Oct 092014

Reference ID Created Released Classification Origin
2008-08-01 08:26
2011-08-30 01:44
Embassy Manila

DE RUEHML #1838/01 2140826
O 010826Z AUG 08
C O N F I D E N T I A L SECTION 01 OF 03 MANILA 001838


E.O. 12958: DECL: 07/31/2018

¶B. MANILA 404
¶C. MANILA 317

Classified By: Ambassador Kristie A. Kenney, Reasons 1.4 (b) and (d)

¶1. (C) SUMMARY: Recent steep increases in the cost of
petroleum and pending deadlines associated with the UN
Convention on the Law of the Sea (UNCLOS) have kept the
six-nation territorial dispute over the Spratly Islands in
the eye of public debate in the Philippines. The underlying
controversy over the Spratlys strikes a chord in Philippine
national pride, both because of the awareness that the
Philippine armed forces cannot defend the Philippines’ claim
to the islands, and because of concern over growing Chinese
influence in the region. In addition, there is widespread
suspicion that corruption may influence Philippine policy.
Competing views on how strongly the Philippines should press
its claim to the islands are closely linked to political
affiliations. In a move at least partly intended to defuse
further criticism of its cooperation with China and Vietnam
in exploring the Spratlys’ mineral resources, the Arroyo
administration allowed its Joint Marine Seismic Undertaking
(JMSU) agreement with those countries to lapse when its term
expired June 30. END SUMMARY.


¶2. (SBU) The Spratly Islands of the South China Sea are the
object of overlapping sovereignty claims by China, the
Philippines, Vietnam, Taiwan, Malaysia, and Brunei to various
islands believed to be rich in natural resources — chiefly
oil, natural gas, and seafoods. The Spratlys consist of some
100-230 islets, atolls, coral reefs, and seamounts spread
over 250,000 square kilometers, although the island chain’s
total landmass equals less than five square kilometers. In
1988 and 1992, these sovereignty disputes led to naval
clashes between China and Vietnam. The 2002 ASEAN-China
Declaration on the Conduct of Parties in the South China Sea
lowered tensions in the region by calling for self-restraint,
cooperation, and renunciation of the use of force among all

Growing Regional Tension Over Spratlys

¶3. (C) In September 2004, the Philippine and Chinese
national oil companies agreed to conduct seismic soundings in
the South China Sea. In March 2005, the Joint Marine Seismic
Undertaking (JMSU) agreement among China, Vietnam, and the
Philippines coordinated “pre-exploration” of possible
hydrocarbon reserves, and an exclusive contract was awarded
to a state-owned Chinese company to conduct the surveys.
However, the disputes have not ceased. In April 2007, China
accused Vietnam of violating its sovereignty by allowing a
consortium of energy companies led by British Petroleum to
develop gas fields off Vietnam’s southeast coast, and in July
2007, Chinese naval vessels fired on a Vietnamese fishing
boat, killing one sailor.

UN Law of the Sea

¶4. (C) The Philippines, along with Brunei, Malaysia, and
Vietnam, have overlapping claims to some or all of the
Spratlys based on the UN Convention on Law of the Sea
(UNCLOS). Under UNCLOS, the Philippines must meet a May 12,
2009, deadline in defining the territorial baselines of the
Philippine archipelago. At issue for the Philippines has
been whether to include the Spratlys within its UNCLOS
baselines, or restrict the baselines to territorial limits
outlined in the 1898 Treaty of Paris, whereby Spain ceded the
Philippines to the United States following the
Spanish-American War. Even in the latter case, under UNCLOS,
the Philippines still retains an Exclusive Economic Zone
(EEZ) of 200 nm, and may claim an extended continental shelf
of 350 nm; the latter would appear to encompass virtually all
of the Spratlys. Even the Philippines’ 200 nm EEZ includes
most of the islands, while the 200 nm EEZs of China, Taiwan,
and Vietnam include few or none.

The China Card

¶5. (C) Recent corruption scandals involving Chinese
investments and development assistance have spilled over to
affect the debate over the Spratlys. In September 2007,

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allegations arose that President Arroyo’s husband Mike Arroyo
had accepted multimillion-dollar kickbacks from the Chinese
in return for facilitating a $349 million telecommunications
deal between the Chinese ZTE Corporation and the Philippines’
National Broadband Network (NBN); the deal was soon scrapped
(reftel B). This and other recent scandals involving the
Chinese led to charges in Congress and media circles that the
Arroyo administration had likewise assented to the Spratlys
joint seismic exploration deal in exchange for bribe-tainted
loans, and that the government’s attempts to get Congress to
back off on inclusion of the Spratlys in Philippine baselines
was similarly motivated by illicit Chinese influence. In
mid-May, reports surfaced in the national media outlining new
eyewitness accounts of secret 2006 meetings in Shenzhen,
China, between President Arroyo and ZTE officials, serving to
keep the Chinese angle of the controversy in the public eye.
Controversy has similarly touched the primarily
Chinese-financed and Chinese-contracted North Luzon Railways
(Northrail) project, which entails the construction of an
80-kilometer railway from metropolitan Manila to the Clark
Freeport. Chinese-Philippine disputes resulted in a March
cessation of construction.

Three Different Approaches

¶6. (C) In August 2007, Senator Antonio Trillanes filed
Senate Bill 1467, which defined the Philippines’ baselines as
including the main archipelago described in the 1898 Treaty
of Paris (the current Philippines), plus Scarborough Shoal,
while classifying the Spratlys as a “regime of islands”
outside the baselines. However, under the December 2007
House Bill 3216 submitted by Foreign Affairs Committee Chair
Rep. Antonio Cuenco, the Philippines’ baselines would include
not only the main archipelago (Treaty of Paris), but also the
Spratlys and Scarborough Shoal. Cuenco said publicly that a
December 2007 Chinese note verbale to the Philippine Embassy
in Beijing expressed Chinese “shock and concern” that his
bill had defined the Philippine baselines to include the
Spratlys. Fearing that the inclusion of the Spratlys in
Philippine territorial baselines would provoke China, inflame
tensions in the South China Sea, and upset the delicate
status quo, the Arroyo administration pursued a third
approach, pressing Congress to revisit the baselines issue
and include only the main archipelago, leaving the Spratlys
and Scarborough classed as “regimes of islands.”
Administration supporters argued that the Philippines would
have no hope of winning a war against China.

Free-for-all in the Congress

¶7. (C) The highly-publicized February 2 visit to the
Spratlys by Taiwanese President Chen Shui-bian re-ignited
debate over the islands (reftel C). In March, then –
Philippine Air Force Commander Lt. Gen. Pedrito Cadungog
announced that the airstrip would be upgraded at Pagasa
Island (also known as Thitu or Zhongye Dao), home to a
Philippine military base and a civilian settlement of more
than 300 Filipinos. Then- Armed Forces Chief of Staff Gen.
Hermogenes Esperon underscored that a beefed-up Philippine
military presence in the islands stood ready to defend
Philippine sovereignty. Although Cuenco’s House bill
including the Spratlys and Scarborough Shoal was tabled April
21 over the objections of its author, on April 22, Senate
Minority Leader Aquilino Pimentel called the Arroyo
administration’s exclusion of the Spratlys from the baselines
treasonous, and called for the adoption of the House bill in
its entirety. Dialogue perhaps reached its low point soon
afterwards, when pro-administration Senator (and
International Court of Justice candidate) Miriam
Defensor-Santiago criticized House members for “shooting
their mouths off,” and characterized the Administration’s
legislative opponents in the Spratlys debate as “idiots.”

Embassy Reaction: Studied Neutrality

¶8. (C) When questioned by the Philippine media about the
U.S. position on the Spratlys, the Ambassador and other USG
officials have consistently stressed that the U.S. is not a
party to territorial disputes in the region, and that it is
our hope that all such conflicts will be resolved peacefully
among the relevant parties in accordance with applicable
international law. For example, at the May 26 opening
ceremony in Puerto Princesa, Palawan Island for the
U.S.-Philippine Cooperation Afloat and Readiness Training
(CARAT) bilateral naval exercise, national media pressed Rear
Admiral Nora Tyson and Embassy Press Officer over whether the

MANILA 00001838 003 OF 003

presence of such a robust American naval force (five vessels,
including two guided-missile frigates) in the Spratlys area
indicated a U.S. endorsement of Philippine claims, and an
intention to assist in defense of those claims. We carefully
responded that the purpose of the bilateral naval exercise in
question was to build capacity for interoperability and
bilateral cooperation, that the exercise would not be carried
out in the Spratlys area, and that the U.S. calls on all
claimants to resolve the issue peacefully.


¶9. (C) The Spratlys controversy represents something of a
strategic conundrum to the Arroyo administration. Filipino
nationalism and widespread suspicion over China’s intentions
in the region militate in favor of the government taking a
more aggressive stance in advocating for Philippine
sovereignty over the islands, and the terms of the UNCLOS
likewise tend to favor such a position. For these reasons,
the Arroyo administration had little choice but to allow the
JMSU agreement to lapse when it expired on June 30, even
though doing so posed a setback to its relations with China.
On the other hand, the Philippines is the weaker party in an
increasingly asymmetric relationship with China, and
Philippine military forces are sufficiently occupied in
addressing the nation’s insurgent groups, without the added
worry of projecting power in the South China Sea. It is
clearly not in the Philippines’ best interests to allow
tensions in the South China Sea to escalate to the level of
armed confrontations. Against a backdrop of rising oil
prices and growing demand for offshore energy reserves,
controversy over control of the Spratlys’ resources seems
likely to continue. END COMMENT.



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