Iran Threatens To Close Oil Shipping Lanes, Could Beijing Do Likewise In South China Sea?

News from late last week that Iran had threatened to close oil shipping lanes in the Strait of Hormuz if the U.S. proceeds with further military drills in the area is disturbing enough, but it also provokes questions about actions China could also take in the not too distant future in the South China Sea.

Oilprice.com reported on the Iran story on Friday, citing remarks made on Iranian television by General Hossein Salami, the deputy commander of Iran’s Islamic Revolutionary Guard. "If the Americans and their regional allies want to pass through the Strait of Hormuz and threaten us, we will not allow any entry," Salami said.

Salami was referring to an early April large-scale military drill “International Mine Countermeasures Exercise (IMCMEX),” which saw 30 nations participate. According to an April 9 Reuters report, the drills kicked off in Bahrain where the U.S Navy's Fifth Fleet is based, in part as a bulwark against Iran.

The exercise, according to Vice Adm. Kevin Donegan, commander, U.S. Naval Forces Central Command, was designed to stop militants from causing disruption to shipping as, "we know that they want to disturb trade lines.”

The Strait of Hormuz (located between Oman and Iran, connects the Persian Gulf with the Gulf of Oman and the Arabian Sea) is the world’s most important oil transport choke point. Around 20% of the world’s oil flows through the Strait, with an average of 15 oil tankers passing through it per day. Consequently, it has been and will be the task of the U.S. to ensure that the waterway remains open. It is, however, also a continual point of contention between the U.S. and Iran, while Tehran repeatedly makes threats to close the Strait.

Would China close much of the South China Sea?

Iran’s threats also pre-shadows what the future could hold in the South China Sea, also one of the most important oil and natural gas transport choke points in the world , particularly as China increases its land reclamation activities amid disputed claims in the body of water, all the while militarizing its outposts despite promises made by Chinese President Xi Jinping to President Obama in September to not militarize the area.

However, China's task of enforcing a no-fly zone and any prohibited sailing areas would be exacerbated by the vastness of the South China Sea, while the Strait of Hormuz at its narrowest point has a width of only 29 nautical miles (54 km). 

Around a third of global crude oil and over half of global liquefied natural gas (LNG) passes through the South China Sea each year, according to U.S. Energy Information Administration (EIA) estimates.

About two thirds of South Korea’s oil and LNG supplies, almost 60% of Japan’s and Taiwan’s energy supplies, and 80% of China’s crude oil imports pass through the South China Sea each year. However, unlike the Persian Gulf where only oil and gas is transported, billions of dollars of finished and unfinished goods also pass through the South China Sea.

The South China Sea also holds potential vast reserves of natural gas and to a lesser degree crude oil. One older Chinese estimate places potential oil resources in the South China Sea as high as 213 billion barrels of oil, though that estimate seems extremely high.

A conservative 1993/1994 US Geological Survey (USGS) report estimated the sum total of discovered reserves and undiscovered resources in the offshore basins of the South China Sea at 28 billion barrels.

The USGS estimates that about 60%-70% of the area’s hydrocarbon resources are gas and has placed the sum total of discovered reserves and undiscovered resources in the offshore basins of the South China Sea at 266 trillion cubic feet.

Chinese state-owned oil major Chinese National Offshore Oil Company (CNOOC), responsible for most of China’s offshore hydrocarbon development, estimates that the area holds around 125 billion barrels of oil and 500 trillion cubic feet of gas in undiscovered areas, although the figures have not been confirmed by independent studies. Others, however, claim that oil and gas reserves in the South China Sea are exaggerated.

As China continues to build on its reclaimed reefs, islets and formations in the South China Sea as well as placing military assets on these new formations, including runways, in time fighter jets, missiles, radar installations, troops and naval assets, it will also increasingly be able to threaten to close much of the South China Sea, or at least pose a lethal threat to shipping and aircraft traversing the body of water.

Moreover, like Iran, China would likely threaten to do so to bring pressure against U.S. naval activity and military drills Washington conducts with its allies (the Philippines, Japan, Australia and others) in the region.

To think otherwise, would be to ignore China’s aggressive South China Sea push in the last few years, particularly since Xi Jinping took office in 2013.

Why would China go to so much trouble, potentially damaging its relations with the U.S. and a plethora of regional trading partners, including Association of Southeast Asian Nations (ASEAN) members, as well as appearing as the proverbial bully in world public opinion if it did not have an agenda?

Beijing's South China Sea agenda

That agenda isn’t just claiming nearly 80% of the South China Sea in the name of national sovereignty, it's a mandate that includes taking de facto control of the waterway while also minimizing U.S. naval influence in the region, effectively pushing the U.S. further away from China's periphery.

In a span of just a few years, if China’s current land reclamation push goes unchallenged and unabated, headlines will likely read “China Threatens to Close Vital Oil Shipping Lanes in South China Sea: U.S. Offers Muted Response.”

If so, Beijing will have control of one of the most important shipping lanes in the world, while freedom of navigation in the area will only be a dream whose days have vanished.