Fearless nadia slide

China Rises, India Ponders: India’s ‘Look East’ Policy Gathers Momentum

Fearless nadia slide

In a quiet stretch of water off Vietnam’s coast, India and China are jockeying for position in a maritime game that serves as a microcosm of wider regional anxieties about China’s claims to sovereignty over large parts of the South China Sea. By calling for international bids on an offshore oil and gas exploration lease in a block where India and Vietnam are already undertaking exploration, China has thrown down the gauntlet1 By deciding to stay put in the assigned block, India has indicated it’s ready to take up the Chinese challenge. At stake is India’s claim to be a regional power.

The conflict between India and China over the South China Sea has been building for almost two years. In October 2011, India signed an agreement with Vietnam to expand and promote oil exploration in the South China Sea.2 After asking countries “outside the region” to stay away from the area, China issued a demarche to India in November 2011, underlining that Beijing’s permission should be sought for exploration in Blocks 127 and 128. Without it, exploration activities in the two blocks by India’s state-owned oil company ONGC Videsh Ltd (OVL) would be considered illegal. Vietnam, meanwhile, relied upon the 1982 UN Convention on the Law of the Sea to claim its sovereign rights over the two blocks. By accepting the Vietnamese invitation to explore, India not only underlined New Delhi’s desire to deepen its friendship with Vietnam, but also ignored China’s warning to stay away.3 India maintains that its exploration projects in the region are purely commercial. China claims India’s activities violate its sovereignty, and views India’s growing engagement with East and South-East Asia with suspicion.

India’s decision to explore for hydrocarbons with Vietnam followed an incident in July 2011 when an unidentified Chinese warship demanded that the amphibious assault vessel INS Airavat identify itself, and explain its presence in the South China Sea after leaving Vietnamese waters.4 Completing a scheduled port call in Vietnam, the Indian warship was in international waters at the time.

After an initial show of defiance, India appeared to have second thoughts about its exploration efforts in the region. In May 2012, India’s junior oil minister R.P.N. Singh told Parliament that OVL had decided to return Block 128 to Vietnam, as exploration there wasn’t commercially viable. Hanoi publicly suggested that New Delhi’s decision was a response to pressure from China. In July 2012, after Vietnam gave OVL more time to prove commercial viability, India decided to continue the joint exploration. Vietnam extended the OVL contract for hydrocarbon exploration in Block 128, reiterating that it valued India’s presence in the South China Sea for regional strategic balance.

In June 2012, state-owned China National Offshore Oil Company, or CNOOC, opened nine blocks for exploration in waters also claimed by Vietnam.5 Oil block 128, which Vietnam argues is inside its 200-nautical mile Exclusive Economic Zone granted under the UN Law of the Sea, is part of the nine blocks offered for global bidding by CNOOC.

By putting up for global bidding a Vietnamese petroleum block under exploration by an Indian oil company, China forced India into a corner, but India was quick to show that it would not be cowed. At the July 2012 ASEAN Regional Forum in Phnom Penh, India made a strong case for freedom of navigation and access to resources in accordance with principles of international law.6 New Delhi, which so often sits on the sidelines and avoids taking sides, seems to have recognised that it can no longer afford the luxury of inaction if it wants to preserve credibility as a significant actor in East Asia and South-East Asia.

In July 2013, an unsourced report carried by the India News and Feature Alliance claimed that

‘…of late, OVL (India’s ONGC Videsh Limited) has relinquished block no.127 and suspended work in block no.128, which had been the epicentre of diplomatic uproar. It relinquished block 127 after it encountered dry wells. It had already invested US $50 million in exploration in block 128 until last year. After repeated exploration, it was found that due to the hard seabed in the area, the prospect of finding oil in the block was low. Hence, it was not a very cost effective project to continue. Besides, India had to pay US $15 million as exit fee to Petro Vietnam to get out of the block. By giving up exploration in these two blocks India has extracted itself from the SCS (South China Sea) dispute.’

But despite reports to the contrary, India has certainly not exited from Block 128. The issue of Block 127 is more complicated but there has been no official withdrawal. So officially India remains present. This continued presence, despite the apparent lack of commercial viability, further emphasises the seriousness with which New Delhi is pursuing its ‘Look East’ policy, notwithstanding China’s displeasure. In the same month that India’s withdrawal from the South China Sea oil hunt was erroneously reported, The Hindu reported that India had offered Vietnam a US $100-million credit line for the purchase of four military patrol boats.8 This rare offer, usually reserved for India’s immediate neighbours, emphasises that New Delhi’s gaze remains firmly eastwards.