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South China Sea verdict: Looking for Chinese investments, Delhi unlikely to antagonise Beijing, says research firm

"We do not expect to see India going beyond diplomatic statements even after China recently blocked its entry into the Nuclear Suppliers Group," said Romita Das, Senior Analyst, South Asia, Control Risks.

Written by Abhimanyu Chakravorty | New Delhi |
Updated: July 14, 2016 1:19:28 pm
South China Sea, China, South China sea dispute, South China Sea india, Indian on South China Sea, India SCS South China Sea dispute: Philippine crewmen gesture towards a Chinese Coast Guard ship as they block them from entering Second Thomas Shoal in the South China Sea. (AP Photo/Bullit Marquez)

In a move that is likely going to ratchet up regional tensions, a UN-backed international tribunal on Tuesday struck down China’s ‘historical rights’ in the South China Sea with Beijing insisting it owns the islands for over 2000 years.

But global risk consultancy firm Control Risks has sought to downplay the tensions, despite Beijing categorically stating that if threatened, it could draw up an air defense identification zone over South China Sea.

According to the firm, although the South China Sea verdict is clearly not in China’s favour, it won’t have any dramatic short-term impact in terms of security risks.

WATCH VIDEO: South China Sea Ruling: How Will It Impact India

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READ: South China Sea judgment: Here’s how it matters to India

“From China’s perspective, the ruling is even more unfavourable than expected. However, Beijing rejected the tribunal’s legitimacy from the start and questioned its neutrality, and China’s Philippines disputes are not as emotive domestically as the periodic bilateral crises it has in relations with Japan and the US. These factors give it room to limit its response to strong rhetorical rejection and continuance of its existing stance for now, while it waits to see what the Philippines and US do. Since the latter countries will probably try to avoid any immediate responses that China would risk significant escalation (such as trying to ‘enforce’ the tribunal ruling at sea) we don’t expect a dramatic short-term impact in terms of security risk,” said Andrew Gilholm, Managing Director, Greater China and North Asia of Control Risks.

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South China Sea, China, South China sea dispute, South China Sea india, Indian on South China Sea, India SCS In this photo taken March 29, 2014, a Chinese Coast Guard ship attempts to block a Philippine government vessel as the latter tries to enter Second Thomas Shoal to relieve Philippine troops and resupply provisions. (AP Photo/Bullit Marquez)

As far as India is concerned, with the Permanent Court of Arbitration (PAC) in Hague ruling out Chinese claims over South China Sea, Indian naval warships can now move through the region under United Nations Convention on the Law of Sea (UNCLOS) without informing the Chinese.

India, on its part, has asserted that all parties should respect the ruling. “India supports freedom of navigation and over flight and unimpeded commerce, based on principles of international law as reflected notably in UNCLOS,” said a statement released by the Ministry of External Affairs (MEA). Stating that there is a need for peaceful cooperation among the states, MEA added the countries need to resist using force in the disputed territory.

However, despite improving political ties with US and the pressure to be more forthcoming, India is unlikely to be too assertive on the issue so as to avoid antagonising China which it needs for investments, said Romita Das, Senior Analyst, South Asia, Control Risks.

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South China Sea, China, South China sea dispute, South China Sea india, Indian on South China Sea, India SCS FILE – In this Sept. 23, 2015, file photo, Chinese Coast Guard members approach Filipino fishermen as they confront each other off Scarborough Shoal in the South China Sea, also called the West Philippine Sea. (AP Photo/Renato Etac, File)

“India has limited stakes in the South China Sea compared to the Indian Ocean region, but has taken a more active interest in recent years as it has been drawn into the issue. As expected, India has maintained a sense of ambiguity regarding the UN tribunal ruling which in part reflects its own internal conflict and pressures from certain sections in the government. We do not expect to see India going beyond diplomatic statements even after China recently blocked its entry into the Nuclear Suppliers Group,” said Das.

In the event of escalation of tensions by all sides, particularly if Philippines tries to resume fishing and energy-related activities in certain places or even ask for naval support from the US, the firm says: “China has options including island-building activity at Scarborough Shoal, or significant new military deployments to sensitive areas. Any of these moves would trigger a strong reaction from the other side.”

“There are some in Beijing calling for a very robust response such as with the kind of actions noted above, so this is a real test of President Xi’s risk appetite. However, we expect it to avoid looking too obviously like the ‘first escalator’ with serious new provocations in the most sensitive areas,” said Gilhom.

Watch Video: What’s making news

 

In a judgment on Tuesday, the UN-backed international tribunal ruled out China’s ‘historical claims’ over the disputed South China Sea islands. The Permanent Court of Arbitration in The Hague said in a statement that China had breached the Philippines’ sovereign rights by endangering its ships and fishing and oil projects in the energy-rich region. “The tribunal concluded that there was no legal basis for China to claim historic rights within the sea areas falling within the ‘nine-dash line’,” the PAC said.

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The verdict is quite significant in the sense that it is the first time a legal challenge has been brought in the issue. Although the court has no enforcement power, a victory for the Philippines could give impetus to Malaysia, Vietnam, Brunei and Taiwan to file similar cases on their claims to the waters.

Control Risks is an independent, global risk consultancy specialising in political, integrity and security risk.

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First published on: 13-07-2016 at 08:00:49 pm
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