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South China Sea Flare-Up Pits China Against the Philippines Over Oil, Shipping Lanes

Shipping lanes used by international marine carriers including Neptune Orient Lines (NOL:Singapore) and Maersk Line (MAERSK-B:Copenhagen) will not be any more affected now than before. Six governments claim all or parts of the ocean, but usually focus on tracts where they have material holdings such as oil contracts or military bases rather than interfering with passing traffic.

Because the Philippines knows it's militarily weaker than China -- ranked 37th vs. third in conventional military might -- it will not get into scuffles at sea, says Eduardo Araral, professor at the Lee Kuan Yew School of Public Policy under the National University of Singapore. But Manila may take up Beijing's offer for two-way talks on the sea dispute, Araral says.

Growing ties with China's fellow superpower the U.S., plus the request for UN arbitration, would strengthen its bargaining position. The U.S. state department quickly expressed support for Manila's filing for UN dispute resolution, a move likely to irk fellow superpower China.

"I'm sure China will do something symbolic to squeeze the Philippines, and I'm sure the Philippines has factored in that cost already, but in the future of course the relationship will further go south unless the Philippine government does something more," Araral says.

"The next move is for the Philippines to have a formal talk with Beijing," he says. "[President Benigno] Aquino has got a few good chips with him so he can directly talk to the Chinese."

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

At the time of publication, the author held no positions in any of the stocks mentioned.
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