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Wednesday, July 30, 2008      

Beijing threatens ExxonMobil over deal with Vietnam in South China Sea

China issued a sharp warning to the world’s largest corporation, ExxonMobil, over an oil deal with Vietnam. Hanoi has indirectly responded that its agreement is in force and will proceed.

File photo shows an Esso fuel tanker, a brand owned and operated by oil giant Exxonmobil. China has warned the firm to drop an exploration deal in the seas off Vietnam.       AFP/Paul Ellis
A Hong Kong newspaper says Beijing’s diplomats have threatened retaliation if ExxonMobil goes ahead with a preliminary agreement with the Vietnamese state oil firm PetroVietnam. The deal covers exploitation in the South China Sea off Vietnam's south and central coasts, according to the Sunday Morning Post.

Beijing claims a huge swath of the South China Sea just east of the Indochina peninsula and west of the Philippines and has acted to control sea lanes and oil rights in the area with several military skirmishes. The most serious occurred in 1976, when China invaded and captured the Paracel Islands from Vietnam. In 1988, Chinese and Vietnamese navies clashed at Johnson Reef in the Spratly Islands, sinking several Vietnamese boats and killing more than 70 sailors.

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The Hong Kong newspaper quoted unidentified sources saying Exxon Mobil was confident of Vietnam's sovereign rights to the blocks it was now seeking to explore. But it is clear that ExxonMobil could not dismiss China's warnings out of hand given the rapidly increasing Chinese market for crude oil and oil products.

The newspaper said China's foreign ministry did not immediately respond to queries about the situation, and an Exxon Mobil spokesman refused comment. However, Vietnamese Foreign Ministry spokesman Le Dung came back with the assertion “that Hanoi's dealings with foreign oil partners fell entirely within Vietnam's legal rights and sovereignty.”

Last year, Chinese media targeted an agreement between Vietnam and BP near the Spratlys maintaining that those islands had been an “indisputable part of Chinese territory since ancient times.” The Spratlys, like other island groups in the region, are uninhabited rocky outcroppings and coral but are in an area that may contain large oil and gas deposits.

The islands also lie directly across the major shipping route for oil from the Persian Gulf to markets in China, Japan, South Korea and Taiwan.

China is an ancient enemy of Hanoi dating back over centuries even though the two countries were allied after the Chinese Communists came to power in 1949. That lasted through the two Vietnam wars, one between the French and the Vietnamese and the other the U.S. engagement. But it fell apart in 1979 when the two countries fought a brief border war after Vietnam occupied Cambodia — another instance of an ancient and bitter rivalry — and overthrew the pariah Khmer Rouge regime, a staunch ally of Beijing.

China-Vietnam relations have since improved with the Vietnamese adopting what many call the post-Deng Xiaoping China model of development. On June 21, the Vietnamese Communist Party newspaper Nhan Dan reported Vietnamese Communist Party General Secretary Nong Duc Manh had successfully concluded an official visit to China at the invitation of the Chinese Party General Secretary and President Hu Jintao.

In fact, Vietnam and China have agreed to cooperate in oil and gas exploration in the Gulf of Tonkin just off the northern Vietnamese major port of Haiphong. But still, last year BP halted plans to conduct exploration work off the southern Vietnamese coast, citing territorial tensions caused by Chinese claims. And in December, China chided Vietnam after protests in front of the Chinese Embassy in Hanoi proclaimed that the Spratly and Paracel islands belonged to the Vietnamese.

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