By: Sourishree Ghosh, Research Analyst, GSDN
The South China Sea (SCS) is the new arena of geopolitical competition and rivalry. The South China Sea not only holds a regional but also global importance. Geographically, this region encompasses a portion of the Pacific region stretching roughly from Singapore and the Strait of Malacca in the Southwest, to the Strait of Taiwan in the northeast. Historically, the South China Sea played a crucial role as an important trade route which led to economic growth in the countries of the Asia-Pacific Region. The geopolitical competition for influence in the South China Sea has been a sphere of contestation among various regional powers including China, Vietnam, Malaysia, Brunei and Taiwan. This region has assumed significant geopolitical significance in the region, thereby has become the latest geopolitical hotspot in the present context of world affairs. The article aims to delve into the economic and geostrategic importance of the South China Sea to understand the geopolitical power play in the region.
Economic and Geostrategic Importance of the South China Sea
The political geography of the South China Sea is one of the factors determining the geopolitical significance of this region. The region is at the crossroads of the international maritime routes which connect the Indian Ocean and the Pacific Ocean. The global economic importance of this region also lies in the fact that it accounts for over one-third of global maritime traffic, connecting the vast major economies and connecting Asia with the markets of Europe, Africa and Americas. The South China Sea accounts for more than 60% of the global maritime trade, more than 22% of the total global trade and one third of the global shipping.
It is a crucial hub of trade for the economies of East Asia, South Asia, South Asia and beyond. About a million people rely upon the marine economy of the SCS. The access to the energy reserves and fisheries are at risk and it is vital to the lifeline of several South Asian states. This region is the main artery of trade in Southeast Asia which links waterways from Singapore and Malaysia to Indonesia, the Philippines and Taiwan. This dispute over the South China Sea is a multifaceted dispute. An example is the 105-kilometre-long Singapore Strait which is integral for economic security of Singapore as it is placed on the most critical sea lanes of communication (SLOC). If there is disruption in the South China Sea, there would be severe damage and disruption to the global supply chain. A study by Kerem Cosar and Benjamin Thomas, University of Virginia, published as a working paper by the US National Bureau of Economic Research, states that major Asia-Pacific economies could potentially incur a loss of up to 12% of their GDP in the situation of the closure of key trade routes of the region. Therefore, the South China Sea is a maritime choke point.
According to the United Nations Conference on Trade and Development, an estimated US$3.37 trillion worth, or 21% of all global trade passed through this region in 2016. The SCS is also a geopolitical chokepoint for the economies connected to this region. The South China Sea accounts for trade which is equivalent to 5% of the global GDP. The region is also a very important world energy trade route as almost a third of the global crude oil and over half of the global liquefied natural gas (LNG) passes through the South China Sea every year. According to estimates, the South China Sea contains about 190 trillion cubic feet (Tcf) of natural gas reserves and 11 billion barrels of untapped oil reserves. The competition over access to these resources have been the source of geopolitical conflict among the nations.
China’s imports and exports flow through these waters, so the SCS is integral to the economic and energy security of the region. This region is also one of the biggest maritime routes of the Liquefied Natural Gas (LNG). It is also estimated by the US Energy Information Administration, that about 4.7 trillion cubic feet of LNG (which is around 40% of the global LNG trade) passes through this region. So, the energy security of the extra regional as well as regional countries are dependent on the South China Sea. The Sea also contains important mineral resources including rare earth elements. These minerals play a crucial role in modern technology and manufacturing. The freedom of navigation in the SCS, which means that all nations can travel through the sea and utilise the sea for various purposes without the interference or intervention from other nations. According to the Department of Environment and Natural resources, Philippines, the SCS accounts for one-third of the entire world’s marine biodiversity. The region accounts for around 12% of the world’s fish catch. Moreover, its untapped reserves of oil and natural gas are significant, which is estimated to be around 11 billion barrels of oil and 190 trillion cubic feet of natural gas. This is integral for the economic growth of the littoral nations.
There are critical security issues with regard to maritime safety and infrastructure in this region. The South China Sea faces the problem of overfishing and this has led to imbalance in the maritime ecosystem of this region. The significance of preserving the marine ecosystem of this region requires maritime cooperation from all nations. Blake Herzinger, civilian Ind0-Pacific defence policy expert, pointed out that food security in the South China Sea can quickly cause national instability in the Southeast Asia region.
Major Players and their Interests in the South China Sea
South China Sea is characterised by an intersection of territorial demands and strategic importance, thereby making it one of the most contentious regions of the world. There are major regional security challenges of this region on account of the ongoing disputes over the islands, reefs and waters. This geopolitical rivalry among major powers has also threatened the peace and stability of this region. There are many regional and extra-regional countries which are shaping the evolving dynamics of the South China Sea. This region has also become the latest arena of clash between the US and China.
The most pressing geopolitical conflict is the delicate and complicated territorial disputes of the region. The strategic location of these islands has made the South China Sea a geopolitical hotspot. The Spratly Islands (Nansha Islands) is one of the most disputed islands in this region. It is a resource rich and strategically positioned archipelago. This island is at the heart of the territorial disputes in the South China Sea. Paracel Islands is another site of territorial dispute. This island is the hub of fishing and world’s fourth most productive fishing zone. This also plays a vital role for the economies of China and Vietnam.
The Scarborough Shoal is a subject of conflicting claims between China and the Philippines. The whole conflict in the South China Sea also revolves around China’s contentious “Nine-Dash Line” claim over territories which overlap and clash with the territories of the maritime waters (Exclusive Economic Zones) of the other neighbouring states, namely Brunei, Indonesia, Malaysia. Philippines, Taiwan and Vietnam. These nations allege that China is establishing its hegemony over this region by militarising this region. The military bases developed by China would give China significant geopolitical leverage in this region and project its power.
The territorial disputes have grown in recent times as states have tried to exert their sovereignty in this region. Historically, the South China Sea has been an arena of disagreements and antagonisms. The regional players such as Philippines, Vietnam and Malaysia have high stakes in the region with regard to their national security.
The United States has been playing the role of maintaining the regional equilibrium and supports the claims of some of China’s neighbouring states and implements the Freedom of Navigation Operations (FONOPs) and also upholds the commitments under the Mutual Defense Treaty (1951). This treaty mandates mutual assistance if either of the parties is harmed. This injects further complexity into the South China Sea.
A military dispute would lead to disruption of regional equilibrium. China is unilaterally taking aggressive initiatives for changing the status quo in the South China Sea by building artificial islands and militarisation of the SCS. The economic security of China is closely tied with the South China Sea. This region is an arena of geopolitical contestation among major powers. The United States has always maintained a strong presence in the region along with its regional allies, including Japan and the Philippines.
China has been aggressively pursuing its territorial claims and the Chinese Government created artificial islands with military facilities and declared an Air Defense Identification Zone (ADIZ) in the region. Russia also shares its own set of concerns and interests in this region. In August 2023, the US Navy sent destroyer ships to the coast of Alaska when around a dozen of Russian and Chinese warships were spotted in the nearby international waters.
Japan also has high stakes in this region for securing its commercial and energy needs, thereby supporting the freedom of navigation in the region and territorial conflicts. There has been a substantial increase in the military deployment by the US, Philippines and Japan in recent years to uphold the Freedom of Navigation in the international sea.
The South China Sea also holds geostrategic importance for India’s economy in the context of India’s national security. India also has high geopolitical stakes in the region given India’s trade in the Indo-Pacific Region. A Lok Sabha reply states that over 55% of India’s trade passes through the South China Sea and Malacca Straits. So, the evolving dynamics of the South China Sea would also determine the geopolitics of the Indo-Pacific Region. India, as a State party to the UNCLOS, in its foreign policy has put forward its stance that it supports the freedom of navigation and unimpeded commerce based on the principles of international law as reflected in the UNCLOS (UN Convention of the Law of the Sea).
The freedom of navigation through the Special Economic Zones also determines the territorial integrity and sovereignty of the maritime borders of the littoral states. The economic security of the regional states is closely tied with the South China Sea. This region has geopolitical as well as geostrategic importance for the energy and economic security of the littoral countries. To conclude, the ongoing diplomatic tensions in the South China Sea has significant political and economic implications for the future of this region.
