Published April 09, 2013

What Will Really Trigger the Next Asian War?

North Korea has been rattling its sabers once again, even producing some videos that threaten attacks on US forces using "powerful weapons of mass destruction" and show an invasion of Seoul where thousands of American citizens are taken hostage. American senators are already up in arms about how a "major war" is brewing on the Korean peninsula.

But as usual, American lawmakers are completely missing the point. The real war will not be launched by the hungry, demoralized troops of North Korea, but rather the warships of China, Taiwan, the Philippines, Vietnam, Malaysia, Brunei, and Indonesia. And unlike a North Korean invasion that could likely be thwarted in days, a war in the South China Sea would have far bigger implications.

Let us explain.

The South China Sea contains approximately 150 uninhabited islands off the southern coast of China. It is important for two main reasons:

  1. It is the second most-used sea lane in the world, as it is the shortest sea route between the Middle East and Asia. If there were conflicts in the South China Sea, it would cause half of the world's fleet to detour around Indonesia.
  1. There are billions of barrels of oil and trillions of cubic feet of natural gas that could be trapped beneath the ocean floor.

Its importance also means that the countries in the area are all vying for a piece of the action, sometimes even leading to armed confrontations: In May of 2011, Chinese patrol boats harassed a Vietnamese oil exploration ship, disrupting a seismic exploration program being done by PetroVietnam.

In a time where big oil and gas deposits are becoming harder to come by, the oil and gas wealth of the South China Sea becomes even more attractive. Unlike North Korea, China is absolutely unafraid to project its economic and military might upon its neighbors.

But the Southeast Asians are no pushovers either – they will take every advantage they can to push China out of their waters.

So isn't it a matter of time before someone takes this game of chicken too far and leads into a full-scale war? But more important, where does this lead for energy investments?

Additional Links and Reads

Taiwan Expects Rare Break in Dry Search for Natural Gas (Forbes)

Germany is an unexpected ally to Taiwan, but it brings a lot of money and knowledge to the table. It appears that the energy situation in Germany is more ominous than expected, and it has been looking at countries without a lot of exploration. Production is very far in the future, but the two countries are expecting by then that supply will tighten and make extraction economic.

Turkey Dismayed at Lack of US Partnership on Second Nuclear Plant (Hürriyet Daily News)

Turkey has tried to alleviate some of its dependence on Russia in terms of nuclear energy. We do not know the exact terms, but the United States declining a partnership with Turkey means that the Putinization of Europe continues. Turkey's energy minister was right in saying they could not be accused of being too dependent on Russia.

South Africa Looks Nearly Set to Start Building New Nuclear Power Plants (Engineering News)

Not to beat a dead horse, but here is another example of Putin's dominance in the nuclear sector.

Russia has a dedicated South Africa representative to ensure it will have a foothold in the African country. Unlike most of Russia's other partners, South Africa is a more developed nation, which just shows you that many countries are willing to accept Putin as an energy savior.