China and Philippines fail to reach agreement on oil and gas basin

Philippine President Rodrigo Duterte’s much-touted meeting with Chinese leader Xi Jinping yielded no agreement on the South China Sea territorial dispute between the two nations or a plan to explore the area for oil and gas.

Instead, Xi and Duterte agreed to form committees to advance oil exploration talks, with the goal of lifting a Philippine moratorium on existing contracts, Manila’s envoy to Beijing Chito Sta. Romana told Bloomberg TV.

“The goal is to proceed with service contracts that the Philippines has already issued and get the ball rolling,” the ambassador said, adding there’s a “moderately good chance” for a definitive deal by November.

The outcome of Xi and Duterte’s meeting shows joint oil exploration talks are proceeding “as slow as can be expected,” said Jay Batongbacal, director of the University of the Philippines Institute for Maritime Affairs and Law of the Sea.

“This will only be the start of the process,” Batongbacal said. “This does not guarantee that a final agreement will be signed.”

Sea Code

Xi also said China and the Philippines should aim to conclude talks on the Code of Conduct in the South China Sea by 2021, the state-run Xinhua News Agency reported in a Weibo post. This was Duterte’s fifth visit to China in his three years in office, and his eighth meeting with Xi.

Duterte was “steadfast” in his nation’s territorial claims and its victory in the arbitral court three years ago which the Philippine leader described as “final, binding and not subject to appeal,” his spokesman Salvador Panelo said in a statement. Xi stood by China’s position of not recognizing the ruling.

“Both President Duterte and President Xi agreed that while their variant positions will have to remain, their differences however need not derail nor diminish the amity between the two countries,” Panelo said. They agreed “to manage the South China Sea issue, and to continue to dialogue peacefully in resolving the conflict.”

The meeting in Beijing took place amid tensions over China’s increasing presence in South China Sea and Beijing’s crackdown on the Philippines’ billion-peso online casinos catering mostly to Chinese nationals.

Xi explained China’s position on online gaming during the bilateral talks, Sta. Romana said, while adding that the Philippines will continue to regulate the industry but will not seek “a drastic step that will have adverse effect on the economy.”

Six Deals

A loan agreement for a rail project across the Philippines’ main island and a financing cooperation were among the six deals signed, witnessed by Xi and Duterte.

Weeks before the trip and as the Philippines protested the presence of hundreds of Chinese vessels in one of the disputed Spratly Islands, Duterte said the time had come to bring up his country’s 2016 international tribunal win against China. He had set aside the ruling to warm ties with Xi and tap Chinese funding.

“President Duterte and President Xi agreed on the importance of self-restraint and respect for freedom of navigation in – and overflight above – the South China Sea,” Panelo said in his statement.

Xi “wants a good media narrative out of his meeting with Duterte” said Jeffrey Ordaniel, assistant professor of international security studies at Tokyo International University. “Certainly, China wants to create a false atmosphere of calm and cooperation in the South China Sea.”

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