If Donald Trump’s choice for US secretary of state, Rex Tillerson, is confirmed—and we’ll find out next week whether he is—he’ll face a potentially awkward situation off Vietnam’s coast in the South China Sea (among many others).
For years ExxonMobil, with Vietnam’s blessing and Tillerson as CEO (who spent over 40 years working for the energy giant until he resigned last month), has been laying the groundwork for a $10 billion natural gas project at the Ca Voi Xanh gas field. Nicknamed “Blue Whale,” the field lies about 80 km (50 miles) off the central coast. That’s well within the Vietnam’s exclusive economic zone, where the nation has sole rights to extract resources in and below the sea, as per the UN Convention on the Law of the Sea (UNCLOS).
Unfortunately, China has other ideas. Blue Whale is in deepwater Block 118. At least part of that block also falls within the dubious “nine-dash line” that China uses to claim nearly the entire sea as its own—a claim that flies in the face of UNCLOS and was shot down by an international tribunal last July. (Beijing vowed to ignore the ruling, despite signing UNCLOS in 1996.)
The geopolitical risk posed by China’s claim—and its aggressive moves to defend it—has discouraged energy firms from embarking on joint projects with nations around the sea, despite the potentially vast hydrocarbon riches and growing energy needs in the region. In 2011, soon after ExxonMobil announced finding gas in Block 118, Beijing warned foreign energy companies against exploring in disputed areas (meaning nearly the whole sea).
But ExxonMobil forged ahead with Vietnam on Blue Whale. In May 2014, Hanoi expressed its appreciation to the company for doing so. The appreciation was merited: That same month China had menacingly moved a mobile deepwater rig nearby, sparking deadly riots in Vietnam and creating the potential for military conflict, with dozens of ships from both nations gathering near the rig.
Enter the US state department. With tensions mounting, secretary of state John Kerry stepped in to soothe both sides. He also called China’s foreign minister to complain that the rig move was “provocative” and “aggressive.” Beijing fired back that Kerry should “speak and act cautiously” and be objective when talking about China.
Such tensions could soon rise again—possibly involving Block 118 itself, or other nearby blocks (paywall) that ExxonMobil also has exploration rights to. (This month the company signed long-expected agreements with Vietnam officially initiating the Blue Whale project.) If so, the US would be likely to again send its secretary of state to calm the situation and sternly warn China about its aggressive moves.
But that could mean sending Tillerson, the very man who led ExxonMobil as it laid the groundwork for its projects off Vietnam in the first place. While his experience might help in some ways, the optics would be bad—much to the delight, no doubt, of China’s propaganda department.