examiner.com
by D. Doms
The ongoing dispute between China and Japan over ownership of the uninhabited and rocky Senkaku islands is not the result of the September 8 collision between Japanese Coastguards and a Chinese fishing boat, but about the large oil and gas reserves on and around the cluster of islands.
The Senkaku Islands are nothing more than a cluster of small rocky isles in the South China Sea that is not worth the dispute were it not for what lays underneath and around it: large amounts of oil and gas reserves.
While the mainstream media continue to focus on Japan taking custody of a 15 crew Chinese fishing boat as the main reason for the renewed dispute, the real underpinning of such, which has been ongoing since 1970, barely gets any attention.
Today, three countries are claiming the Senkaku Islands to be rightfully theirs; China, Japan and Taiwan. The UN gave an ambiguous opinion in 1982 about who the rightful owner is of these islands, deciding that both China and Japan are entitled to the energy rights of the region.
An outright claim by either one of them would certainly be beneficial given the current demand for natural resources and fossil fuel.
It would fuel the Chinese economic growth and its strong export business if they would be able to drill for what may amount to vast and untapped reserves.
Japan on the other hand, could use the new found resource to revamp its slumping and deflationary economy.
The capture of the Chinese fishing boat is just a smoke screen to hide what is really at stake: natural resources, exploitation and economic fuel.
Secretary of State, Hillary Clinton, offered to mediate the conflicting claims over the Senkaku Islands in July but was immediately rebuked by Chinese Government officials.
The seemingly small dispute however takes on a different meaning when placed in the grand scheme of things that stealthily occurs in the region.
Let us look at a recap of events in the last six months alone to get a better picture of what boils economically that may allow us to understand the puzzle instead of the jigsaw pieces.
• The current dots
-China refuses to de-peg its currency from the USD and instead agrees to peg the yuan to the Malaysian Ringgit to further increase its convertibility.
-China starts investing heavily in yen-denominated assets and makes the yen rise 15% in 2010, although indirectly.
-Japan’s economic growth slows to a snail’s pace of 0.4%, while China grows at 10%.
-Taiwan signs a free trade agreement with China, eliminating most of the import tariffs.
-South Korea wants an amendment of the USKFTA to include its Kaesong Industrial Complex.
Connecting all the dots with a simple red thread should give us a clear view of how the Asia Pacific region is positioning itself within the global economic game.
• The thread and the puzzle
Convincing Taiwan to retract its claim for the Islands is a very easy task to accomplish given that China just gave more concessions in their new free trade agreement than ever before. That means Taiwan is out of the race and not part of the big picture.
South Korea never really had a legitimate claim given the history of the islands that goes back to the 19th century.
There are now two main players left to complete the jigsaw puzzle of global economics and if the current events over the past 10 years are any indication of which horse will win and which one will place, the choice should be obvious.
http://www.examiner.com/international-trade-in-national/oil-and-gas-reserves-at-center-of-china-japan-dispute