In another move to pre-empt its successor’s foreign policy, the Donald Trump administration has imposed 11th-hour sanctions on one of China’s energy giants over its activities in the South China Sea.
China National Offshore Oil Corp. (CNOOC), a Hong Kong-listed company and one of the world’s leading energy companies, has been placed on a lengthening US blacklist of Chinese companies affiliated with the People’s Liberation Army (PLA).
The move effectively bars the energy company, China’s main deep-water explorer, from American markets and potential partnerships.
US investors, who until currently have held up to 16.5% of the company’s listed shares, will be forced to divest amid the ongoing anti-China crackdown underway in Washington.
CNOOC operates multiple US oil and gas fields and served as a partner for major American energy companies such as Exxon Mobil Corp. Similar to other Chinse companies targeted by the Trump administration, including ZTE and Huawei, it has also relied on Western equipment and technology.
On Monday, the company’s shares in Hong Kong stock markets fell by 14%, underscoring market perceptions of the ongoing risk of tit-for-tat sanctions between the two superpowers.
CNOOC was likely targeted because of its involvement in China’s energy exploration activities in the contested waters of the South China Sea, including areas claimed by US partners and allies in Southeast Asia such as the Philippines.
The Trump administration’s latest sanctions against the Chinese energy giant are part of broader efforts by the US and its allies to prevent China from coercively cornering precious energy resources in the contested maritime area.
For decades, CNOOC has been part of China’s “big three” national champions operating at the forefront of securing China’s energy security and expansion of its global investment footprint.
Analysts now wonder if the outgoing Trump administration will also go after the energy trio’s other two members, namely China National Petroleum Corp and China Petrochemical Corp (Sinopec), both of which have vast investments across major energy-producing regions of the world.
“My guess is it’s CNOOC that got targeted, and not CNPC or Sinopec, because of its drilling in the South China Sea area, which is deemed as so-called military actions by the US,” Chinese expert Lin Boqiang said in a television interview.
In recent years, CNOOC has been involved in controversial negotiations vis-à-vis a joint development agreement with the Philippines, despite an Arbitral Tribunal rejection in 2016 of China’s expansive nine-dash line claim to as much as 90% of the South China Sea.
Facing constant Chinese harassment, including an incident involving a suspected Chinese militia intentionally ramming a Filipino fishing vessel in Reed Bank last year, smaller Southeast Asian claimants have been forced to either cease energy exploration or enter joint schemes with Chinese energy companies such as CNOOC.
The Trump administration, however, has encouraged Southeast Asian claimant states to resist Chinese intimidation tactics and develop energy resources in the area for their own interest.
“Beijing has used intimidation to try to stop [Southeast Asian] nations from exploiting the off-shore resources, blocking access to $2.5 trillion of oil and gas reserve alone,” declared US National Security Adviser Robert O’Brien during his November visit to Bangkok for a regional summit.
During his visit to Manila days later, the top US official decried Chinese energy exploration activities in the South China Sea since “those resources belong to the children and grandchildren of the people here. They belong to the [Filipino] people.”
“They don’t belong to some other country that just because they may be bigger than the Philippines, they can come take away and convert the resources of the Philippine people. That’s just wrong,” O’Brien continued.
In a major South China Sea policy statement earlier this year, the US State Department rejected almost the entirety of Beijing’s claims in adjacent waters, since “[China] cannot lawfully assert a maritime claim – including any Exclusive Economic Zone (EEZ) claims derived from Scarborough Reef and the Spratly Islands – vis-a-vis the Philippines in areas that the [Arbitral] Tribunal found to be in the Philippines’ EEZ or on its continental shelf.”
“Beijing’s harassment of Philippine fisheries and offshore energy development within those areas is unlawful, as are any unilateral [Chinese] actions to exploit those resources,” the statement added.
Encouraged by growing American support, including delivery of precision-guided missiles in recent weeks, the Philippines has seemingly reconsidered its earlier decision to explore joint exploration deals with Chinese companies.
In recent months, the Philippine government lifted a moratorium on unilateral exploration of energy resources within its EEZ, including in areas that fall within China’s nine-dash line claim. Other Southeast Asian states are also upping the ante.
Malaysia, which has also been at loggerheads with Beijing, is pressing ahead with its own energy exploration activities in the South China Sea. According to a recent report by the Center for Strategic and International Studies’ Asia Maritime Transparency Institute (AMTI), Chinese vessels continue to harass Malaysia’s oil drillship in its northern waters.
“China Coast Guard [CCG] ship 5402 harassed a drilling rig and its supply ships operating just 44 nautical miles from Malaysia’s Sarawak State on November 19,” read the report. “Malaysia deployed a naval vessel in response, which continues to tail the 5402”, the report added, following “two weeks of increasing tensions between the CCG and RMN [Royal Malaysian Navy] in the area.”
Chinese Coast Guard vessels “have maintained a nearly constant presence in the area in recent years facilitated by the nearby logistics hubs in the disputed Spratly islands,” according to the AMTI.
So far, however, there are few signs that Malaysia is backing off from the intimidation tactics.
Indonesia is also ramping up its defensive position in the North Natuna Sea, parts of which overlap with the southernmost tip of Beijing’s vaguely-defined South China Sea claims, in response to China’s growing presence in its waters.
In late-November Indonesia’s Chief of Naval Staff Admiral Yudo Margono said the naval combat force (Guspurla) Command Fleet I will be permanently relocated to the Natuna area.
“In anticipation of something that can happen any time, the commander of the combat force can directly lead a warship with the deployed task force,” Margono told reporters, emphasizing Indonesia’s growing need for combat readiness against China.