US Slaps Sanctions on Chinese Oil Giant over South China Sea Activity

The United States on Thursday blacklisted Chinese oil giant CNOOC and slapped visa restrictions on officials of the Chinese navy, ruling party and state-owned enterprises over land reclamation and “coercion” of Southeast Asian claimants in the disputed South China Sea.

The action by the Trump administration will add to U.S.-China tensions that have spiked in the past year. It comes just six days before Joe Biden takes office as the new U.S. president on Jan. 20.

The actions were intended to preserve “a free and open South China Sea,” Secretary of State Mike Pompeo said in a statement.

It follows a hardening of U.S. policy in July against what Washington called China’s illegal maritime claims in the waterway, and the blacklisting in August of two dozen Chinese state-owned companies and executives it said were involved in constructing artificial islands in the Paracel and Spratly chains.

The new visa restrictions target officials and executives “responsible for, or complicit in, either the large-scale reclamation, construction, or militarization of disputed outposts in the South China Sea, or the PRC’s use of coercion against Southeast Asian claimants to inhibit their access to offshore resources in the South China Sea,” Thursday’s statement said, adding that immediate family members may also face the restrictions.

PRC stands for the People’s Republic of China.

In addition, the Department of Commerce added the China National Offshore Oil Corporation (CNOOC) to its Entity List. That restricts exports to businesses abroad due to their “activities contrary to the national security or foreign policy interests of the United States,” effectively killing any ability for American businesses to trade or interact with them.

Wilbur Ross, the U.S. commerce secretary, said in a statement that, “CNOOC acts as a bully for the People’s Liberation Army to intimidate China’s neighbors.”

Pompeo cited CNOOC’s role in operating the Hai Yang Shi You 981 movable oil rig in the South China Sea that kick-started a tense and dangerous standoff between Vietnam and China in 2014.

The Chinese Embassy in Washington did not immediately respond to a request for comment.

CNOOC had been “notably absent” from the South China Sea-related designations announced by the U.S. in August, Greg Poling, senior fellow for Southeast Asia at the Center for Strategic and International Studies think tank, noted. But he questioned the impact it would have.

“These are symbolic punishments for wrongdoing that occurred 7 years ago. They’re important for messaging, but don’t address China’s ongoing illegal behavior,” he wrote on Twitter.

The U.S has sanctioned Chinese companies primarily for their role in China’s extensive dredging campaign in the South China Sea from 2014 to 2017, which saw it build massive artificial islands and military bases to strengthen its claim to disputed waters and support the activities of its military.

In his statement on Thursday, Pompeo said: “Beijing continues to send fishing fleets and energy survey vessels, along with military escorts, to operate in waters claimed by Southeast Asian nations and to harass claimant state oil and gas development in areas where it has failed to put forth a coherent, lawful maritime claim.”

Six Asian governments have territorial claims or maritime boundaries in the South China Sea that overlap with China’s claims. They are Brunei, Indonesia, Malaysia, the Philippines, Taiwan and Vietnam. While Indonesia does not regard itself as party to the South China Sea dispute, Beijing claims historic rights to parts of that sea overlapping Indonesia's exclusive economic zone.

While Southeast Asian claimants have been increasingly willing to take a diplomatic stance challenging China’s claims, they have been cautious about being caught up in the great power rivalry in their backyard.

For its part, China has accused the U.S. of destabilizing the region through its military activities – such as when it conducts “freedom of navigation operations” – and meddling in regional affairs.

In addition to differences over the South China Sea, the U.S. and China have locked horns on trade, Beijing’s crackdown on pro-democrats in Hong Kong, and the internment of Uyghur Muslims in China’s far west.

It emerged this week that Biden has selected Kurt Campbell, a former U.S. top diplomat for East Asia under the Obama administration, as coordinator for Indo-Pacific Affairs on the National Security Council. He will play a key role in coordinating U.S. policy toward China.