Thayer Consultancy Background Briefing:

ABN # 65 648 097 123

South China Sea – What to
Expect in 2019
Carlyle A. Thayer
December 31, 2018

We are working on a report that aims to review and predict what will happen in
2019 in the South China Sea.
Q1: Through negotiations and discussions between the ASEAN and China, over the
past year, what is your assessment of developments in the South China Sea’? Is it
getting worse since China has entered into a new phase of militarization of its
artificial islands?
ANSWER: Negotiations between China and the ten members of ASEAN reached a
high point on August 3, 2018 when the eleven parties agreed on a Single Draft South
China Sea Code of Conduct Negotiating Text. This text is a “living document,”
meaning it will be revised and added to as negotiations continue. The Single Draft
Negotiating Text calls for “three readings” before it is formally adopted. The term
reading was not defined; presumably it means a process by which all the parties
agree on parts of the text and then move on to more difficult sections.
After August, China initiated diplomatic discussion with the Philippines and the two
parties agrees on a Memorandum of Understanding on Cooperation on Oil and Gas
Development. President Xi Jinping visited Brunei to confer with the Sultan. The two
leaders agreed to raise bilateral relations to a Strategic Cooperative Partnership.
In the Joint Statement issued after their talks the two leaders agreed to “cooperate
in the areas of maritime oil and gas resources.” With regard to the South China Sea,
the Joint Statement “welcomed the improving cooperation between China and
ASEAN Member States in the South China Sea... and encouraged further progress on
negotiations towards the early conclusion of an effective Code of Conduct (COC) on
the basis of consensus.”
In sum, the agreement on the SDNT and China’s push for joint oil and gas
development in the South China Sea, has resulted in a lowering of tensions between
China and ASEAN claimant states, incluiding Vietnam.
China already has sufficiently militarized its artificial islands in the South China Sea to
exert influence on Southeast Asian states. China will continue to improve its C4ISR
capabilities (Command, Control, Communications, Computers, Intelligence,
Surveillance and Reconnaissance). Between April and June 2018, for example, China
installed an Ocean-E Station on Bombay Reef in the Parcels to enhance its collection
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of electronic intelligence over the shipping lanes that pass by. The Ocean-
E station is part of a region-wide Blue Ocean Information Network designed to
enhance China’s control over the maritime domain.
Q2: As China increases its deployment of military vessels and equipment in the
region, how does this affect future negotiations on the COC?
ANSWER: China is facing an increasing challenge from the United States in three
forms – Freedom of Navigation Operational Patrols, continuous naval presence
patrols and continuous strategic bomber presence patrols. China has always stated
that is has the right to self-defence over its artificial islands in the South China Sea
and that China would take appropriate steps to defend itself depending on its
perception of the threat that it faces from outside powers (the United States).
China has used this diplomatic position to warn Southeast Asian states that friendly
negotiations on a COC could be undermined if they engaged in increased military
cooperation with the United States. China is trying to divide ASEAN members from
the United States and justify its militarization because of threats from the U.S.
It is notable that China’s input into the Single Draft Negotiating Text gave China a
veto over military exercises between ASEAN members and outside states. China’s
proposal stated:
The Parties shall establish a notification mechanism on military activities, and
to notify each other of major military activities if deemed necessary. The
Parties shall not hold joint military exercises with countries from outside the
region, unless the parties concerned are notified beforehand and express no
objection; [CH]
CH is the abbreviation in the Single Draft Negotiating Text for China.
Q3: What do you expect to come out of the COC negotiating process in 2019? What
will China do with the COC in 2019?
ANSWER: Thailand, as ASEAN Chair, will play a major role in consensus making within
ASEAN on negotiations with China on a COC. Thailand’s deputy minister for foreign
affairs has expressed his hope to complete the first reading of the Single Draft
Negotiating Text by May 2019.
It has been the common position between China and the ten members of ASEAN
that the timetable for reaching agreement on the COC in the South China Sea would
be “mutually agreed.” However, after China and the ASEAN states agreed to the
Single Draft South China Sea Code of Conduct Negotiating Text on August 3, 2018,
China unilaterally declared that it would take at least three years to complete.
In other words, China is in not in a hurry to complete COC negotiations because it
suits Beijing to prolong negotiations and play on differences within ASEAN. Regional
diplomats report that China has put the pace and scope of COC negotiations into
ASEAN’s court knowing that divisions within ASEAN will slow the process;
Q4: Some, including Mark J Valencia from China’s National Institute for South China
Sea Studies, argue that the United States by conducting freedom of navigation
operational patrols (FONOPs) has set a new normal in the South China Sea that
harms the small claimants’ efforts. What do your assessment of this argument?
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ANSWER: The United States has been conducing FONOPS in the South China Sea for
nearly two decades. Global data from 1991 to 2016 showing the number of years the
United States has conducted FONOPS against a specific country reveal that Iran and
Oman top the list at over two decades; Cambodia, Malaysia, Vietnam and Myanmar
follow in the range from 14 to 17 years.
FONOPS are a multifaceted U.S. program to challenge what Washington views as
excessive maritime claims by littoral states. In recent years both the Philippines and
Vietnam have adopted legislation that brings their claims for maritime jurisdiction
into conformity with international law. China has not.
The Trump Administration approved an annual FONOP program proposed by the
Pentation in May 2017. Under Trump the scope and frequency of FONOPS has
increased markedly when compared to the Obama Administration. The small
claimant states benefit from the U.S. challenge to China’s illegal and excessive claims
in the South China Sea, contrary to Valencia’s assertionl
Q5: As the United States implements its Indo-Pacific strategy, what wioll be the
effectson the region? Can this strategy cope with recent developments? Is there any
chance the U.S. can compete successfully against China’s Belt and Road?
ANSWER: U.S. policy towards the Indo-Pacific region will continue to be conducted
within the framework of the U.S. National Security Strategy (NSS) adopted in late
2017, the U.S. National Defense Strategy (NDS) adopted in early 2018 and the
National Defense Authorization Act FY 2019 (NDAA FY2019).
The NSS explicitly singles out China’s policies in the region: “China is using economic
inducements and penalties, influence operations, and implied military threats to
persuade other states to heed its political and security agenda. China’s infrastructure
investments and trade strategies reinforce its geopolitical aspirations.”
The NSS identifies providing quality infrastructure through the World Bank and other
multilateral institutions to counter China. The NSS states the U.S. will adopt a policy
“encouraging multilateral development banks to invest in high-quality infrastructure
projects that promote economic growth.” Finally, the NSS commits the U.S. to
develop a “networked security architecture capable of deterring aggression,
maintaining stability, and ensuring free access to the common domains” and to
provide leadership for a collective response that upholds “a regional order respectful
of sovereignty and independence.”
This is clearly aimed at China. The U.S. will push back and compete against China in
the region. The NSS is focused entirely on the maritime domain and freedom of
navigation, free and reciprocal trade and defence issues. The NSS explicitly mentions
that the U.S. will redouble its commitment to allies and established partnerships as
its first priority in the region. The NSS commits the United States to improving ties
with its allies, Thailand and the Philippines. The NSS specifically identifies Vietnam
along with Indonesia, Malaysia and Singapore (in that order) as “growing security
and economic partners of the United States.”
The U.S. commitment to support high-quality infrastructure that promotes economic
growth will offer regional states an alternative to dependency on China.
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The NDAA FY2019, approved in August 2018, includes a section on the Indo-Pacific
region. The Indo-Pacific Command will increase the forward presence, capabilities
and posture of U.S. armed forces in the Indo-Pacific region especially in the maritime
domain.
The NDAA FY2019 includes four measures directly aimed at China. The first measure
prohibits China’s participation in the Rim of the Pacific Exercise (RIMPAC) on three
conditions (1) cessation of land reclamation in the South China Sea, (2) removal of
weapons from China’s artificial islands and (3) certification that China has observed
these conditions for a period of four years.
The second measure mandates new and detailed reporting requirements be added
to the Pentagon’s annual report to Congress on China’s military and security
developments. For example, the revised report must include details of China’s
overseas basing and infrastructure, political influence operations, etc.
The third measure mandates as a top priority a whole-of-government strategy
towards China as a long-term strategic competitor of the United States.
The fourth measure requires the Department of Defense to prepare detailed and
specific reports on China’s coercive activities in the South China Sea.
Secretary of State Mike Pompeo defined what the Trump Administration meant by a
Free and Open Indo-Pacific (FOIP) when he addressed the U.S. Indo-Pacific Business
Council on July 31, 2018. According to Pompeo, a free Indo-Pacific is a region where
all countries are able to protect their sovereignty against coercion by another
country. An open Indo-Pacific is a region where all countries have unfettered access
to the seas and oceans and where territorial and maritime disputes are resolved
peacefully. Finally, open also means “fair and reciprocal trade, open investment
environments, transparent agreements… and improved connectivity.”
The U.S. Indo-Pacific strategy includes funding for “high-quality infrastructure
investment that promotes economic growth” through international financial
institutions such as the World Bank and Asian Development Bank as well as
encourage the private sector to invest in regional infrastructure.
Finally, in December 2018, both houses of the U.S. Congress passed the bipartisan
Asia Resassurance Initiative Act (ARIA); it will become law when signed by President
Trump . ARIA promotes the security interests of the United States in the Indo-Pacific
region in eight major areas:
1. To advance U.S. foreign policy interests and objectives in the Indo-Pacific
region in recognition of the value of diplomatic initiatives and programs in
furtherance of United States strategy;
2. To improve the defense capacity and resiliency of partner nations to resist
coercion and deter and defend against security threats, including foreign
military financing and international military education and training programs;
3. To conduct regular bilateral and multilateral engagements, particularly with
the United States’ most highly-capable allies and partners, to meet strategic
challenges… [destabilizing activities by China and North Korea’s nuclear and
ballistic missile programs];
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4. To build new counterterrorism partnership programs in Southeast Asia to

combat the growing presence of ISIS and other terrorist organizations that
pose a significant threat to the United States, its allies, and its citizens’
interests abroad;
5. To help partner countries strengthen their democratic systems, with a focus
on good governance;
6. To ensure that the regulatory environments for trade, infrastructure, and
investment in partner countries are transparent, open, and free of
corruption;
7. To encourage responsible natural resource management in partner countries,
which is closely associated with economic growth; and
8. To increase maritime domain awareness programs in South Asia and
Southeast Asia…
ARIA appropriates U.S. $1.5 trillion dollars for each fiscal year from 2019-2013 to the
Department of State, U.S. Agency for International Development and – as
appropriate – the Department of Defense to advance U.S. interests in the Indo-
Pacific region.
In sum, the United States has in place a whole-of-government national security
strategy that includes the Indo-Pacific as a region. The U.S. will maintain a military
posture to deter and push back against China. The U.S. has also devised an economic
component to complement the military aspects of its Indo-Pacific strategy to provide
regional states an alternative to dependency on China. It should also be noted that
U.S. officials argue that the economic apspects of its Indo-Pacific strategy is not a
counter to the Belt and Road so much as an alternative.
Q6: By withdrawing troops from Syria and Afghanistan, the U.S. seems to be ending
its presence in the Middle East. The situation is somewhat similar to Vietnam in
1972. The US’ decision to leave Vietnam was a part of its policy of focusing on
countering Soviet Union during the Cold War. That strategy led to the dissolution of
the Soviet Union. Does the U.S. withdrawal from the Middle East signal a new
strategy to pivot to oppose China particularly in the South China Sea? Is there linkage
beteween Trump’s decision draw down the U.S. presence in the Middle East and the
U.S. Indo – Pacific strategy?
ANSWER: President Donald Trump for decades has argued against American military
commitments abroad on the ground of cost, allies were taking advantage of the
United States, and the countries of concern were not important strategically. Trump
has ordered U.S. military forces out of Syria but has not yet announced his reported
decision to cut back on U.S. forces in Afghanistan. This month he said U.S. forces in
Iraq could intervene in Syria if there was resurgence by the Islamic State.
Trump’s decision to withdraw from Syria was not part of a strategy to pivot to the
Indo-Pacific. In fact, Trump’s actions have undermined the credibility of the United
States to support allies and partners globally.
Q7: Under tghe Trump presidency, this is the first time we see U.S. allies
simultaneously stand up to condemn the Chinese government directly over
accusations of hacking. Is this a shift from the digital world to a “real” battlefield?
Can the Five Eyes intelligence community evolve into an anti-
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China alliance/coalition? Can the Quad develop a strategy for the South China Sea?
Can ghe U.S. successfully form a coalition to counter China?
ANSWER: The Five Eyes is an expression used to describe the highest level of
intelligence cooperation and integration among five countries – the United States,
United Kingdom, Australia, Canada and New Zealand. With the exception of New
Zealand, all are treaty allies. The UK and Canada are part of NATO; while Australia
has a separate security treaty with the U.S. Quite clearly the five countries are
countering China, particularly in cyber space. Australia, the UK, Canada all conduct
naval presence patrols in the South China Sea. In other words, there is a de facto
anti-China coalition but their willingness to counter China is limited. None of these
countries has joined the U.S. to conduct joint FONOPs or naval presence patrols in
the South China Sea.
The Quadrilateral Security Dialogue Forum is a talk shop that India insists be led by
officials from their respective foreign ministries, rather than defence officials.
The most significant development for 2019 will come when President Trump signs
the Asia Reassurance Initiative Act (ARIA) of 2018. ARIA is a bipartisan Bill that was
approved by both houses of Congress. When it is signed by Trump it will become
law.
ARIA sets out U.S. policy and strategy for the Indo-Pacific region. One of its eight
major objectives is “to conduct regular bilateral and multilateral engagements,
particularly with the United States’ most highly-capable allies and partners, to meet
strategic challenges…“ such as destabilizing activities by China and North Korea’s
nuclear and ballistic missile programs.”
ARIA identifies China’s illegal construction and militarization of artificial features in
the South China Sea and coercive economic practices as one of the three major
security challenges to the “United States-backed international system.”
Q8: What is your assessment of Vietnam’s policy on maritime disputes in the South
China Sea over the past year?
ANSWER: Vietnam has been constructive in its proposals to the Single Draft
Negotiating Text, offering definitions of key terms and proposing detailed
suggestions for cooperation and suggesting specific military and coercive activities
that should be prohibited. For example, Vietnam suggested:
The Contracting States shall not:
1. Resort to threat or use of force, coercive actions or any other cruel, inhuman
and degrading treatment and punishment against persons from other
Contracting States while conducting law enforcement activities;
2. Conduct construction of any artificial island in the South China Sea;
3. Initiate, participating in, or allow the use of its territories for any policy or
activity that would complicate or escalate disputes and affect peace and
stability;
4. Militarize occupied features in the South China Sea;
5. Blockade vessels carrying provisions or personnel for rotation;
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6. Declare an Air Defence Identification Zone (ADIZ) in the South China Sea;
7. Conduct simulated attacks that aim guns, missile launches, inter alia, at
targets of other countries.
Vietnam also has been successfull in including a section on the South China Sea in
joint statements with the leaders of major powers. Vietnam has sought to give
meaning to its strategic partnership with the Philippines by proposing joint activities
in the South China Sea.
Vietnam, however, has not resume oil exploration in the waters around Vnguard
Bank (Tu Chinh) after diplomatic pressure from China to stand down. Vietnam has
ceased operation in one bloc and suspended operations in another bloc.
Q9: What are Vietnam’s priorities in the South China Sea in 2019?
Vietnam will continue to play an active role in ASEAN to help shape a final regional
Code of Conduct that protects its interests. Vietnam, as the ASEAN Chair in 2020, will
also consult closely with Thailand the ASEAN Chair for 2019. Vietnam and Indonesia
will continue their negotiations on their maritime boundry in order to resolve the
issue of Vietnamese fishermen illegally poachng in Indonesian waters. Vietnam tops
the list of illegal fishermen in Indonesia’s Exclusive Economic Zone.

Suggested citation: Carlyle A. Thayer, “South China Sea – What to Expect in 2019,”
Thayer Consultancy Background Brief, December 31, 2018. All background briefs are
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Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.