Report

You Sank My Fishing Ship!

The sinking of a Vietnamese fishing boat is pushing tensions between Beijing and Hanoi even higher --and driving China's rivals closer together.

The dangerous game China is playing in Asian waters became more violent as Chinese vessels reportedly rammed and sank a Vietnamese fishing boat that wandered near a $1 billion oil rig Beijing planted earlier this month in waters claimed by both countries.

China's heavy-handed approach to foreign policy seems to be driving Asian nations into an anti-China bloc, tightening ties among one another and with the United States. Coming only days after Chinese fighter jets buzzed Japanese patrol planes over disputed islands, regional leaders are escalating warnings about what they call China's aggressive behavior, and all are articulating a more muscular response to Beijing.

Three weeks of tension ratcheted up late Monday, May 26, when the Vietnamese trawler was apparently rammed by Chinese ships before capsizing and sinking. The Vietnamese Coast Guard blamed the incident, which took place about 17 miles away from the oil rig, on aggressive Chinese vessels, scores of which have become a permanent fixture in the area. Vietnam summoned Chinese diplomats on Tuesday to convey its displeasure over the incident.

Chinese Foreign Ministry officials offered a different version of events, saying that the Vietnamese boat rammed a Chinese ship, damaging itself and sinking.

"It's worth pointing out that the direct reason for this incident is that, in spite of the repeated representations, warnings, and dissuasions from the Chinese side, the Vietnamese side continues to forcefully disrupt the normal drilling operations of the Chinese company and take dangerous actions," said Chinese Foreign Ministry spokesman Qin Gang at a regular briefing Tuesday.

Chinese officials repeatedly claim that Vietnamese Coast Guard patrols are interfering with the operations of HD-981, the billion-dollar oil rig searching for oil and gas in the contested waters of the South China Sea. Yet early Tuesday, the company operating the rig successfully concluded the first phase of drilling and shifted to a nearby location even closer to the Vietnamese coast.

The fishing boat's mysterious sinking just adds to roiling nationalist tensions that have seized both countries since the dispatch of the rig. Anti-Chinese riots have spread across Vietnam, and one woman even immolated herself in protest. Users on Chinese social media largely applauded the ship sinking.

The biggest worry of the clash at sea isn't the loss of one fishing boat, but rather that such incidents harden nationalistic sentiment among domestic audiences in both countries, said Ely Ratner, an Asia-Pacific expert at the Center for a New American Security.

"They further galvanize the public on both sides and make it more difficult for national leaders to compromise" or find a way to defuse the tension, he said.

More broadly, China's ham-fisted foreign policy-- illustrated best by efforts to fence off parts of the seas and the skies that other countries consider part of the global commons -- is bringing countries as diverse as Vietnam and Japan together in their wariness of Beijing and driving the whole region closer to the United States.

One telling example: Indonesia and the Philippines just resolved a maritime border dispute that simmered in the background and soured relations between the two countries for 20 years.

Vietnam's prime minister, Nguyen Tan Dung, said that the oil rig dispute is fracturing an otherwise stable relationship and suggested that economic ties between Hanoi and Beijing won't be enough to repair it.

"We always wish for peace and friendship, but those things must be based on independence, self-reliance, sovereignty and territorial integrity. We will never trade these sacred things for a certain false and dependent peace and friendship," he said in written responses to questions from Western journalists.

Vietnam is mulling its limited response options, including moving closer to the United States and its allies and preparing to inflict "mutually assured destruction" if China raises the stakes.

Japanese Prime Minister Shinzo Abe told the Wall Street Journal that he wants to beef up Vietnam's Coast Guard and push back against Chinese aggression in both the South China and East China seas.

"We will never tolerate the change of status quo by force or coercion," Abe said. Under his watch, Japan is jettisoning some of the pacifist restraints on the use of military force outside Japan that has defined the country since the end of World War II. Abe will give the keynote speech at an Asian security summit in Singapore this weekend -- a first for a Japanese leader -- and observers expect him to reiterate why smaller Asian countries must confront China's expansionist behavior.

Tension between the Philippines and China over disputed maritime territories has also grown, leading President Benigno Aquino to take a tougher tone against Beijing.

Aquino recently told the Financial Times that China is playing a "dangerous game of brinkmanship and gunboat diplomacy." After entering office determined to forge closer ties with China, Aquino is now seeking better defense cooperation with the United States.

China's bid to assert control over parts of the South China and East China seas, as well as its blanket dismissal of other countries' concerns, illustrates what strategist Edward Luttwak called "great-state autism," or the inability of great powers to understand how their behavior is perceived by other countries.

For instance, Chinese officials defend the oil rig's position on the grounds that the Paracel Islands, known as the Xisha Islands in China, are Chinese territory, as are the waters nearby.

"The Xisha Islands are China's inherent territory; and relevant exploration and drilling activities are being carried out in waters that are indisputably under China's administration. We are going about our own business in our own waters without causing any trouble to anyone," China's Foreign Ministry spokesman said Tuesday.

However, the United States, Vietnam, Japan, and the Philippines point out that the rig sits squarely inside Vietnam's 200-mile exclusive economic zone, as laid out in the Law of the Sea treaty that China has signed and ratified.

Photo by Jason Pier - Flickr

Report

The Honeymoon's Already Over

Petro Poroshenko easily won Ukraine's elections. But from air strikes in the east to empty government coffers in Kiev, the country's new president will have no time to celebrate.

President-elect Petro Poroshenko successfully won over at least 54% of Ukrainian voters, but even before the official count is over, he must turn to the challengers that weren't on the ballot.

First on that list, pro-Russian separatists that threaten to cleave off the country's eastern regions demand Poroshenko's immediate attention. After claiming victory, he said his first trip would be to Donbass, Ukraine's restive southeast. Armed fighters blocked Sunday's vote in certain areas and took over the Donetsk airport. The Associated Press reported that Ukrainian forces responded by launching an air strike against the militants. If confirmed, the assault would mark a sharp escalation of Kiev's military operations against the rebels and risk inflaming tensions with Moscow -- which has promised to protect the country's Russian speakers -- just as they seemed to be slightly cooling.

Ukraine's weak military has battled the eastern fighters they deem terrorists for weeks without successfully re-establishing control. Poroshenko said Monday that the effort should be concluded much more quickly.

"The anti-terrorist operation cannot and should not last two or three months," he said. "It should and will last hours."

To achieve his goal of quickly making peace in the east, Poroshenko may have to give the separatists more autonomy. Many observers see Kiev giving up more regional power as an inevitability after the Donetsk and Luhansk regions voted two weeks ago to become independent.

"Ukraine is likely to go through constitutional reform with a high probability of decentralization and some form of federalization," Bank of America analysts Vadim Khramov and Vladimir Osakovskiy said in a note Monday.

If Poroshenko can resolve the immediate crisis at the Donetsk airport and broker a compromise that keeps Ukraine's borders intact, he will still have to negotiate with Russia to make sure the deal sticks. Poroshenko said Monday he wanted to talk to Moscow and Russian Foreign Minister Sergey Lavrov welcomed the conversation. That suggests a possible willingness, once he formally takes power, to limit the military push there in favor of closer ties with Vladimir Putin's Russia. Moscow's initial response was a warm one.

"We are ready for dialogue with representatives of Kiev, with Petro Poroshenko," Lavrov said, according to Reuters.

That warm reception is an about-face from earlier chilly relations between Moscow and Poroshenko, nicknamed the "chocolate king" because of his Roshen confections company. Poroshenko's vocal support of the protesters that overthrew Russia-friendly former president Viktor Yanukovych made him the target of Moscow's ire. In March, Russian authorities retaliated against his candy business, shutting down his chocolate factory in Lipetsk, Russia.

Tim Ash, head of emerging markets research at Standard Bank Group, said he still expects Russia to make life difficult for the new Ukrainian administration.

"Russia will be waiting to see how the dust settles, and waiting for Poroshenko to deal, i.e., seeing what he is willing to offer to ensure some kind of normality in terms of the relationship with Russia," Ash said in a note Monday.

If Poroshenko can manage to keep the country together and get Russia off his back, the next challenge on his list will be the one that set off the crisis six months ago: his inheritance of a nearly bankrupt country. The International Monetary Fund has agreed to give Ukraine a $17 billion bailout, but is also requiring that Kiev impose austerity measures, such as raising taxes and cutting the gas subsidies that make it easier for many Ukrainians to heat their homes.

The cuts and changes required to fix the country's money problems will likely be unpopular with the voters that just put Poroshenko in power. But they will be even harder if he fails to also solve the two more pressing problems of making peace with the separatists and appeasing Moscow. Any failure to solve those two conflicts will make fixing the economy much more difficult.

After years of mismanagement and alleged corruption under the Yanukovych regime, Poroshenko inherits empty state coffers and an economy in dire need for major reforms. Previous Ukrainian leaders have bought Russian gas at high prices and then sold it to businesses and individuals at lower subsidized prices, guaranteeing themselves a certain amount of political goodwill, but also bankrupting the state's finances. The IMF deal also assumes that Ukraine's borders remain intact, so if the separatists successfully break off, Kiev could need even more money than the IMF originally assumed.

In addition to support bringing pro-Russian separatists into line, Poroshenko also needs Russia to cut a deal over Ukraine's outstanding debts. State-owned energy giant Gazprom holds a multi-billion dollar gas tab that Moscow has been happy to hold over Kiev's head as a way of keeping the government in tow.  In addition, the Ukrainian government is on the hook for the first installment of Russia's promised loan to Yanukovych, in the form of $3 billion in government bonds.

Ukraine's new president will face a headache over gas bills, even though its summertime and demand for Russian gas is low. Gazprom charges Ukraine about the highest prices in Europe, and has said that it will not consider opening negotiations on gas prices until Ukraine pays its outstanding debt for past deliveries, which sums $3.5 billion.

What's more, Gazprom said that Ukraine will have to start pre-paying for gas deliveries in July. That will put added fiscal pressure on the cash-strapped government as it seeks to purchase gas throughout the summer to build up storage ahead of the winter. Like Willy Wonka, then, Ukraine's chocolate king will find petulant behavior perhaps his biggest challenge -- without the option of liquidating those behaving badly.

Keith Johnson contributed to this report.

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