US sanctions threaten to sink China at sea

While the US Navy ramps up patrols near China’s claimed features in the contested South China Sea, American legislators are upping the ante with proposed sanctions on Chinese entities involved in Beijing’s expansionist militarization of the contested maritime area.

In a rare bipartisan move, US Republican Senators Marco Rubio and Tom Cotton along with Democratic Senator Ben Cardin last week formally re-introduced the South China Sea and East China Sea Sanctions Act, a punitive measure that aims to target Chinese individuals and companies.

The bill’s provocative language, which refers to China’s “illegitimate activities” to “aggressively assert its expansive” claims in the hotly contested sea, is certain to provoke a response from Beijing at a time bilateral tensions are already on a boil. It could also escalate trade tensions if top Chinese companies are targeted with South China Sea-related sanctions.

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Significantly, the sanctions bill takes the legal high ground, saying that the US “opposes actions by the government of any country to interfere in the free use of waters and airspace in the South China Sea or East China Sea” while saying China should stop pursuing “illegitimate claims and to militarize an area that is essential to global security”

It also calls on the US government broadly to “expand freedom of navigation operations and overflights and respond to Chinese provocations with commensurate actions.” Many in the region believe that China is on the verge of declaring an Aerial Defense Identification Zone (ADIZ), a move that would give it de facto control over the sea.

The US aims to forestall any move in that direction. Earlier this month, a US Navy guided-missile destroyer deployed near the Scarborough Shoal, a sea feature occupied by China since 2012 but claimed by the Philippines as part of its exclusive economic zone (EEZ).

The freedom of navigation operation came against the backdrop of joint US-Philippine coast guard exercises held earlier this month near the shoal, representing the two sides’ first ever search-and-rescue exercise near the China-controlled feature.

China claims nearly 90% of the South China Sea through its so-called “nine-dash line” map and has consistently maintained that America’s freedom of navigation operations in the area are illegal and a violation of its sovereignty.

China has territorial disputes with the Philippines, Brunei, Malaysia, Taiwan, Vietnam and Indonesia in the highly trafficked waterway.

First mooted in early 2017, the revived sanctions bill “requires the President to impose entry and US-based property sanctions” on “any Chinese person that contributes to construction or development projects” or “engaged in actions or policies that threaten peace and stability” in the South China Sea.

Given China’s holistic approach to the South China Sea disputes, whereby all relevant government and military as well as para-military agencies are involved in pushing its ever-expanding claims, the sanctions could extend beyond state-owned and influenced companies to target the People’s Liberation Army as well as local government units.

The bill includes an initial list of 25 Chinese companies that could be sanctioned under its provisions. They include CCCC Dredging Group, a subsidiary of the state-owned China Communications Construction Company that has been instrumental in artificial island-building in contested areas of the sea.

Other major Chinese companies mentioned include China Petroleum Group (Sinopec), China National Offshore Oil Corporation (CNOOC), China Mobile, China Telecom, and China Aerospace Science and Industry Corporation (CASIC). If sanctioned, they would all be barred from US-based or owned financial institutions, a potential blow major blow for the globally oriented firms.

Moreover, the sanctions could ultimately target no less than Chinese President Xi Jinping, who has personally overseen the country’s massive reclamation and militarization activities in the South China Sea. Some analysts see the bill as a potential diplomatic “nuclear option” against China as trade negotiations falter.

If passed, which seems increasingly possible as bipartisan support for confronting China coalesces, the sanctions will for the first time put America’s military might behind the claims of regional allies and strategic partners pitted against China in the sea.

The sanctions would also effectively nix America’s longstanding formal “neutrality” on the status of the disputed territories and resources in China’s adjacent waters, particularly in the South China Sea.

The Trump administration’s hardening stance in trade talks has gone hand-in-hand with a lesser noticed tougher defense policy against China, a strategic shift that could likewise soon require regional countries to take sides between the two superpowers.

This week, US Defense Secretary Patrick Shanahan is expected to announce a new Indo-Pacific Strategy at the Shangri-La Dialogue in Singapore, the world’s premiere gathering of defense officials and experts.

The new strategy is expected to contain new military, diplomatic and economic measures to deter and punish China’s maritime expansionism in adjacent waters.

It will also likely call on regional allies and like-minded partners to conduct more FONOPS and related operations in the area; step up defense aid to China’s rival claimant states such as the Philippines and Taiwan; and encourage expanded and increasingly coordinated naval exercises and other military cooperation in China’s adjacent waters.

The sanctions bill, some suggest, could be designed specifically to complement that soon-to-be-unveiled Asian security strategy. At the very least, Trump’s China hawks can dangle the possibility of sanctions to press Beijing into more acquiescence in the South China Sea.

US Secretary of State Mike Pompeo, who would be charged with reporting to Congress on which entities should be targeted under the sanctions, has expressed confidence in the utility of a maximum pressure strategy against China.

“I haven’t met anyone in Asia that believes there was a pivot from the previous administration,” Pompeo said in reference to Barack Obama’s “pivot” to Asia policy, which committed to deploy 60% of America’s naval assets to the theater, in a late May interview.

“But today they can see we are more engaged. We’re there. We’re not only attending meetings but we’re acting. We’re active. Our military is active,” America’s top diplomat said.