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TheStreet Open House

Cool Heads Quietly Dominate Heated South China Sea Dispute

(Corrects story originally published May 12 to say China accused Vietnam of ramming its ships.)

TAIPEI (TheStreet) -- It looks like Southeast Asia is prepping for war.

On Thursday China accused Vietnam of ramming its ships after water cannons had forced them back in a flap over the bigger country's oil rig on the smaller one's continental shelf. China had demanded earlier in the week that the Philippines return 11 of its fishermen who were arrested on suspicion of poaching sea turtles in what Manila considers an exclusive economic zone.

The two Southeast Asian governments hardly accept what Beijing says about the latest upsets in a 40-year-old contest over rights to the strategic, resource-packed South China Sea. Both found backing from the Association of Southeast Asian Nations meeting Sunday and lean increasingly on the United States for support. The Philippines is also pressing for United Nations action against China, but Beijing says it won't go there.

No one, however, will go to war. Everyone needs everyone else. China wants Southeast Asia's markets and economic cooperation. Southeast Asia looks to China as an export destination. The United States backs Asia ex-China only to check Beijing's growing power but otherwise prizes its stable relations with the world's No. 2 economy.

Flaps last week over the ocean tract south of Hong Kong show China is standing up for its perceived rights to drill and fish. They prove that the smaller South China Sea claimants, at least two out of five, are sick of China's maritime expansion. That's all.

"For China, a two-pronged strategy is still on track, although the hard hand has gone up a little," says Lin Chong-pin, retired strategic studies professor in Taiwan, noting that Beijing also wants economic relations with neighbors to the south.

"The United States wants those neighbors to challenge Beijing, but no war, just to consume China's energy or time by encouraging Vietnam and other countries," he says.

That means China's state-owned oil giant CNOOC Ltd. (CEO) can keep drilling in the 3.5 million square-kilometer ocean without a serious fight. The Philippines can go ahead with awarding oil and natural gas exploration contracts, potentially to foreign bidders. Speaking of which, Exxon Mobil (XOM) started working a natural gas tract in the same ocean just over a year ago, a joint venture with Malaysia. The ocean is estimated to hold 7.5 billion barrels worth of oil.

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