ZTE Scandal: The Spratlys Connection

As the ZTE-NBN scandal continues to rage, the scuttlebutt in the Philippines now is whether the Arroyo administration surrendered to China the country’s sovereign claim over the Spratly islands. Such a surrender, the theory goes, is seen as the reason why Beijing is showering Manila with billions of loans, several of which, like the ZTE deal, are hounded by allegations of overpricing and corruption. To provide some context to this issue, PinoyPress is reprinting a Newsbreak exclusive on how Malacanang, a few years ago, seemed to have set aside the country’s territorial claim over the Spratlys in favor of China.

A Newsbreak Exclusive:
Exploring the Spratlys

The Philippines sets aside territorial claims to look for oil deposits with China and
Vietnam.

By Miriam Grace A. Go
August 28, 2006

The diplomat draws invisible lines about three to four inches from the Palawan coastlines on the Philippine map. There’s no doubt, he says, that the Spratlys, “are nearest the Philippines than any other claimant countries.” Yet, he says with a sigh drawn from decades of seeing the Philippines’ failure to establish its territorial claims, “it won’t be ours during my lifetime, not even my grandchildren’s lifetime.”

Therefore “the way to go,” he says, is play into China’s so-called common development strategy with neighbors, which President Deng Xiaoping first proffered in 1996. The Philippines did get onto the bandwagon and agreed initially with China, and then with Vietnam, to explore the Spratlys for potential petroleum deposits.

On Sept. 1, 2004, the state-owned oil companies, Philippine National Oil Company and the China National Offshore Oil Corp. (CNOOC), signed an agreement for a Joint Marine Seismic Undertaking (JMSU) in the South China Sea. On March 14, 2005, that agreement was superseded by a tripartite accord that included the Vietnam Oil and Gas Corp. (PETROVIETNAM).

But NEWSBREAK learned that involving other claimant countries didn’t seem necessary because several private companies have been exploring the Spratlys since the 1970s under the Philippine service contract system. These were known to other claimants, but no protest was ever filed.

The 142,886 square kilometers that the geophysical survey covers is very well “within our claims,” acknowledges the diplomat, who requested not to be named because of the sensitivity of the topic. However, the Department of Foreign Affairs (DFA) didn’t question the project when it was being negotiated because “it looked like it was a done deal.” And it was: it had the blessings of Malacañang.

Should survey data confirm the long-held belief that large oil deposits lie in the seabed of the Spratlys, the estimates of reserves-from 2 billion to 200 billion barrels-could give the Philippines and its Southeast Asian neighbors, currently all import-dependent, a steadier oil supply at cheaper prices.

PNOC president Eduardo Mañalac, who was instrumental in forging the agreement, says that if such potential is discovered through the JMSU, the governments would hopefully consider settling the territorial dispute by negotiation so they can all partake of Spratly’s resources.

The agreement provides, too, that “the signing of this Agreement…shall not undermine the basic position held by the Government of each Party on the South China Sea issue.”

The issue is not that simple, however. Legal and diplomatic experts say that by agreeing to what Mañalac calls “a purely commercial transaction supported by the respective governments,” the Philippines may have effectively agreed to limit its sovereignty, even to give up its claims, over the Spratlys, which is locally called the Kalayaan Group of Islands.

These experts say that the agreement suffers from legal infirmities, and in some aspects goes against the Constitution. It could even be a ground to impeach President Arroyo.

Chinese-Friendly

When she was vice president, and in the beginning of her presidency, Gloria Macapagal Arroyo reportedly sent memoranda to the DFA about China’s idea of jointly developing disputed areas with claimant countries. The memoranda, according to those privy to them, informed the department of the proposal, and didn’t imply any endorsement. It nevertheless indicated her openness to the idea.

In 2002, Arroyo appointed Mañalac, an experienced exploration geologist, as undersecretary at the Department of Energy (DOE) right after his seven-year stint in China. As executive of the American firm Philips Petroleum, Mañalac had dealt with the CNOOC and was given the highest possible award by the Chinese government for having discovered the largest oil deposit in the offshore of China.