Report

How Do You Say 'Drill, Baby, Drill' in Chinese?

Beijing's deployment of its billion-dollar oil rig sends a clear message to Vietnam: We'll drill where we damn well please.

NOTE: This story was updated May 6, 2014 to include State Department comments.

 

China has triggered a potentially dangerous escalation in tensions in the South China Sea with the dispatch over the weekend of the Haiyang Shiyou 981, a massive billion-dollar rig designed to drill for oil in waters claimed by both Beijing and Hanoi.

Vietnam has vociferously protested the move because the rig is squarely inside the 200-mile exclusive economic zone that extends offshore from every country; China, which claims the nearby Paracel Islands, says the rig is legal because it is working in waters that it says belong to Beijing.

It's hardly the first time that the search for energy has sparked fights between China and its neighbors in the region, but the latest step is a big deal for several reasons.

China had carried out energy survey activities in disputed areas, and prevented other countries, including Vietnam, from carrying out their own surveys in disputed waters, but this seems to be the first time that Chinese oil companies are actually drilling wells in waters claimed by other nations. Just as alarmingly, China and Vietnam have a history of armed conflict, including a bloody land war in 1979 and a series of armed skirmishes over disputed islands in the South China Sea. The oil drilling issue could potentially trigger a new round of sparring.

The Chinese move also represents a slap in the face to President Barack Obama, who just returned from a trip to Asia designed to reassure jittery allies like Japan, South Korea, and the Philippines that the U.S. would deter Chinese maritime bullying. Six days later, Beijing took one of its most provocative steps to date.

"Given the recent history of tensions in the South China Sea, China’s decision to operate its oilrig in disputed waters is provocative and unhelpful to the maintenance of peace and stability in the region," State Department spokesperson Jen Psaki said at a briefing Tuesday. The dispatch of an oil rig by itself is hardly enough to unleash the dogs of war, but is meant to slowly assert Chinese control over the region, experts said.

"It's going to be one more of these small, incremental steps that individually won't lead to conflict, but collectively over time gradually will change the status quo," said Mike McDevitt, a retired admiral and head of strategic studies at the CNA Corporation.*

A spokesperson for the Chinese Foreign Ministry defended the deployment of the rig, saying that it is operating "completely within the waters of China's Paracel Islands," Reuters reported. China has occupied the Paracel Islands since the 1970s, and also claims the maritime resources around those specks of land. That's part of Beijing's expansive view of its sovereign rights in the South China Sea, the so-called "nine-dashed-line" that the current regime inherited from Chinese nationalists at the end of the civil war in the late 1940s.

Vietnam's Foreign Ministry and state oil firm PetroVietnam, unsurprisingly, both protested the move. The Foreign Ministry said that the move is a "violation of Viet Nam's sovereign rights," since the rig is located in waters that only Vietnam has the right to exploit for undersea resources. PetroVietnam asked China National Offshore Oil Corporation, a state-owned giant, to remove the rig and cease drilling activities there in the future.

The South China Sea is the biggest flashpoint for potential conflict between China and neighbors like Vietnam and the Philippines, and others; the sea is both a byway for trillions of dollars in international trade and potentially sits atop a mother lode of oil and gas resources coveted by energy-poor countries in the region. Manila recently took Beijing to an international tribunal in The Hague over competing claims to tiny specks of land in the South China Sea, in part because it believes there are plentiful deposits of oil and gas off the Philippine coast.

The quest for oil and gas lies behind the latest incident, at least superficially. China publicly announced in 2012 that it would auction off energy-exploration rights in disputed waters; at the same time, CNOOC took the unusual step of building its own deep-water rig rather than contracting to purchase one from specialized suppliers. That was a costly, but necessary, step for China's oil company to take: CNOOC did not want to have to rely on Western companies to supply drilling gear for contentious areas of the South China Sea because the companies could have potentially refused to lease the equipment to CNOOC if it was going to be used on controversial deepwater projects.

Last weekend, CNOOC dispatched the rig to drill in deep waters about 120 nautical miles east of the Vietnamese coast, not far from where international oil firms such as Exxon Mobil have found potentially large deposits of natural gas. It seems part and parcel of CNOOC's stated strategy of dispatching oil rigs to serve as "mobile national territory" that can extend Chinese sovereignty to open waters.

"I think this is the other shoe dropping, which is the Chinese actually going to go out and drill for oil" in those disputed areas, said Holly Morrow, an expert on the South China Sea at Harvard University's Belfer Center.

China's apparent escalation with the dispatch of the rig is especially surprising because the two countries signed an accord in 2011 to peacefully resolve South China Sea disputes, as they successfully did with maritime borders in the Gulf of Tonkin.

"I thought that agreement cooled down the rhetoric between Vietnam and China, and that China would not go out of its way to humiliate the Vietnamese," said McDevitt. "But the Chinese seem to feel they have a good argument for going where they're going, and they are going to do it."

The U.S. as a rule doesn't take a position as to who owns what in the disputed areas, but in recent years has stressed the need for states such as Vietnam and China to rely on the rule of law to settle disputes over territory and maritime rights in the South China Sea. In December, Secretary of State John Kerry announced a deal to help strengthen the Vietnamese coast guard, in part to help parry Chinese territorial expansion in the area.

Oil and gas rigs are the pointy ends of the battle over sovereignty, but there is plenty of uncertainty over just how energy-rich the area really is. In part, that is because all the territorial disputes have discouraged large-scale surveys of potential oil and gas resources.

The U.S. Energy Information Administration estimates that the South China Sea holds the modest amount of 11 billion barrels of oil and 190 trillion cubic feet of natural gas. CNOOC believes there could be ten times as much oil and plenty more gas in the South China Sea. Vietnam, bolstered by recent work by firms such as Exxon, is also bullish on the energy prospects in parts of the South China Sea it considers its own.

But regardless of how much energy actually lies under the ocean, Beijing's heavy-handed approach to regional relations and the damage it has caused could hardly be worth tapping some extra barrels of oil, said Morrow of the Belfer Center. That makes the constant tug-of-war, provocations, and brinksmanship more about national sovereignty than a scramble for resources.

"The cost in foreign policy terms of what they are doing is so high, and so outweighs whatever energy security benefit there is," she said.

*Correction, May 6, 2014: Mike McDevitt is with the CNA Corporation; an earlier version of this story said that he was an analyst with the Center for Naval Analyses. (Return to reading.)

AFP - Getty

Report

Can I Pay You in Rubles?

Meet the young British lawyer who could unravel the West’s sanctions against Russian and Ukrainian oligarchs.

From Tehran to Moscow, the Obama administration and its European allies have made targeted sanctions their weapon of choice against rogue governments and those who support them. The business people, political leaders, spooks, and soldiers who find themselves on those blacklists have a surprising ally: an understated British lawyer named Maya Lester.

Lester, 39, has built a successful career getting Iranian, Syrian, Egyptian, and Burmese clients out of Western crosshairs. She's already started getting calls from people sanctioned after Russia annexed Crimea and moved tens of thousands of troops to its border with Ukraine. The crisis there is intensifying by the day, and President Barack Obama and German Chancellor Angela Merkel used a Friday press conference at the White House to warn that more sanctions may be coming. When they do, Lester's phone will likely be ringing off the hook.

She's an unlikely combatant in the financial wars. Lester said she has no opinion about whether sanctions should be used or their effectiveness. Her core belief, she said, is that those accused of supporting terrorists, working with corrupt regimes, or trafficking in weapons should have the same rights as anyone else to challenge their accusers before a judge. She believes the lawsuits she brings make the sanctions system stronger.

"I don't think anyone benefits from a system that puts the wrong people on the list," Lester said in an interview from London. "The goal of everyone, including those who argue for due process, is a robust system."

Lester travels around the world to meet her clients, many of whom are legally barred from setting foot in other countries, let alone flying to Washington or Europe to plead their cases. When she shows them the evidence against them, Lester said, it's usually the first time anyone has told them why they're even on the list. "They're very often very grateful," she said.

Taking on unpopular causes runs in her family. Her father is Lord Anthony Lester, a prominent human rights pioneer who spearheaded equality and anti-discrimination laws in the U.K. after studying at Harvard in the 1960s. Her mother, Katya Lester, is an immigration judge, who hears cases of asylum-seekers. Grandfathers on both sides were also in the legal profession. Though she practices in London, she studied at Yale Law School and spent time as a fellow at the U.S. State Department in 2012.

"It didn't come out of nowhere," said her brother, Gideon Lester, a professor of theater at Bard College. "Law and particularly human rights law was very much a subject of regular conversation when we were growing up."

He said his younger sister has a fierceness and a tenacity, hidden behind her soft curls and big brown eyes.

"I mean this in the nicest way -- there's a bit of a terrier about her," he said. "She likes to grab hold of a problem and wrestle it to the ground."

The biggest challenge to the European sanctions regime, so far, involved Saudi Arabian businessman Yassin Abdullah Kadi. He was sanctioned by the United Nations Security Council in 2001, at the request of the U.S., for his alleged association with Osama bin Laden and al Qaeda. That meant that he was also blacklisted in Europe. Lester and Kadi's team of lawyers have won several cases on his behalf. Europe's top court, the Court of Justice, ruled that the E.U. couldn't implement the U.N.'s sanction decree without evidence to substantiate it, removing him from the E.U. list. In 2012, Kadi was removed from the United Nations list, but Washington hasn't lifted its sanctions. American courts have given U.S. authorities broader leeway to build their cases for sanctions on classified information, which is not shared with blacklisted people or their lawyers. "We don't know whether there's compelling evidence held in a file by the U.S., but I haven't seen that," Lester said.

The Kadi case highlights a key difference between the way Washington sanctions its targets and the way the E.U. does, a divide that is on full display as the West looks for a way of punishing Russian President Vladimir Putin for menacing Ukraine. While the European Union extends due process rights, including the presumption of innocence, to anyone blacklisted, the U.S. government does not. The U.S. Treasury, under authority from the president, can blacklist people if it has "reason to believe" they are supporting terrorism or a nefarious regime. Kadi has challenged his status in the U.S., but in his case, as in others, the U.S. courts have ruled in the government's favor. A Treasury spokeswoman declined to comment on Kadi's case.

Though both Washington and Brussels issued incremental new sanctions this week, the U.S. move went further. The Obama administration targeted individual business people and banks with links to the Putin regime, but Europe avoided sanctioning banks and companies and went after only military leaders and politicians. Europe's reluctance to take stronger measures reflects its lucrative economic ties with Russia, but it also stems from a reluctance to get sued at home in a court system that gives challengers far higher chances of success than they would have in the United States.

Juan Zarate, a former senior Treasury Department official charged with overseeing the U.S. sanctions program, said European policymakers "fear that fundamental challenges to their sanctions system will crumble the targeted sanctions regime across the board."

"The litigation challenges the E.U. has faced to its imposition of aggressive targeted sanctions -- from alleged terrorist financiers to Iranian banks -- has certainly tempered European willingness to push the envelope in using these tools," he said.

Some of the people who've found themselves on the E.U. blacklist over Ukraine are already preparing to challenge their punishments in Europe. Sanctioned individuals have roughly two and half months to appeal their designations, the first round of which were issued March 6, so the cases could come in the next days or weeks.

Many of those cases could be argued by Lester, whose specialty is litigating sanctions cases before European courts and picking apart the government's justification for blacklisting her clients. She's built so strong a reputation that other, older lawyers routinely bring her on to argue their cases in court. In the Kadi case, she worked with a more senior litigator, David Anderson.

He said that Lester's straightforward style in court is part of what makes her so successful.

"She will argue a difficult case and will retain the respect of the court while doing it," Anderson said. "She is a serious lawyer; she's not a rabble-rouser."

The Kadi case set a precedent in Europe for sanctioned people's rights to know the evidence against them and be given a chance to defend themselves. European authorities have to make a case and present evidence as to why a particular person was designated. Since the Kadi case, Lester has successfully gotten several other individuals and companies off the list because the court decided the evidence against them wasn't strong enough.

For instance, Lester has represented at least 20 Iranian clients, including Iran's energy ministry, the Islamic Republic of Iran Shipping Lines, and several Iranian banks. Though many of them were removed from the list, some of them have been added back, after the government bolstered the case against them.

Despite those defeats, clients keep coming. In 2008, Anderson and Lester went on to work together on the case of a Burmese man, Pye Phyo Tay Za, who was sanctioned because his father was close to the junta. In March 2012, the E.U. court ruled in favor of Lester and her client, saying that it was against E.U. law to sanction someone based solely on a family connection. Lester's most recent case involves a Belarusian soccer team that can't travel to championships because it has been blacklisted based on one of its owners' relationship to the president of Belarus.

Lester's cases are considered "glamorous work" in England, Anderson said.

"There's no opprobrium attached to representing someone who is accused of being an associate of al Qaeda," he said. "Maybe because we didn't have 9/11."

Anderson now serves as the independent reviewer of Britain's terrorism legislation, making him a watchdog that effectively oversees U.K. anti-terror policy.

Lester, meanwhile, is described by other lawyers in her field as the "guru" or "go-to" person on sanctions cases. About a year ago, she started blogging on sanctions, further cementing her reputation as a top expert on the E.U.'s punitive economic measures. Michael O'Kane, a partner at Peters & Peters, who runs the blog with Lester, said she's made more appearances before Europe's top court than any other junior barrister.

She's likely to make more in the months to come as the Russia sanctions lists continue to grow. Sanctions lawyer Nigel Kushner said E.U. sanctions are still easier to challenge than in the U.S., but it's becoming harder as policymakers take greater care in drafting the measures. Still, he said, the listings over Ukraine could be vulnerable because of their variety.

"One person's a TV presenter, one person's an oligarch, one person purports to be in Putin's inner circle," said Kushner, the head of W Legal Limited. "They seem to have picked out specific individuals that don't fall into a broad category."

Though it could take over a year for any case to conclude, a challenge in the E.U. could rattle the determination of an already shaky coalition on sanctions. As Western countries scramble to figure out how to contain Putin, Russian troops remain on Ukraine's border and the new government in Kiev has lost control of parts of eastern Ukraine to pro-Russia separatists.

Like most lawyers around the world, most of Lester's work days are spent poring through lengthy documents and trying to poke holes in her opponents' cases. There's one key difference, though: Lester has to dress up in a traditional gown and horsehair wig when she goes to court, a far cry from the staid suits worn in the United States. The costume is being reconsidered lately, as more and more judges decide to hang up the wig. Lester has to pack it up and take it with her every time she travels to Luxembourg for a case in front of the European Court of Justice, where lawyers all suit up in what they'd wear to court in their home countries. But she said she doesn't mind.

"There's just something about dressing up in uniform that makes you feel like you're going into battle to have a good fight," she said.

Courtesy of Maya Lester.