Malaysia says China is “great friend” despite maritime dispute in waters off Sarawak 

Under the leadership of Malaysia’s prime minister Anwar Ibrahim, in his pursue of stronger ties with China, bilateral relationship is going from strength to strength. Since coming to power in 2022, Anwar has turned his back on the West and pivoted strongly to China. However, it appeared that this pro-China stance is not enough to stop the Chinese Communist Party from claiming sovereign rights inside Malaysia’s exclusive economic zone (EEZ). 

According to an August 29 report from the Philippines’ INQUIRER.net, the Chinese Ministry of Foreign Affairs, in a note to the Malaysian embassy in China dated February 18, demanded Malaysia to stop all oil and gas exploration activities at Luconia Shoals, 100 km off the coast of Sarawak, well within the country’s EEZ.

Since 1963, Malaysia has exercised sovereignty over Luconia Shoals, and in 1974, the government incorporated state-owned energy company Petronas and vested in it the rights to explore and produce oil and gas.

According to the Malaysian Investment Development Authority, the oil and gas industry is a vital part of the economy, contributing about 20 percent to the GDP. Overall, the oil and gas industry is an important driver of the country’s long-term economic development. 

China claims sovereignty over almost the whole of South China Sea, including Luconia Shoals, and in the diplomatic note, urged Malaysia to respect its territorial sovereignty and maritime interests, and expressed serious concern and strong dissatisfaction over Malaysia’s oil and gas exploration projects. 

The note also accused Malaysia of infringing on China’s sovereignty in the South China Sea, despite the fact that Luconia Shoals are only 100 km from Sarawak and almost 2,000 km from mainland China.

Anwar, on September 5 at the sidelines of the Eastern Economic Forum in Vladivostok, Russia, said “China is a great friend” and that the maritime dispute “should not harm the bilateral relationship between the countries”. However, he insisted that Malaysia will not stop oil and gas exploration in the South China Sea despite protests by China.

Be that as it may, even when Malaysia has sovereignty and legal rights under international law to all mineral resources in its EEZ, Anwar reiterated that his government is open to continuing discussions with China regarding South China Sea.

The South China Sea, rich in fishing stocks, oil and gas, and also a key global trade route, is a hugely contested area with claims made by China, Vietnam, the Philippines, Malaysia, Indonesia, Brunei and Taiwan.  

China claims almost the entirety of the South China Sea as its sovereign waters and rejects a 2016 international arbitration ruling by an independent arbitral tribunal established under the UN Convention on the Law of the Sea (UNCLOS), of which it is a State Party to UNCLOS. The ruling stated China has no legal basis for the expansive claims. The tribunal also ruled that China had infringed on the Philippines’ sovereign rights. China dismissed the ruling as “nothing more than a piece of waste paper”.

Against China’s uncompromising stance on its territorial claims in the South China Sea, Malaysia maintains a quiet and low-key approach, in the hope of settling disputes via engagement and peaceful resolution through negotiations, so as not to jeopardize economic relations. Malaysia almost always never criticize China in public and prefers to use closed-door diplomatic channels.

Nonetheless, it is expected that China will not leave Luconia Shoals’ oil and gas exploration alone as the Chinese Communist Party becomes more aggressive in its rhetoric and actions. Of course, to be sure, Malaysia will not go to war with China over territorial disputes in the South China Sea. 

But, in the face of an emboldened China, Anwar’s balancing act of Malaysia’s sovereignty and financial interests derive from the oil and gas industry, against China’s sweeping claim of South China Sea, will become increasingly more difficult.

Photo credit: iStock/ Rosley Majid

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