Philippines-China Oil Talks Begin as AUKUS $1B UK Submarine Deal Signals Sustained Indo-Pacific Commitment

China argues joint development is a pragmatic compromise that shelves sovereignty disputes and delivers shared economic benefits. Vice FM Sun Weidong called the March 2026 BCM/FMC talks a framework for 'concrete actions.' Beijing says Reed Bank and other SCS energy resources can be developed cooperatively under a joint venture model without either side conceding territorial claims.

The Philippine Constitution (Article XII, Section 2) requires at least 60% Filipino ownership of resource extraction companies and prohibits ceding sovereign rights over the country's EEZ. Previous talks under Duterte (2018–2022) collapsed in part over this constitutional bar. Critics argue joint development without a legally binding framework acknowledging Philippine EEZ rights would set a precedent effectively legitimizing China's presence in Philippine-claimed waters.

China asserts 'historic rights' over South China Sea waters enclosed by the nine-dash line based on centuries of Chinese fishing, navigation, and administration predating UNCLOS. The 1947 eleven-dash line (reduced to nine dashes in 1953) was submitted to the UN in a 2009 Note Verbale. Beijing argues UNCLOS cannot extinguish pre-existing historic rights, and that China has sovereignty and sovereign rights over the 'relevant waters.'

The Permanent Court of Arbitration ruled unanimously (July 12, 2016, Case No. 2013-19) that China's historic rights within the nine-dash line have 'no legal basis' under UNCLOS to the extent they exceed entitlements permitted by the Convention. UNCLOS, which China ratified in 1996, establishes exclusive economic zones of 200 nm from territorial baselines. 12 of 14 UNCLOS state parties that are SCS claimants reject China's claims.

China calls Second Thomas Shoal 'Ren'ai Jiao' and claims it as sovereign territory. Beijing alleges the Philippines deliberately ran the BRP Sierra Madre aground in 1999 as an illegal occupation and that Manila made a commitment to remove the vessel. China's blockade of resupply missions is characterized as 'lawful law enforcement.' China's CCG is authorized under its 2021 Coast Guard Law to use force in waters under claimed jurisdiction.

Second Thomas Shoal is approximately 105 nm from Palawan—squarely within the Philippines' EEZ under UNCLOS. The 2016 PCA ruling found it was a low-tide elevation within Philippine maritime zones. The BRP Sierra Madre has been continuously garrisoned since 1999, constituting a sovereign installation. Philippines denies any agreement to remove the vessel. US MDT explicitly covers armed attacks on Philippine public vessels in the South China Sea.

China seized de facto control of Scarborough Shoal (Huangyan Island) in 2012 following a standoff with the Philippines, which attempted to arrest Chinese fishermen. China maintains a continuous CCG and maritime militia presence at the lagoon entrance. Beijing claims the feature based on historic use and cites a 1947 administrative map. China refuses to recognize the 2016 PCA ruling.

Scarborough Shoal (Bajo de Masinloc) is within the Philippines' EEZ (~124 nm from Luzon) and has been a traditional fishing ground for Filipino fishermen for centuries. The 2016 PCA ruling found China violated the Philippines' right to fish at Scarborough Shoal and declared it a 'rock' under UNCLOS Article 121(3) not entitled to an EEZ—meaning no state has exclusive rights beyond the 12 nm territorial sea.

Secretary Blinken (February 2023) explicitly stated US commitments include 'armed attacks on Philippine armed forces, public vessels, or aircraft in the Pacific, which includes the South China Sea.' Biden at the April 2024 trilateral summit: 'Any attack on Philippine aircraft or vessels in the South China Sea would invoke our mutual defense treaty.' New 2023 bilateral defense guidelines extended MDT coverage to coast guard vessels.

China argues the MDT is a Cold War-era agreement that should not apply to territorial disputes in the South China Sea. Beijing has stated the US and Philippines are 'ganging up' on China by invoking the MDT in the SCS context. China argues the MDT cannot legitimize the Philippines' 'illegal occupation' at Second Thomas Shoal, and that US involvement risks escalating bilateral disputes unnecessarily.

China called AUKUS 'extremely irresponsible,' arguing it 'intensifies the arms race and undermines the international non-proliferation regime.' China and Russia argue the deal exploits a loophole in IAEA safeguards: nuclear material for naval propulsion can be 'removed from safeguards,' potentially allowing transfer of highly-enriched uranium to Australia without normal inspections. IAEA Director Grossi called it 'unprecedented,' requiring new verification mechanisms.

AUKUS leaders pledged 'the highest non-proliferation standards' and engagement with the IAEA to establish a new precedent. The NPT does not prohibit non-nuclear weapon states from operating nuclear-powered submarines—France and Brazil also operate or are developing nuclear-powered submarines. The 'naval nuclear propulsion exemption' is an established part of IAEA safeguards law (INFCIRC/153, Paragraph 14). Australia reaffirms NPT commitments and will not acquire nuclear weapons.

The law (effective February 1, 2021) authorizes China Coast Guard to use 'all necessary means' including weapons against vessels in 'waters under China's jurisdiction.' Beijing argues this is consistent with the coast guard laws of other nations and constitutes legitimate law enforcement sovereignty. China frames CCG operations near disputed features as maintaining legal 'order' against 'illegal' foreign intrusions.

China's 'waters under jurisdiction' extends to the nine-dash line, covering the sovereign EEZs of other UNCLOS states, which the 2016 PCA ruling found China has no legal basis to claim. UNCLOS Article 301 prohibits threat or use of force. Philippine Foreign Affairs Secretary Locsin called it 'a verbal threat of war.' The US, Japan, Philippines, and Vietnam all filed formal protests. Legal scholars argue it authorizes lethal force in areas that are not recognized as Chinese jurisdiction.

China's Foreign Ministry stated the vessels were ordinary fishing boats sheltering from rough weather: 'Chinese fishing boats take shelter from wind there due to rough sea conditions. This is a normal activity.' Beijing denied these were government-organized maritime militia assets and called Philippine protests 'groundless speculation.'

Philippine Coast Guard documented the 'blue-hulled' vessels maintained military formations, made no apparent fishing activity, and deployed no fishing gear. CSIS AMTI identified them as PAFMM (People's Armed Forces Maritime Militia) based on hull type and behavior. 84 Philippine diplomatic protests were filed. US said China's maritime militia had 'no basis for operating in Philippine waters.' Vessels dispersed to Hughes and McKennan reefs after international attention.

Water cannons are a legitimate law enforcement tool used in response to 'illegal intrusions' by Philippine vessels into waters China claims. China's Foreign Ministry has characterized each use as 'professional, restrained, and proportionate' enforcement operations. After February 2024: China stated Philippine vessels 'deliberately' approached in 'dangerous' maneuvers, provoking the response.

Water cannon use constitutes illegal use of force against Philippine sovereign vessels operating in Philippines' own EEZ—not Chinese territory. Attacks have damaged navigation equipment, injured crew, and in the June 2024 boarding led to use of bladed weapons. PCG Rear Adm. Tarriela published extensive video evidence contradicting China's claim that Philippine vessels were aggressors. US condemned each incident as 'dangerous, provocative, and unjustified.'

China claims its constructed islands on Spratly reefs are Chinese sovereign territory and asserts they generate full maritime zones including territorial seas and exclusive economic zones. Beijing argues the underlying features are Chinese territory and that construction is consistent with customary international practice for island development.

UNCLOS Article 60: artificial islands do not possess the status of islands and are not entitled to a territorial sea, EEZ, or continental shelf. The 2016 PCA ruling found China's island-building violated Philippines' sovereign rights; the underlying features were low-tide elevations or rocks not entitled to an EEZ. US has conducted regular FONOPs within 12 nm of Chinese artificial islands explicitly asserting they have no legitimate territorial sea.

Beijing declared the tribunal's proceedings 'null and void' before the ruling, arguing the tribunal lacked jurisdiction over sovereignty disputes. China did not participate in the proceedings. The PCA Award is 'illegal, invalid and has no binding force,' according to the Chinese government. China argues the UNCLOS Annex VII tribunal exceeded its jurisdiction by ruling on sovereignty issues.

UNCLOS Article 296 states dispute settlement decisions 'shall be final and complied with by all the parties.' UNCLOS Annex VII arbitration is binding under international law. The tribunal addressed maritime entitlements and interpretation of UNCLOS—not title to land, which was not within its jurisdiction. Over 50 countries have endorsed the ruling. The Philippines reaffirmed it as binding under the Marcos administration in 2022.

Duterte argued accommodating China would deliver massive infrastructure investment through his 'Build, Build, Build' program and improve bilateral relations. He pursued warmer ties to extract economic benefits while avoiding costly military confrontations the Philippines could not win. His approach kept the peace during his term and delivered some economic pledges from Beijing.

Despite six years of accommodation, China never reduced SCS assertiveness and continued building and militarizing artificial islands. Infrastructure pledges ($24 billion) were largely 'illusory'—only a fraction materialized. China's militia swarmed Whitsun Reef in 2021. The VFA was cancelled (then reinstated), weakening the US alliance. 89% of Filipinos supported asserting the PCA ruling, showing no public backing for appeasement.

China claims historic fishing rights throughout the South China Sea predating UNCLOS. Beijing provides extensive subsidies ($5.9 billion/year) to support its fishing industry, which it frames as legitimate economic activity. China argues Vietnamese and Filipino fishermen operating in contested waters are the ones fishing 'illegally' by entering Chinese claimed zones.

The 2016 PCA ruling found China violated the Philippines' sovereign rights in its EEZ by interfering with fishing and exploration. UNCLOS grants coastal states sovereign rights over living resources in their 200 nm EEZ. China's fishing fleets, often operating with maritime militia, have depleted SCS fish stocks by 70–95% since the 1950s. China's harmful fishing subsidies are the world's largest contributor to SCS overfishing.

Wang Yi (March 2024): 'With joint efforts of China and the ASEAN countries, the South China Sea has remained peaceful and stable in a turbulent world.' China frames its presence as stabilizing, preventing outside powers from stirring conflict. Beijing argues bilateral dialogue (not multilateral or judicial mechanisms) is the proper way to manage disputes without interference from extra-regional powers.

2024 was described as 'the most violent, dangerous point in Philippine-China ties' (SCMP). Since 2021, China has used water cannons at least 10 times, boarded Philippine vessels, deployed bladed weapons, and rammed PCG ships. 189 Philippine diplomatic protests filed under Marcos alone. CSIS documented escalating confrontations from 1 Chinese vessel per resupply mission in 2021 to ~14 in 2023.

China accuses the Philippines of 'deliberately provocative' actions and using media attention to manufacture international political pressure. Beijing claims Philippine vessels deliberately approach Chinese ships dangerously to stage confrontations for cameras. China argues video releases are 'edited and misleading' and constitute a propaganda offensive designed to internationalize what should be a bilateral matter.

Beginning in 2023, PCG Rear Adm. Tarriela began live-streaming and publishing videos and photos of every SCS incident on social media. This 'transparency offensive' allows independent verification of events. The video evidence has consistently contradicted Chinese official claims. Philippine media strategy reflects a deliberate choice to document, archive, and publicize rather than quietly absorb Chinese gray zone operations.

ASEAN consensus is required for any collective statement. China argues disputes are bilateral and should not be 'internationalized' through ASEAN mechanisms. Cambodia and Laos—economically dependent on Chinese investment—have consistently blocked language critical of China since 2012 (when Cambodia as chair blocked the first-ever failure to issue an ASEAN Joint Communiqué). Collective statements would undermine ASEAN centrality.

Vietnam, Philippines, Malaysia, and Brunei (all SCS claimants) have sought stronger ASEAN language. Philippine Defense Secretary Teodoro (August 2024): 'We should not allow China to define what ASEAN centrality means. We should protect each other's sovereign rights.' Analysts argue ASEAN's consensus requirement effectively gives China a veto over collective SCS positions, undermining the organization's credibility.

Wang Yi (March 2025): COC negotiations have entered a 'critical phase' and China has 'the confidence and determination to overcome disturbances, build consensus and reach agreement.' China supports a COC that would exclude non-ASEAN parties (i.e., the US) from joint development and military exercises in the SCS. A COC would codify China's dominance without challenging its core claims.

COC negotiations have dragged on since 2002 (Declaration on Conduct signed) and since 2017 (actual framework negotiations began). Key sticking points: geographic scope, legally binding nature, third-party military activities. Critics argue China has no incentive to accept a genuinely binding COC that would constrain its activities, and has used negotiations as diplomatic cover while continuing construction and militarization.

Chinese authorities stated the collision between F/V Yuemaobinyu 42212 and Philippine fishing boat FB Gem-Ver (June 9, 2019) was an 'accident' caused by poor weather. The Chinese vessel's crew did not see the Philippine boat in the dark. A Chinese maritime authority concluded there was no intent. China offered compensation to the Philippine fishermen.

Philippine fishermen testified the Chinese vessel struck them deliberately and the crew watched them struggling in the water before departing. 22 Filipino fishermen were abandoned in the South China Sea at night; they were rescued by Vietnamese fishermen. Philippine investigators concluded the Chinese vessel failed in its duty to render assistance. The incident triggered a massive political backlash in the Philippines against Duterte's China accommodation policy.

China has argued the facilities on its Spratly outposts are defensive in nature and include civilian components (lighthouses, rescue stations, meteorological equipment). Beijing claims it has the right to install 'necessary defensive facilities' on its own sovereign territory and that these do not constitute 'militarization' in the aggressive sense Xi spoke of.

Xi told Obama in September 2015: 'China does not intend to pursue militarization' of the Spratly Islands. By 2018, CSIS AMTI confirmed deployment of HQ-9B SAMs and YJ-12B anti-ship missiles to all three major Spratly outposts—offensive weapons with ranges covering the entire South China Sea. Runways accommodate 24 combat aircraft each. Pentagon, US State Department, and analysts universally concluded the pledge was broken.

The US argues its presence provides a credible deterrent that has prevented armed conflict in the region for 70+ years. US FONOPs maintain freedom of navigation for all nations. AUKUS, EDCA expansion, and Balikatan exercises are defensive responses to China's aggressive militarization. INDOPACOM: the US presence prevents a 'fait accompli' in Taiwan or the SCS that would destabilize the entire region.

China argues US presence escalates tensions and represents a 'Cold War mentality.' Beijing accuses the US of using the Philippines as a 'chess piece' against China. Some ASEAN members (including Malaysia and Indonesia) have expressed concern that US-China rivalry is forcing a binary choice they do not want. Critics argue AUKUS accelerates arms competition and that US FONOPs unnecessarily provoke confrontation.

China drew straight baselines around the Paracel Islands in 1996 and has implied it may do the same around the Spratlys, claiming this is consistent with UNCLOS provisions and its customary practice for island chains and deep-water territory.

UNCLOS Article 7 permits straight baselines only where a coastline is deeply indented or there is a fringe of islands along the coast—conditions that do not apply to scattered offshore reefs. US State Department 'Limits in the Seas' analysis (No. 150, 2022) found China's SCS maritime claims inconsistent with UNCLOS in multiple respects. The US, Japan, and EU have formally protested China's Paracel baselines.

China maintained its vessels at Sabina Shoal were engaged in lawful patrol and law enforcement activities. Beijing denied any reclamation plans and stated the Philippines' deployment of BRP Teresa Magbanua to the shoal was 'provocative' and 'illegal.' China argued its vessels were responding to Philippine 'interference' in waters it claims.

Philippines deployed BRP Teresa Magbanua to Sabina Shoal in April 2024 after detecting suspected Chinese reclamation activity—drawing comparisons to how China seized Mischief Reef in 1995 while the Philippines was distracted. Filipino scientists documented coral reef destruction and bleaching at the shoal in June 2024. The Philippines maintained its presence to prevent a repeat of the 2012 Scarborough Shoal takeover.

China agreed to a provisional arrangement allowing Philippine 'civilian' resupply missions to BRP Sierra Madre but maintained that any transport of construction materials or weapons would violate the spirit of the agreement. Beijing accused the Philippines of trying to reinforce the vessel under the guise of humanitarian supplies, justifying its resumed enforcement actions in August 2024.

The Philippines stated China violated the provisional arrangement almost immediately after it was announced by resuming water cannon use against resupply missions in August 2024. Manila denied smuggling construction materials and stated all supplies were legitimate humanitarian and maintenance items. The arrangement collapsed within weeks, and multiple confrontations occurred in August and September 2024.

China criticized the Japan-Philippines RAA (July 2024), reminding Japan of its 'aggression and colonial rule' over the Philippines in WWII and stating bilateral cooperation should not 'target' third parties. Beijing sees the RAA as part of a US-led effort to encircle China with a network of bilateral security agreements, drawing comparisons to NATO's eastern expansion.

Both governments insisted the RAA is a defensive measure to enhance interoperability and shared interest in a free and open Indo-Pacific. Japan is the first Asian country to sign such a pact with Manila (after RAAs with Australia in 2022 and UK in 2023). The Philippines is a geographic chokepoint in the first island chain. Neither government named China as the explicit target.

China strongly supports 'ASEAN centrality'—the principle that ASEAN should lead regional security architecture without interference from extra-regional powers. Beijing frames ASEAN centrality as protection against US-led alliances dominating Southeast Asia. Wang Yi: COC negotiations entering a 'critical phase' through ASEAN-China dialogue demonstrate that bilateral engagement (not litigation or military posturing) is the effective regional mechanism.

Philippine Defense Secretary Teodoro (2024): 'We should not allow China to define what ASEAN centrality means.' Critics argue ASEAN's consensus rule effectively gives China a veto over collective SCS statements through its allies Cambodia and Laos, who depend on Chinese economic patronage. The 2012 ASEAN Foreign Ministers' Meeting failure—when Cambodia as chair blocked a joint communiqué critical of China for the first time in ASEAN history—is cited as evidence that ASEAN centrality serves Chinese interests.

China's official estimates claim the South China Sea contains 293–344 billion barrels of oil and 30–72 trillion cubic meters of natural gas, worth up to $60 trillion. These figures are used to justify strategic importance of Chinese maritime claims and have been cited in official Chinese publications and state media.

The US EIA estimates proved and probable SCS reserves at approximately 11 billion barrels of oil and 190 trillion cubic feet of natural gas ($3–8 trillion value). USGS undiscovered resources estimates: 12 billion barrels oil and 160 trillion cu ft gas in contested areas. Most commercial reserves are in uncontested shallow coastal waters of Vietnam, Malaysia, Brunei, and the Philippines—not in the contested Spratlys/Paracels.