zone of peace and prosperity.

It would be a boon for the Philippines. Indeed, the Reed Bank has potentially more oil and gas reserves than the Malampaya oil field, which has been providing one-fifth of the country’s energy needs. Unfortunately, Malampaya is expected to start running out of gas by 2025.

China appears to be keen on undertaking joint development. After all, this has been its revered leader Deng’s view, and it is an unchallenged dogma in Chinese foreign policy, and even recently reaffirmed by President Xi Jinping.

Sui generis

In the Philippines’ case, if there is a need to amend the Constitution to implement it, then it should do so. After all, the South China Sea conundrum is sui generis, and the framers of the past constitutions, including the 1987, were uninformed about the dispute and the proper way to resolve it.

But amending the Constitution may not be necessary since there has been, in fact, a template for joint development in the SCS — the Malampaya Gas Field. Operating since 2002, it has been run by Royal Dutch Shell and the American Chevron Corp., each receiving 45 percent of its profits, with the Philippine National Oil Co. getting 10 percent. It would require only some clever legal device for a similar set-up to extract gas from the Sampaguita Gas Field in the Reed Bank, with China and the Philippines designating their state corporations that will participate in it.

The most profitable firms of certain conglomerates — for example the Indonesian-owned First Pacific’s (aka MVP Group) PLDT and Smart Communications as well the Ayala Corp.’s Globe Telecom — in fact, had skirted the 40 percent constitutional limit on foreign ownership of telecommunications firms through their use of “voting preferred stocks.” This unique form of equity created the legal fiction that their firms are at least 60 percent-owned by Filipinos when in reality they were not. (Details on this are in my 2016 book “Colossal Deception: How Foreigners Control Our Telecoms Sector,” available at amazon.com.)

If Royal Dutch Shell, Chevron, the Indonesian-owned First Pacific, and the Ayalas were allowed to go around the 40 percent limit on foreign investments in certain industries, it’s a shame if the Republic can’t do so for the sake not just of peace in the South China Sea but to profit from the resources in that geopolitically troubled sea.

Epidemic

Time ran out though for the 2018 memorandum as the Covid-19 epidemic raged in 2020, which consumed the attention of the leaders of the two nations. Marcos Jr. became president in 2022 — who doesn’t seem to be interested in joint development in the South China Sea.

However, during President Marcos’ state visit to Beijing last January, the two nations issued a joint statement, part of which read:

“On oil and gas cooperation, both sides agreed to bear in mind the spirit of the Memorandum of Understanding on Cooperation on Oil and Gas Development between the Government of the People’s Republic of China and the Government of the Republic of Philippines signed in 2018, and agreed to resume discussions on oil and gas development at an early date, building upon the outcomes of the previous talks, with a view of benefiting the two countries and their peoples.”

Nothing has been heard of it since though, after Marcos announced in March that not only will his government implement the Enhanced Defense Cooperation Agreement with the US that Aquino 3rd entered into in 2014 but will increase the EDCA sites (Philippine camps that the US military can use) to four. Since March, relations between the two countries have worsened, with Marcos officials, even his new defense chief, recklessly calling China an “invader” and a “bully.”

However, this government seems to have decided that instead of profiting from the South China Sea’s natural resources, especially natural gas, it would rather have the EDCA as an illusionary deterrent against an imagined enemy.


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This Post Has One Comment

  1. Dorina S. Rojas

    Our leaders and our media are already settled–the US is superhero, China the super villain, and the Philippines the victim who is so weak and stupid without the superhero. Joint exploration? Maybe the superpowers and their allies will join together and leave the Philippines out of the equation. That’s joint exploration for you.

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