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Thayer Consultancy Background Briefing:

ABN # 65 648 097 123

Vanguard Bank: China’s
Motivations and Vietnam’s
Carlyle A. Thayer
July 22, 2019

We request your assessment of recent developments at Vanguard Bank in the South

China Sea.
Q1. Why China is acting now?
Answer: There are two possible ways to answer this question: either China’s actions
are the result of operational level decisions or China’s actions are the result of high-
level strategic decision-making.
The deployment of the China Geographical Survey’s Haiyang Dizhi 8 may have been
the result of routine decision-making at the operational level for commercial reasons.
In 2012, the China National Offshore Oil Company (CNOOC) promulgated oil
exploration blocks astride China’s nine-dash line map that overlapped with oil blocks
promulgated by Vietnam. No foreign oil companies have taken up the CNOOC offer.
In July 2017 and March 2018, respectively, Vietnam stood down and suspended its oil
exploration activities at two blocs in the Vanguard Bank area. Chinese oil officials may
have concluded that “the coast was clear” to take advantage of this situation. Only
two China Coast Guard ships escorted the survey ship in contrast to the eighty or more
that accompanied the Hai Yang Shi You 981 into disputed waters in 2014. The fact that
one China Coast Guard vessel left the scene and later moved into Malaysian waters
suggests this was an operation level decision.
The Asian Maritime Transparency Initiative suggested that China was trying to
“punish” Vietnam for giving the green light to Russia’s Rosneft Vietnam BV to resume
exploration at block 06-01.
The strategic angle suggests China is pushing back against new U.S. assertiveness by
putting pressure on regional states in order to undercut the U.S.
New U.S. assertiveness includes increased freedom of navigation operational patrols,
continuous bomber presence patrols, naval presence patrols and arms sales to
Taiwan. In addition, Secretary of State Mike Pompeo has confirmed that the 1951
Mutual Defense Treaty with the Philippines includes the South China Sea in its
geographic scope, while a senior U.S. admiral has stated at an attack by Chinese
maritime militia would be considered an armed military attack.

Since the release of the U.S. Indo-Pacific Strategy in mid-year, the U.S. has given
increased priority to enlisting Vietnam as a security partner. Military and diplomatic
sources are reporting privately that the U.S. has suggested to Vietnam that they raise
their bilateral relations from a comprehensive to a strategic partnership and that
Vietnam agree to annual ports visits by a U.S. Navy aircraft carrier.
This angle suggests China is using low-level pressure on Vietnam to undercut U.S.
attempts to form a network of allies and strategic partners to counter China.
Q2. How do you see the protest from Vietnam? Is it enough strong?
Answer: Vietnam has made public that it used a variety of channels, including
diplomatic protests, to demand that the Haiyang Dizhi 8 cease its operations and leave
Vietnam’s Exclusive Economic Zone. This is a necessary first step to resolve this
situation. But it may not be a sufficient step if China refuses to withdraw the survey
Q3. How will the situation at Vanguard Bank evolve?
Answer: It is unlikely that China will keep the Haiyang Dizhi 8 on station after its survey
is completed. In 2014, China withdrew the HYSY 981 on the grounds it had completed
it work and a tropical storm was approaching.
Since Vanguard Bank lies at the southern extremity of the South China Sea China China
is unlikely to deploy an armada comparable to the 80-100 ships that it did in 2014.
Q4. What are the best things Vietnam can do?
Answer: Vietnam should keep on doing what it has already done. Vietnam should
continue to demand that Haiyang Dizhi 8 leave Vietnam’s EEZ. Vietnam should insist
on talks with China at the appropriate level. Vietnam should lobby other ASEAN
members for support and for practical measures such a joint activities between Coast
Guards, especially Malaysia and the Philippines.
Vietnam should explore the advantages and disadvantages of a strategic partnership
with the United States. At the same time, Vietnam’s Coast Guard should step up
activities with Japan and the U.S. And the Vietnam Navy should step up cooperation
with the major powers to enhance its capacity to defend sovereignty,
Finally, Vietnam should keep the option open of resorting to international legal
action against China under Annex VII of UNCLOS following the precedent set by the
Philippines. This would put pressure on China to conform more with international

Media Identification: The University of New South Wales, Canberra or The University
of New South Wales at the Australian Defence Force Academy, Canberra.

Suggested citation: Carlyle A. Thayer, “Vanguard Bank: China’s Motivations and

Vietnam’s Responses,” Thayer Consultancy Background Brief, July 22, 2019. All
background briefs are posted on Scribd.com (search for Thayer). To remove yourself
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Thayer Consultancy provides political analysis of current regional security issues and
other research support to selected clients. Thayer Consultancy was officially
registered as a small business in Australia in 2002.