China-Japan Dispute Tied to Quest for Energy

By Patrick Goodenough | July 7, 2008 | 8:17 PM EDT

( - Asia's two biggest economies are locked in a dispute over undersea natural gas reserves claimed by both, a row underlining the increasingly important role energy is playing in China's foreign relations.

As China's Hu Jintao headed for his first visit as president to the United States, Japanese government officials complained that a ban imposed by Chinese authorities on maritime traffic in the disputed zone between the two countries may infringe international law.

"It could violate our sovereign rights and provisions in the U.N. Law of the Sea," Chief Cabinet Secretary Shinzo Abe told a news conference in Tokyo.

China's Maritime Safety Administration earlier posted a notice prohibiting any ships from entering a strip of water lying northeast of Taiwan for a seven-month period while Chinese gasfield operations were underway.

Chinese gas field developers wanted shipping out of the area while pipelines and cables are laid on the seabed, according to the Chinese agency.

After Japanese complaints, China then said it had made a technical error in defining the no-go area, which would no longer include waters on the Japanese side of a line between their respective territories.

Despite the revision, Japanese Foreign Minister Taro Aso said Tuesday China should in any case have given Japan prior notice of the ban.

The disputed area in the East China Sea lies halfway between the two countries, both of whom hope to exploit the gas reserves to help fuel their booming economies.

The U.N. Convention on the Law of the Sea allows coastal countries to claim exclusive economic zones (EEZs) extending 200 nautical miles (370 kilometers) from their shores. But the disputed area lies where the Chinese and Japanese zones overlap.

Japan recognizes a median line between the two as a demarcation between the two EEZs, but China does not, choosing instead to claim rights up to the edge of the continental shelf, near Japan's southernmost Okinawa Island.

Late last year a Chinese nuclear submarine intruded into Japanese waters off Okinawa, prompting Tokyo to put its Navy on alert for the first time in five years, dispatching warships and military aircraft.

A two-day chase ensued, and Japan said later Beijing had expressed regret for what the Chinese called an accidental incursion.

Numerous meetings between officials from the two - most recently in Beijing last month - have failed to resolve the problem.

The southern strip of the disputed zone approaches a group of small islands called Senkaku by Japan and Diaoyu by China. They are controlled by Japan but claimed by China, the source of another long running dispute.

During the last round of talks, Japan proposed joint development of natural resources on both sides of the EEZ median line. China refused, offering instead joint projects in a wider area, including waters near Senkaku. Japan rejected that proposal.


Relations between the two Asian giants have been strained by historical grudges -- China says Japan is not sufficiently sorry for its wartime past -- and suspicions about each other's regional ambitions.

Japan has frequently criticized China's military buildup and defense spending, while China is wary of Japan's shift from post-war pacifism to pursuit of a more robust security policy, supported by the U.S.

Adding to the ill-feeling, Beijing last year spearheaded a move to block Japan's bid for a permanent seat on the U.N. Security Council -- a key foreign policy goal for Tokyo, the second-largest contributor to U.N. coffers.

One year ago this week, anti-Japanese protests in China culminated in a large demonstration in Shanghai, where the Japanese consulate and several Japanese-owned businesses were damaged.

Beijing subsequently reined in the protests but ties remain chilly.

Underlying the political differences is a race between the two Asian giants to secure energy supplies.

Japan is the world's biggest importer of liquefied natural gas (LNG) -- it imported almost five times as much as the U.S. did in 2004 -- and city gas consumption has increased by 70 percent over the past decade, according to the U.S. Department of Energy. So far, domestic natural gas production is minimal.

China's economy has grown by nearly 10 percent a year over the past decade. LNG is expected to become an increasingly popular source of energy, for environmental and other reasons. Officials in Shanghai, China's largest energy consumer, predict that LNG will account for 10 percent of the city's energy sources by 2010.

Although China has signed a massive LNG deal with Australia, it places high priority on developing domestic resources. The biggest gasfields are in western China but industry analysts say those in the East China Sea are also important, particularly given their proximity to large centers like Shanghai.

The quest for gas is mirrored by the hunt for oil supplies.

China's demand for oil has already passed Japan's, reaching the number two spot after the U.S.

Saudi Arabia has become China's largest oil supplier, but China is also broadening its options, signing deals with producers in Africa -- including, most controversially, Sudan -- Latin America and Central Asia.

Japan imports most of its oil from the Middle East but is making efforts to diversify its sources, looking particularly to Russia.

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Patrick Goodenough
Patrick Goodenough
Spencer Journalism Fellow