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Global Risk Bulletin | Vol 6 2022

In this edition of the Global Risk Bulletin, we discuss the contentious maritime security environment in the South China Sea, look at how Turkey’s economic policies are leading to growing popular discontent, and assess the prospects for Colombia’s new president to follow through on the campaign promises that brought him to power.

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As the tensions in the South China Sea steadily increase, Asees Bajaj explores the maritime security environment around the disputed waters and the potential for accidental conflict.


In recent months, geopolitical tensions have been rising around the South China Sea on the back of conflicting claims, increased military posturing and a heightened sense of urgency from both the US and China in signalling their interests around Asia Pacific.

 

Conflicting claims continue to underline tensions in the disputed waters

The South China Sea’s maritime security environment remains under threat due to USD 2.5 trillion worth of untapped natural resources and fishing areas that have individually antagonised competing claims by Malaysia, Vietnam, Philippines, Taiwan, Brunei and Indonesia with China. In order to avoid conflict, claimants commonly engage in performative tension management; lodging diplomatic protests, denouncing conflicting claims on domestic platforms, or conducting military drills around individual claims. The Association of Southeast Asian Nations (ASEAN) has regularly sought to diplomatically engage with China to forge a legally binding Code of Conduct (CoC) in the disputed waters to ensure peace and security in the region. However, this annual exercise has resulted in the ongoing postponement of delineating maritime claims instead of producing meaningful resolution. 

The key deterrent to defining claims in the South China Sea is the waterway’s global and regional significance. Around one-third of global shipping, approximately worth USD 5.3 trillion, transits through the South China Sea annually. Not only is the economic security of the region closely tied to the ability for maritime trade to transit through the disputed waters without disruption, but the strategic waterway is also a vital artery of trade for the world’s largest economies and their ability to access the sizeable consumer markets in Asia.

 

Stakeholders are shifting away from ambiguity around individual claims

South China Sea claimants have typically refrained from conducting activity within their claimed jurisdictions in the disputed waters that overlap with China’s nine-dash line claims. However, in May 2022, the Philippines coastguard established outposts and installed navigational buoys carrying the country’s flag off three islands in its claimed jurisdiction that remains under dispute with China. Similarly, in March 2022, Indonesia’s president made public a decree outlining plans for Indonesia to establish the Natuna Islands as a defence and security zone, despite unresolved claims with China.

 

China’s nine-dash line claim

China’s nine-dash line claim is based on a u-shaped delineation by a Chinese geographer in the 1940s to mark Chinese territory beyond its land borders. The Chinese government declares its sovereignty and right to maritime resources across islands and reefs within the line, which stakes China’s claim to around ninety percent of the South China Sea.

 

Bold claims by Indonesia and Philippines are likely to have been instigated by ongoing Chinese efforts to project its military capability beyond China’s continental shores. Satellite imagery suggests that China has fully militarised at least three of several islands it has built in the South China Sea. As well as ports, military installations and airstrips, the islands are armed with anti-ship and anti-aircraft missile systems, laser and jamming equipment, and fighter jets.

In its efforts to preserve its nine-dash line claims and to counterbalance competing interests in the South China Sea, there has been a notable uptick in Chinese-led air - and sea borne encounters around its regional claims. Most recently, a Chinese fighter jet dangerously intercepted an Australian maritime aircraft during a routine surveillance exercise in international airspace over the South China Sea. As tensions rise in the disputed waters, China is expected to continue exercising its right to conduct military drills in the Indo-Pacific region, but with greater frequency and increased displays of force.

Increased assertions around claims in the South China Sea are unlikely to undermine the maritime security environment. However, within the context of broader regional developments, potentially destabilising risks have grown.

 

US - and China-led initiatives underline risks to regional maritime security

While Indonesian foreign policy remains on a neutral track, military developments suggest the country is strengthening its security relationship with the US and other democratic allies to counter Chinese activity. In August this year, the Indonesian and the US military will hold the largest iteration of their annual joint Garuda Shield military exercise which will involve 14 countries. The military exercise has historically stayed clear of the South China Sea, but this year military drills are expected to take place in the southern area of the sea around the Natuna Islands.

US presence in Asia Pacific is not limited to military cooperation with Indonesia. The Biden administration increasingly views China’s actions as destabilising and challenging the rules-based international order that US foreign policy prescribes to. As such, the US is growing its outreach in the region through various economic and security initiatives. These initiatives, and recent statements by US officials asserting the US’s pro-Taiwan rhetoric, signal an increased urgency by the US to counterbalance growing Chinese influence in the region.

 

south china sea overview

South China Sea map-01

 

Given the regional interests at stake, China’s response to these collective developments is unsurprising. Domestic Chinese legislation, the January 2021 China Coast Guard Law, and a legal order signed in June 2022, have served to empower China’s military through directives aimed at broadening military operations and authorising the coast guard to employ necessary enforcement measures against vessels violating China’s maritime claims. A recent unverified leaked audio recording between Chinese military commanders further suggests the mobilisation of China’s military forces around Guangdong, a province to the west of Taiwan. Similar to the US, China is increasing efforts to forge stronger security ties in the region, most notably signing a five-year security agreement with the Solomon Islands.

As countries increase the frequency of air- and seaborne military drills to preserve regional stability, the proximity of regional military activity to key trade routes and disputed areas in the South China Sea poses considerable risks for the maritime security environment.

 

Competing activity has raised the potential for accidental clashes around regional interests

Currently there is little indication or intelligence to suggest imminent conflict in the region. Given that stakeholders in the South China Sea reap substantial economic benefits that are closely tied to the ability of maritime trade to transit through the disputed waters without disruption, regional elements will be intent on avoiding provocations that will instigate military escalation. However, with the South China Sea growing as a hotspot for geopolitical tensions, increased military exercises aimed at protecting regional interests have substantially raised the potential for accidental clashes between rival militaries which could provoke uninvited conflict. The potential disruptions and diversions to global trade that will emerge from conflict in the South China Sea risk global contagion akin to the supply chain and inflationary pressures that have emerged from the Russia-Ukraine crisis.

S-RM is a global risk consultancy providing intelligence, resilience and response solutions to clients worldwide. To discuss this article or other industry developments, please reach out to one of our experts.

Asees Bajaj
Asees bajaj ‪Associate Email Asees

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