Japan-China compromise over East China Sea getting harder
May 10, 2006Kyodo News
Mikio Haruna
Amid intensifying resource wars with rising nationalism in every corner of the globe, a conflict between Japan and China over the East China Sea, where there are rich oil and natural gas deposits, is heating up.
Behind the conflict, there is 'neglect' by the Japanese government over a long period of time -- a failure to approve applications for the rights to explore for 33 years.
It was the late Tsunehisa Omija, an Okinawa Prefecture businessman, who first predicted rich oil deposits in the sea. On Yaeyama Islands, there are beaches with star-shaped foram corpses also found along the Persian Gulf, leading him to believe that there would be undersea oil fields in the neighborhood of the islands Japan calls the Senkaku.
Since 1948, when the islands were under the administration of the U.S. military, Omija had conducted his own investigations, and in 1969, he successfully applied for the mining right in the sea around the islands.
An investigation report by the U.N. Economic Commission for Asia and the Far East (ECAFE) also pointed to the possibility of oil deposits there.
Omija, who wanted to use oil revenues for Okinawa's development found a congenial spirit in Masao Araki, now 83, who later became vice chairman of now defunct Nissho Iwai Corp., which merged with Nichimen Corp. into Sojitz Holdings Corp.
Uruma Resources Development Co., a subsidiary of Toyo Oil Development Co. affiliated with then Nissho Iwai, succeeded the mining right from Omija and applied to the then Ministry of International Trade and Industry (now the Ministry of Economy, Trade and Industry) for the right to explore in the sea around the Senkaku Islands in 1973 and received approval.
But for 33 years since, the Japanese government has approved no test drilling. Araki has appealed to about 50 politicians, including former prime ministers, and bureaucrats at the Foreign Ministry and METI for such approval.
In 1990, when China proposed to Japan a joint development plan, Araki appealed to the Foreign Ministry, but the bureau chief in charge said, 'The Soviet Union may propose a joint development plan in resolving the problem of the Northern Territories, and Japan will be placed in a disadvantageous position.'
The Northern Territories is Japan's name for four islands northeast of Hokkaido that the former Soviet Union took control of at the end of World War II.
In 1997, he called on then Prime Minister Noboru Takeshita at his home together with Yoshitaka Yotsumoto, dubbed 'the political community's trend spotter,' and was told, 'It is better to study Japan-China joint development.'
He also met late Prime Minister Keizo Obuchi. Takeshita, Yotsumoto and Obuchi are now dead.
Obuchi visited China in 1999 as prime minister and then Chinese Premier Zhu Rongji proposed that both countries use resources in the East China Sea together. But Obuchi returned home without responding to the proposal, missing a good opportunity to break the deadlock over the development of resources in the sea.
China has since carried out test drilling in more than 20 places near the Japan-demarcated median line between the two countries and begun production at the Pinghu gas field. China does not regard the median line as legitimate.
The now defunct Export-Import Bank of Japan, currently the Japan Bank for International Cooperation, extended $120 million in loans together with the Asian Development Bank to China for helping construct a 375-kilometer-long pipeline to carry the Pinghu gas to the Shanghai-Pudong district in fiscal 1996.
This money was supplied by the governmental finance body without policy coordination with the government, according to the bank's sources.
Two U.S. and European companies, including Unocal Corp. of the United States, which had engaged in joint development near the Japan-drawn median line with a Chinese enterprise, withdrew from the work in 2004 for 'commercial reasons.' It appears there are insufficient natural resource deposits near the line.
According to Selig Harrison, a senior scholar at the U.S. Woodrow Wilson International Center for Scholars, the most promising oil field in the East China Sea is in the Okinawa trough.
This is followed by areas around the Senkaku Islands, which themselves are disputed with China and others. China calls them the Diaoyu Islands.
China is proposing joint development with Japan on the Japanese side of the median line and areas near the disputed islands. Resources in these areas are said to be rich.
In July last year, the Ministry of Economy, Trade and Industry finally approved an application for the test drilling right filed by Teikoku Oil Co., a company merged with International Oil Development Co., into Inpex Holdings Co. in 1969.
But if the company carries out test drilling there, 'obstruction by Chinese warships' is expected, and it will not do so until an 'environment is prepared,' said an industry source. So far, four Japanese companies have applied for the test drilling right, but work has yet to begin.
The Japanese government investigated the geological structure from 2004 to 2005, but no exact information about resources deposits can be available until test drilling is done. Japan has no information.
Araki said the 'ostrich policy' of politicians and bureaucrats has invited rough times for Japan. The East China Sea, the gateway to China, is gaining importance as a strategic military area, making it harder year by year for the two countries to compromise, analysts said.
Manabu Takamizawa, a section chief at the research divisions at the Japan-China Economic Association, said Japan's energy-relation loans to China have totaled 1.7 trillion yen since 1979 in addition to the country's huge official development assistance.
'These Japanese financial and technical contributions to China's energy development are little known among Chinese people,' Takamizawa.