Sanctioned Chinese Company Likely to Keep Influence in South China Sea

Sanctioned Chinese Oil Company Likely to Keep Influence in South China Sea

Experts say a Chinese oil company under U.S. sanctions is likely to keep its influence in the South China Sea even with the economic restrictions in place.

The sanctions, which took effect December 3, came from an executive order issued by the White House in November. The company is China National Offshore Oil Corporation (CNOOC), a major Chinese oil driller working in the South China sea.

The sanctions ban U.S. citizens and companies from trading the company’s shares. U.S. officials ordered the restrictions because they believe the oil company cooperates with China’s military. CNOOC did not answer a VOA request for comment.

U.S. President Donald Trump has said the goal of the sanctions is to restrict the reach of Chinese companies that have military ties.

CNOOC is the first oil and gas company on a list of 35 Chinese companies facing the same sanctions. The company has yearly sales of about $33 billion. U.S. citizens are among its investors.

South China Sea map

CNOOC has active oil operations in the disputed South China sea. Some area experts say the U.S. sanctions will not interfere with these operations, nor with CNOOC’s overall financial success. The company’s American investment is estimated to be just 16 percent.

CNOOC can easily find other non-U.S. sources for financing, including possibly the Chinese government, the experts say.

Alexander Vuving is a professor at the Daniel K. Inouye Asia-Pacific Center for Security Studies in Hawaii. He told VOA that oil drilling equipment and supplies can largely be found outside the United States.

CNOOC’s involvement in the South China Sea is seen as an extension of China’s influence in the 3.5 million-square-kilometer waterway. Six governments have competing claims in the South China Sea. China claims about 90 percent of the sea as its territory and often sends coast guard ships throughout the area.

“CNOOC is not just a company, but it’s also on the forefront of China’s sovereignty struggles, sovereignty combat, against the other countries,” Vuving said.

FILE - In this Monday, May 11, 2015, file photo, This aerial photo taken through a glass window of a military plane shows China's alleged on-going reclamation of Mischief Reef in the Spratly Islands in the South China Sea. The dispute over the…

China has angered other claimants to the sea by creating small artificial islands in the disputed waterway. Observers say Chinese crews have developed some of the land for military purposes.

Vietnam is another country exploring oil and gas in the South China Sea. It has expressed concerns about CNOOC’s development in the area. In 2014, an oil rig linked to the Chinese driller led to a boat-crashing incident in waters east of Vietnam. The incident led to anti-China rioting in Vietnam.

Over the past two years, Chinese ships have also passed near Vietnamese exploration areas. The actions led to criticism by Vietnam’s government.

CNOOC is seeking to cooperate with other countries in the South China Sea as well. The company is targeting partners looking to receive financial support and technical expertise. In September, for example, the driller offered 19 offshore areas in the South China Sea for joint exploration with foreign companies.

Carl Thayer is a professor of Southeast Asian studies at the University of New South Wales in Australia. He told VOA that China and the Philippines are seeking to complete a joint exploration deal signed two years ago. “The big deal I think is really where does this service contract with the Philippines get finalized,” Thayer said.

The goal of the U.S. sanctions is to “pressure against awarding contracts” between China and other countries, said Jay Batongbacal, a professor at the University of the Philippines. But if CNOOC is stopped, he said, China can quickly find another company for exploration with the Philippines.

Vuving said he thinks the U.S. sanctions could hurt CNOOC mainly “in terms of prestige.”

That opinion is shared by Mark Valencia, of China’s National Institute for South China Sea Studies. He wrote in a recent Asia Times commentary the U.S. sanctions could reduce CNOOC’s stock value and “severely damage the company’s reputation.”

I'm Armen Kassabian.

Ralph Jennings at the Voice of America reported this story. Armen Kassabian adapted it for VOA Learning English. Bryan Lynn was the editor.

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Words in This Story

sanctions – n. an action that is taken or an order that is given to force a country to obey international laws by limiting or stopping trade with that country, by not allowing economic aid for that country

driller – n. a tool used for making holes

forefront – n. the most important part or position

sovereignty – n. unlimited power over a country, a country's independent authority and the right to govern itself

artificial – n. not happening or existing naturally, created or caused by people

rig – n. equipment or machinery that is used for a particular purpose

contract – n. a legal agreement between people or companies

prestige – n. the respect and admiration that someone or something gets for being successful or important

reputation – n. the common opinion that people have about someone or something