Sino-Philippine Energy Cooperation in the South China Sea: A Chimera

Due to its dependence on Middle Eastern oil, the Philippines has been hit harder than any other Southeast Asian country by the closure of the Straits of Hormuz. But President Ferdinand Marcos’ suggestion that the war could rekindle talks between the Philippines and China on joint energy projects in the South China Sea faces three insurmountable challenges: the Philippines’ Constitution, a trust deficit between the two countries and Philippine nationalism.

In a media interview on 24 March, Marcos suggested the Gulf crisis might provide “impetus” to stalled talks between the two countries on joint development of oil and gas resources in the South China Sea. Earlier the same day, he had declared a national energy emergency as the country faced the prospect of running out of fuel.

The executive order allows the Marcos administration to prosecute fuel hoarders, introduce measures to mitigate rising fuel prices, and provide social welfare to those suffering the hardest from the energy crunch.

In its desperation to secure oil supplies from alternative sources, the Philippines quickly turned to two countries with which it has strained political relations: Russia and China. The Marcos administration condemned Moscow for its 2022 invasion of Ukraine. China and the Philippines have a long-running territorial and jurisdictional dispute in the South China Sea.

But was Marcos’s suggestion just an offhand comment or a serious policy proposal? 

China certainly seems willing to give it serious consideration. Marcos’ idea is in line with the late Chinese Premier Deng Xiaoping’s maxim that the best way to resolve the South China Sea debacle is to shelve the sovereignty dispute and jointly develop maritime resources. Little wonder China’s embassy in Manila enthusiastically endorsed Marcos’ comment as “the right path” to peace and stability in the South China Sea.

A few days after the media interview, Philippine and Chinese officials held bilateral talks for the first time since last year, though energy cooperation was not on the agenda because, according to Foreign Affairs Undersecretary for Policy Leo Herrera-Lim, the issue was “too complicated”.

But even if Marcos is sincere, dedicated talks between the Philippines and China on energy cooperation in the South China Sea faces three almost insuperable obstacles: the Philippine Constitution, trust issues and nationalism.

According to Article XII, Section 2 of the Philippines’ 1987 Constitution, all natural resources in Philippine waters — either within the country’s 12 nautical mile (nm) territorial sea or 200 nm exclusive economic zone (EEZ) — are owned by the State. The exploration and development of those resources must be under the full control or supervision of the State. The Constitution allows the State to enter into joint venture production-sharing agreements with commercial entities, but they must be 60 per cent Filipino-owned.

On two occasions, this constitutional provision has derailed efforts by the Philippines to conduct joint exploration in the South China Sea. 

In 2005, the state-owned energy corporations of the Philippines, China and Vietnam agreed to conduct seismic surveys over a three-year period in the South China Sea. However, the agreement, known as the Joint Marine Seismic Undertaking (JMSU), triggered a storm of controversy in 2008 when it was revealed that the survey covered parts of the Philippines’ EEZ, including undisputed waters. The China-leaning president at the time, Gloria Macapagal Arroyo, quickly distanced herself from the JMSU, and when it lapsed a few months later it was not renewed.

But even before it had expired, Arroyo’s political opponents had challenged the constitutionality of the JMSU. It took the Philippine Supreme Court 15 years to reach a decision, but in 2023 it ruled that the JMSU was unconstitutional because the Chinese and Vietnamese partners were wholly foreign owned and therefore breached the 60% Filipino-owned requirement. 

In 2019, an even more China-leaning Philippine leader, President Rodrigo Duterte, initiated talks with China on joint development. But the negotiations collapsed three years later for two reasons. First, the same constitutional limitations applied. Second, China refused to recognise the Philippines’ sovereign rights in its EEZ. These rights were endorsed by a 2016 arbitral tribunal award which had rejected Beijing’s nine-dash line claims.

Any future talks would face the same limitations and very likely the same outcome.

Within weeks of Marcos’ comment, the Philippines had accused China of firing flares at a Philippine Coast Guard aircraft near Scarborough Shoal and, more seriously, dumping cyanide into waters surrounding Second Thomas Shoal, presumably in an attempt to poison the fish eaten by the Philippine Marines stationed on the atoll.

The second challenge centres on trust. For negotiations to proceed, there has to be at least a modicum of trust between the two sides. But since Marcos took office in 2022, Manila has pushed back against China’s assertiveness in the South China Sea, resulting in a string of tense incidents between the two countries’ coast guards and navies, especially at Scarborough Shoal and Second Thomas Shoal.

Within weeks of Marcos’ comment, the Philippines had accused China of firing flares at a Philippine Coast Guard aircraft near Scarborough Shoal and, more seriously, dumping cyanide into waters surrounding Second Thomas Shoal, presumably in an attempt to poison the fish eaten by Philippine Marines stationed on the atoll. China vehemently denied both actions.

On the Chinese side, the Philippines’ regular military exercises with the US in the South China Sea are a persistent source of vexation. As the two countries began their annual Balikatan exercises on 20 April, China denounced Manila and Washington for “playing with fire”.

In short, mutual recriminations are hardly the basis to establish “stable relations” between the two countries before any talks can begin.

The third obstacle is nationalism. In tandem with increasing Chinese assertiveness, Philippine nationalism over the South China Sea has been growing over the past few decades. And no sooner had Marcos made his remark than critics were berating him for rewarding Chinese aggression, repudiating the arbitral tribunal award and undermining the country’s sovereignty.

Marcos’ popularity is waning and he has to mitigate the country’s energy crisis. Talks with China about a resource-sharing deal of questionable legality, however, is not the answer, especially on the tenth anniversary of the arbitral tribunal ruling, which validated the Philippines’ sovereign rights to oil and gas in its EEZ.  

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