I had been highly skeptical of the chances for a deal since I believed that the Japanese government’s legal concerns could not be adequately addressed. However, the Japanese government has apparently decided to gloss them over with a business concession from the Chinese side.
The Asahi reports that the Japanese and Chinese governments will announce a joint development deal on the East China Sea gas fields this week. According to the report, the agreement will cover four gas fields—Shirakaba/Chungxiao (SC), Kashi/Tianwaitian (KT), Kusunoki/Danqiao (KD), and Asunaro/Canxue (AC).
The two governments had been at loggerheads over the gas fields because of conflicting legal claims over their respective exclusive economic zones. The Japanese government claims jurisdiction up to the median line between the two countries, while the Chinese government claims jurisdiction up to the Okinawa Trough based on its claims over the natural extension of its continental shelf.
The Japanese government claims that Japanese surveys show that SC and KT extend to the Japanese side of the median line between China and Japan and that that may also be the case for KD and AC.* This would mean that China would be tapping into gas resources part of which rightfully belongs to Japan.* The Chinese side has refused to share its data on the matter. The Japanese government has sought a deal that would include both sides of the median line, while the Chinese government has insisted that a deal would only cover the area where the two EEZ claims overlap. In the meantime, China began production at KT in 2005, and is scheduled to begin production at SC later this year.
The Asahi report goes on to say that the Japanese side will make an equity investment in the Chinese development company for SC and that the two sides will conduct joint explorations on the Japanese side of the median line. So, has the Chinese government made a major concession? Not really.
Note that the Japanese participation on the Chinese side of the median line comes in the form of an equity investment in a Chinese company. Unless the Chinese government is constitutionally barred from conferring any mineral rights to an entity with foreign shareholders, it is not making any legal concessions with regard to jurisdiction over its EEZ. The joint exploration in the disputed areas is a different animal. Unless the exploration is conducted under the exclusive jurisdiction of the Japanese Mining Law, for all practical purposes, the result will be to effectively share joint jurisdiction over the disputed area. This will become even more obvious if and when production activities commence in the disputed area. The Chinese government may have yielded on the economics, but has not budged on the legal end.
In recent years, international law has favored the median line, and the Japanese government has offered to subject the dispute to over the International Court of Justice or the International Tribunal for the Law of the Sea. The Chinese government understandably has refused to do so. Given these recent trends in international case law, nationalists and other elements that want Japan to stand up to China no end will be displeased with the compromise and will insist that Japan continue to uphold its legal claim.
For after all, the economics of the gas fields are reportedly not very attractive. The consensus is that they are too distant and too small to be commercially extracted and transported to Japan. Nearby China is the only viable market for either side of the median line. Moreover, although the recent jump in energy prices makes the gas fields more attractive, they are insignificant as far as energy security is concerned. This is not ANWR that we are talking about. Thus, such elements will see too much loss of national honor and little of economic gain from the deal.
* You may recall that Saddam Hussein accused Kuwait of stealing Iraqi oil in justifying his 1990 invasion.