scir spring 2015 article 1

Southern California International Review

Volume 5, Number 1 • Spring 2015

The Southern California International Review (SCIR) is a bi-annual interdis-ciplinary print and online journal of scholarship in the field of international

studies generously funded by the School of International Relations at the University of Southern California (USC). In particular, SCIR would like to thank the Robert L. Friedheim Fund and the USC SIR Alumni Fund.

Founded in 2011, the journal seeks to foster and enhance discussion between theoretical and policy-oriented research regarding significant global issues. SCIR is managed completely by students and also provides undergraduates

valuable experience in the fields of editing and graphic design.

Copyright © 2015 Southern California International Review.

All rights reserved. No part of this publication may be reproduced or transmitted in anyform without the express written consent of the Southern California International

Review.

Views expressed in this journal are solely those of the authors themselves and do not necessarilyrepresent those of the editorial board, faculty advisors, or the University of Southern California.

Southern California International ReviewSCIR.org

StaffEditor-in-Chief:Aaron Rifkind

Editors:Brad McAuliffeNatalie Tecimer

Reid Thom

Anna MerziJustine BreuchPatrick Vossler

Layout: Aaron RifkindCover: Samir Kumar

ISSN: 1545-2611

Conflict or Cooperation? Proven Energy Reserves in Contested Seabeds

John Deacon

Introduction: The Importance of State Boundaries when Fossil Fuels are Involved

Many of the world’s territorial and maritime boundaries have yet to be precisely estab-lished. Whether it is because the benefits of the diplomacy involved would not outweigh the costs or because states simply do not see the need to establish them, these undefined bound-aries have been largely ignored. However, when new reserves of fossil fuels are discovered, these boundaries suddenly become an issue of international significance. States are quick to jump on the opportunity to claim the territory as their own and, with it, the fossil fuel reserves. But when two or more states claim ownership of the same territory with proven energy reserves, they come to a critical juncture. In an attempt to answer the question of whether the presence of proven or potential energy reserves under territorially disputed seabeds proves to be a source of conflict or cooperation, this paper will analyze the cases of both the Caspian Sea and the East China Sea Island disputes. These cases are chosen because both disputes have received international attention, have not been completely resolved, and, most importantly, contain proven or potential fossil fuels within internationally disputed boundaries. After the comparison of these two cases, the level of cooperation and conflict will be evaluated and the variables that led to this outcome will be identified.

In this case, cooperation is defined as the ability of states to peacefully make boundary agreements and the subsequent production of the energy reserves. Conflict denotes the lack of international agreement and the existence of military interstate disputes (MIDs). This paper ultimately argues that proven or potential energy reserves under contested seabeds do not lead to conflict but facilitate the cooperation necessary to extract the available resources.

This paper begins with an examination of the Caspian Sea offshore fossil fuel dispute, which will then be compared to the current state of the Senkaku/Diaoyu East China Sea Island dispute. Using research from recent academic journals, scholarly articles, and rel-evant political theory, this paper seeks to provide a comprehensive evaluation of each case and insight into their outcomes – whether defined by cooperation or conflict. This essay will conclude by acknowledging potential constraints on the research conducted and proposing future areas of study that would contribute to the resolution of future conflicts and promote cooperation.

John Deacon is a senior in Boston College’s Arts & Sciences program studying International Relations, with minors in History and Political Science.

12

Southern California International Review - Vol. 5 No. 1

John Deacon

The Caspian Sea Maritime Boundary DisputeLocated between Central Asia and the Middle East, the Caspian Sea is the largest en-

closed body of water at 168,000 square miles. For hundreds of years, it has been known to host oil, but interest in exploiting Caspian Sea energy reserves did not arise until the fall of the Soviet Union in 1991 when Azerbaijan, Turkmenistan, and Kazakhstan gained independence.1 Five countries border the Caspian Sea: Russia, Azerbaijan, Turkmenistan, Kazakhstan, and Iran, and all of these states have developed an interest in the 48 billion bar-rels of proven oil reserves and 292 trillion cubic feet of proven natural gas reserves, which, combined, comprise four percent of the world’s proven total.2 Yet most of these reserves are located close to Azerbaijan or Kazakhstan, where their conflicting interests have encouraged a dispute about the best way to divide, or delimit, the maritime boundaries.

Despite these disagreements, the five countries involved have acted bilaterally and uni-laterally, resulting in major oil exports beginning in 2000.3 Currently, there are a series of production projects set to build pipelines in the Caspian Sea. In Kazakhstan, there are five major operational oil production projects and two oil-export pipelines. In Azerbaijan, the Azeri Chirag Guneshli and Shah-Deniz offshore oil and natural gas productions projects are operational.4 The greatest Caspian pipeline construction came in 2005 when the Baku-Tbilisi-Ceyhan (BTC) pipeline began operating, spanning from Baku, Azerbajan to Turkey and circumnavigating Russia as a transit state.5

The only MID involved in the Caspian Sea occurred in July 2001 when Iran used a military vessel to chase Azerbaijani surveyors from disputed waters between the two states in an attempt to stop delimitations.6 MIDs are conflicts between states that do not involve a full-scale war, employing the use of some military force but causing fewer than one thou-sand deaths.7 Other than the presence of fossil fuels in a disputed territory, there is a range of influential variables that ultimately complicate negotiations among the five states. These variables include the legal issues and discrepancies regarding the Caspian Sea, the land-locked geography of Caspian exporters, and the number of actors involved and presence of third-party interests in guiding the outcome of the dispute.

1 “Caspian Sea Region,” United States Energy Information Administration, Aug. 2013.2 Brenda Shaffer, “Caspian Energy Phase II: Beyond 2005,” Energy Policy, Nov. 2010, 7209-15.3 Ibid.4 Shaffer, “Caspian Energy.”5 “Caspian Sea Region.”6 Brenda Shaffer, Energy Politics (University of Pennsylvania Press, 2009). 7 Jeff D. Colgan, “Oil and Revolutionary Governments: Fuel for International Conflict,” International Organization Founda-tion, 2010, 661-94.

13


Conflict or Cooperation?

Littoral States Use Legal Definitions to Support Their Claims The most significant legal issue contributing to the longevity of the Caspian Sea

dispute concerns the legal definitions of the Caspian Sea. Because it is such a unique body of water, it has been difficult to categorize. The Caspian Sea is landlocked, displaying char-acteristics of a lake, but it has the high salinity content of a sea. This problem is magnified by the amount of resources at stake.

There is a serious debate concerning the division of the Caspian Sea, which is contin-gent upon its definition as either a lake or a sea. If defined as a lake, it would adhere to the International Law Governing Border Lakes, which asserts that a “condominium” regime would be installed, where all littoral (coastal) states would divide the Caspian Sea waters and seabed equally.8 Azerbaijan and Kazakhstan both oppose equal division of its resources because they both share a larger coastal boundary than the other three and therefore believe they deserve a larger share of the resources. Azerbaijan and Kazakhstan support defining the Caspian as a sea, which would call for the adherence to the United Nations Convention on the Law of the Sea (UNCLOS). This would signify that ownership of the Caspian resources extends from the geographical coastlines, so Azerbaijan and Kazakhstan would have access to more resources than Russia, Iran, and Turkmenistan.

Ultimately, the manner in which the Caspian Sea is divided is determined by the unani-mous agreement among all coastal states.9 Whether it is defined as a sea or a lake, though, would make no real difference in an anarchical international system. The littoral states are responsible for dividing the resources, which calls for cooperation. However, it is important to understand that this cooperation does not need to be encompassing; states have previ-ously agreed to establish bilateral boundaries with their neighbors. This is exemplified by the concessions Kazakhstan made to Russia in July 1998 when the two states agreed to the delimitation of the Caspian Sea between their borders.10 Therefore, the legal issues should be seen as more of a thin veil for underlying economic motivations of the littoral states than a determining factor in how the Caspian Sea is divided.

Landlocked Geography of Caspian Exporters Presents DifficultiesThe geographical nature of the exporting states requires further cooperation. Because

the Caspian Sea has no outlet to other major bodies of water and the littoral states are land-locked, the states cannot use commercial tankers to ship oil. Instead, Caspian states such as Kazakhstan and Azerbaijan have relied on oil pipelines. Unlike commercial tankers, oil pipelines are permanent and span across multiple countries, presenting a unique political

8 Timothy Oleson, “Gaming the System in the Caspian Sea: Can Game Theory Solve a Decades-Old Dispute?” Earth Maga-zine, Oct. 2013.9 “Caspian Sea Region.”10 Shaffer, 2009.

14


John Deacon

risk. These pipelines are subject to manipulation and disruption along the supply line, so every country that the pipeline passes through presents a risk based on its political interests and stability.11 Furthermore, oil pipelines present enormous upfront costs: the BTC pipe-line is the second largest oil pipeline in operation and cost nearly four billion U.S. dollars to construct.12

But despite these political and economic obstacles, many oil pipelines have been con-structed and started operation. There are currently six operating pipelines that transport oil from the Caspian Sea to European markets, two of which transport oil to East Asian markets.13 Littoral states, with the notable exception of Iran, have reached agreements with each other. To mitigate risks associated with heavy reliance on one state’s stability, therefore, they have taken a “multiple pipeline” approach.14 Although this is very expensive, it avoids dependence on a single transit state and thereby enhances the source state’s national security, and this ultimately results in multilateral cooperation.

Number of Actors Including Foreign Interest Alleviates the Game Theory ProblemThe number of actors involved in the dispute suggests that negotiations will be more

complex, but in reality it has provided a variety of options for states hoping to reach an agree-ment. Game theory posits that the greater the number of actors involved in a negotiation, the more difficult it becomes to reach an agreement. Indeed, with five different players at the table, there comes a breadth of interests and bargaining ranges. For instance, Russia and Iran have more political and economic power than the other three littoral states, but they also stand to gain the least from negotiating the reserves. This is demonstrated by Russia’s attempt to block the establishment of a natural gas pipeline across the Caspian Sea (TCP) so it could maintain dominance over the European market.15 On the other hand, Azerbaijan and Kazakhstan could profit significantly from creating export markets, illustrating the vari-ous influences of national interests in completing negotiations. These negotiations should become more complicated as third party interests like those of Europe, Turkey, and the United States become involved. It is widely known that the United States has been committed to facilitating the independence and security of post-Soviet states in an attempt to gain political leverage.16 But what has occurred in the past decade-and-a-half in the Caspian Sea has proved contrary to the principles of game theory. Instead of the large N-value (number of players) complicating negotiations, the increase in the number

11 Shaffer, 2010.12 “Caspian Sea Region.”13 Ibid.14 Shaffer, 2010.15 Shaffer, 2009.16 Shaffer, 2010.

15



of players has led to a rise in export and investment options for players like Azerbaijan or Kazakhstan that want to exploit the resources. Through multiple smaller agreements between two or three states that share similar interests, Caspian countries have avoided the game theory dilemma by not operating under a single encompassing agreement. These agreements have been established between states that could greatly benefit from foreign direct investment and third-party oil companies, as well as states like Russia that could benefit from transit fees.17 In the end, a unanimous agreement may never be reached in the Caspian Sea region, but that has not yet stopped the states that want to cooperate from atempting to do so.18

East China Sea Island DisputeThe East China Sea Island dispute began in 1971 when the sovereignty of the Senkaku/

Diaoyu Islands reverted from American to Japanese control. Following World War II, from Article III of the Treaty of San Francisco, the U.S. had handed its “administrative rights” over the islands back to Japan.19 However, both China and Taiwan claimed sovereignty over the islands.20 In June of 1971, President Nixon, in a concession to Taiwan, determined that the United States would be neutral in any underlying sovereignty claims, which set the U.S. policy over the islands for the next forty years. Since then, the United States, with this doctrine of neutrality, hoped that China and Japan would resolve the dispute on their own. In June 2008, the two states were close to an agreement to develop jointly the Shirakaba/Chunziao and Asurao/Lonjing gas fields, but negotiations broke down after China asserted sovereignty over the islands in 2009. In November 2013, the dispute became a militarized conflict when China announced an Air Defense Identification Zone (ADIZ), restricting air traffic over the East China Sea.21 Both players further militarized the conflict by deploying naval vessels in the territorially disputed waters.

Sovereignty over the islands is desired because a geological survey in the late 1960s de-termined that the waters surrounding the islands likely have large deposits of oil and natural gas.22 This energy potential has yet to be realized. China and Japan place special importance

17 Ibid.18 A unanimous agreement is unlikely to occur because of the current trade sanctions on Iran imposed by the U.S. and Euro-pean governments. Oil companies from each region are prohibited from conducting business with Iran. Caspian Sea countries other than Iran that wish to profit from exports therefore choose to avoid dealing with Iran for stability reasons as well as to gain Western favor and business. This has led Iran to lash out in defense of its own interests, which is shown by the only MID that has occurred during these negotiations.19 “How a Tiny Island Chain Explains the China-Japan Dispute,” The Atlantic, Dec. 4, 2013. 20 Paul J. Smith, “The Senkaku/Diaoyu Islands Controversy: Much More Than a Territorial Dispute,” China U.S. Focus, Oct. 2012.21 “How a Tiny Island Chain Explains the China-Japan Dispute.” 22 “Today in Energy,” U.S. Energy Information Administration, Nov. 2013.

16


John Deacon

upon these islands because they import more fossil fuels than any other country in the world.23 With China’s rapidly growing economy and middle class and Japan’s nuclear power plant shutdowns, both countries would benefit enormously from access to the potential oil and natural gas deposits along the chain of islands. These national interests fuel the tensions that are currently rising in the East Asian Sea. Aside from the presence of fossil fuels in a disputed territory, the current energy policies of each state, the nationalism and history of tension between the two states, and the role of the United States in resolving the dispute also intensify the conflict.

Current Energy Policies of Both Players Rely Heavily on Fossil FuelsChina and Japan both rely heavily on fossil fuels, and increases in domestic resourc-

es decrease energy dependence and consequently enhance national security. China relies mainly on Middle Eastern countries for its supply of oil, along with some countries in Africa. Together, Saudi Arabia and Angola account for one-third of China’s crude oil imports.24 Dependence on few states for energy increases a state’s vulnerability to energy markets and political instability. Combined with the Chinese Communist Party’s reliance on fast economic growth to garner support, the opportunity to increase domestic production of fossil fuels becomes very appealing.25 Japan separated itself from fossil fuel energy until the Fukushima disaster led to the shutdown of all Japanese nuclear power plants. Nuclear power made up thirty percent of Japan’s energy, and fossil fuel imports now largely cover this loss.26

Both the benefits of domestic production and Japan and China’s large economies set them apart from the Caspian littoral states. Although both Russia and Iran have large GDPs, their relative benefits from domestic production of Caspian resources is relatively small. And while Azerbaijan and Kazakhstan benefit substantially from the production of oil and natural gas reserves in the Caspian seabed—all of Azerbaijan’s exports come from Caspian Sea resources—the countries’ GDPs are miniscule compared to those of China and Japan. It is this combination of large GDPs and potential marginal benefits that makes the East China Sea case different from the Caspian Sea case. The situation of two world powers competing for the same resources has proven to be a recipe for conflict, as shown by naval operations and China’s imposition of the ADIZ.

State Nationalism and History of Conflict Make the Dispute PersonalChina and Japan have a history of tension and nationalism that makes the Senkaku/

Diaoyu Islands a political battle as well as an economic one. China has plenty of political

23 Ibid.24 “China,” U.S. Energy Information Administration, Feb. 2014.25 “How a Tiny Island Chain Explains the China-Japan Dispute.”26 Kyung Lah, “Japan Shuts Down Last Nuclear Reactor,” CNN, May 2012.

17



motivations for establishing sovereignty over these islands. Some see China’s claim of sov-ereignty as an attempt of the new president, Xi Jinping, to establish legitimacy. China’s na-tionalism is exemplified by Jinping’s “Chinese Dream” slogan.27 Another argument can be made for China using this dispute as an opportunity to flex the new muscles it grew after three decades of sustained economic growth and modernization.28 China has increasingly been seen as a bully in East Asia, exemplified in the “nine-dotted line” it drew when claim-ing sovereignty over the South China Sea Islands.

Japan also has a poor reputation in East Asia. China, South Korea, and many other Asian countries believe that Japan has not sufficiently made amends for its pre-World War II regional dominance, with its “Greater East Asia Co-Prosperity Sphere” in which it en-visioned a world divided among major blocs, with Japan leading East Asia.29 Today, this dispute can be seen as an attempt to recapture the political power it once enjoyed before the Second World War.

These historical tensions add a dimension of complexity unseen in the Caspian Sea disputes because Japan and China are far from allies. Since the breakdown of agreements in 2009, the dispute has no longer been about fossil fuel resources. China has focused on slow accumulations of power in its political and economic rise, which Japan has worried about keeping China from becoming a larger threat to its national security and maintaining its own political prowess. This dispute is between the second and third largest economies in the world and has become personal and much more difficult to resolve diplomatically, as evidenced by Jinping’s refusal to meet with Japanese officials.30 This type of behavior con-tributes to the potential for military brinkmanship and future MIDs.

United States’ Role Has Increased ConflictU.S. involvement is the last variable affecting the conflict in the East China Sea. The U.S.

is inevitably tied to the dispute for three reasons. First, the Treaty of San Francisco acknowl-edges “administrative rights” over the islands to Japan. This seemingly ambiguous language has a profound effect on China’s perception of the U.S. position and has perhaps incited the problem. Although the official U.S. foreign policy is to abstain from taking a position on sovereignty, it is clear that China views the superpower as decidedly pro-Japan on the issue.31

Second, as an ally, the U.S. is bound by treaty to aid Japan, making the United States’ neutrality claim much less credible. The U.S. has an interest in maintaining stable relations

27 “How a Tiny Island Chain Explains the China-Japan Dispute.”28 Ibid.29 William T. De Bary, “Sources of East Asian Tradition: The Modern Period” (Columbia University Press, 2008).30 “How a Tiny Island Chain Explains the China-Japan Dispute.”31 “CFR Media Call on East China Sea with Sheila Smith and Scott Snyder,” Council on Foreign Relations, Dec. 2013.

18


John Deacon

between the two states. However, China has rejected third-party mediation in the dispute, as it lacks an alliance with the U.S.32

Third, it is in the United States’ national security interest to keep China from becoming a regional hegemon. China’s conflict in the East China Sea may preclude a larger conflict that signals its desire to remove U.S. influence from Eastern Asia. This larger conflict has fueled tensions and conflict in the East China Sea, which has prevented any measure of co-operation. Unlike U.S. oil companies working around Russian opposition to the BTC and TCP pipelines, Japan and the U.S. cannot circumvent China without risking militarized consequences.

Conclusion: Conflict Results from Multi-Causal Political Variables It is important to briefly note the limitations of studying states’ behaviors. Because

there is a vast number of factors that can influence a state’s behavior, it is rare to establish causal linkage between a variable and an action. Furthermore, this paper views states from the realist perspective as unitary and rational actors in an anarchical system. Due to the length limits of this essay, it does not include the additional research that would account for variables that other schools of thought would consider more influential. These variables include the influence of culture, individual behavior of political leaders, the types of political regimes of the states involved, and non-state actors like NGOs and IEAs. Future research of these variables would help clarify state decision-making in territorial disputes involving proven energy resources, which would ultimately contribute to the development of solutions to promote future cooperation.

After examining maritime border disputes in the Caspian Sea and East China Sea, it has been determined that the Caspian Sea dispute among the five littoral states can be largely classified as one of cooperation, with few elements of conflict, while the East China Sea dis-pute should be classified as one of conflict, with very little to no elements of cooperation. The Caspian Sea maritime boundary dispute is markedly cooperative because there have been a series of bilateral agreements that have led to the development of oil and gas infra-structure as well as resource exploitation. The Caspian Sea dispute can improve through multilateral agreements, particularly ones that involves Iran, which as a state has yet to make any agreements and has shown militarized defiance to resource exploitation. The East China Sea maritime boundary dispute is conflictive because there has been increased militariza-tion, proven by the establishment of the Chinese ADIZ and the deployment of naval vessels on behalf of both players involved, as well as a complete lack of resource development and exploration.

32 Ibid.

19



After analyzing the main variables of each case, there is a noticeable difference in the involved states’ motivations, which provides insight into determining an answer to the over-arching research question. The Caspian Sea dispute is economically oriented, where the states involved seek to capitalize on the oil and natural gas deposits for their own monetary benefit. The only exception to this was Russia’s attempt to prohibit U.S. and European oil companies from establishing political influence, but this was thwarted due to the presence of states that were interested in Western investors, namely Kazakhstan and Azerbaijan. On the other hand, the East China Sea dispute is economically and politically oriented, with a deep-seeded history of political tensions that contribute to MIDs, demonstrated by the U.S.-Japanese alliance and the threat of China as a rising global power. These factors show that the presence of proven and potential energy reserves under territorially disputed seabeds provides an incentive for cooperation, as seen in the Caspian Sea case, but most often have multi-causal variables that go beyond the presence of resources in a territorially disputed region, which could potentially facilitate a conflict.

20


John Deacon

Works Cited“Caspian Sea Region.” United States Energy Information Administration. Aug. 2013.“CFR Media Call on East China Sea with Sheila Smith and Scott Snyder,” Council on Foreign

Relations. Dec. 2013. “China.” U.S. Energy Information Administration. Feb. 2014. Colgan, Jeff D., “Oil and Revolutionary Governments: Fuel for International Conflict.”

International Organization Foundation (2010): 661-94.De Bary, William T. “Sources of East Asian Tradition: The Modern Period.” Columbia

University Press, July 2008.“How a Tiny Island Chain Explains the China-Japan Dispute.” The Atlantic, Dec. 2013. Lah, Kyung. “Japan Shuts Down Last Nuclear Reactor.” CNN. May 2012.Oleson, Timothy. “Gaming the System in the Caspian Sea: Can Game Theory Solve a

Decades-Old Dispute?” Earth Magazine, Oct. 2013. Shaffer, Brenda. “Caspian Energy Phase II: Beyond 2005.” Energy Policy (2010): 7209-15.Shaffer, Brenda. Energy Politics. University of Pennsylvania Press, 2009.Smith, Paul J. “The Senkaku/Diaoyu Islands Controversy: Much More Than a Territorial

Dispute.” China U.S. Focus, Oct. 2012.“Today in Energy.” U.S. Energy Information Administration. Nov. 2013.

scir spring 2015 article 1

Documents