Philippines’ Duterte says Xi offering gas deal if arbitration case ignored

Philippine President Rodrigo Duterte has acknowledged he’s short of solutions for having China adhere to Manila’s arbitration victory in their South China Sea disputes. (File/AP)
Updated 11 September 2019

Philippines’ Duterte says Xi offering gas deal if arbitration case ignored

  • If Duterte ignores the Permanent Court of Arbitration’s 2016 ruling, China would agree to be the junior partner in a joint venture to develop gas deposits at the Reed Bank
  • The tribunal in The Hague clarified maritime boundaries and the Philippines’ sovereign entitlements

MANILA: Philippine President Rodrigo Duterte said his Chinese counterpart has offered Manila a controlling stake in a joint energy venture in the South China Sea, if it sets aside an international arbitral award that went against Beijing.
Duterte said Chinese President Xi Jinping told him during their recent meeting that if he ignored the Permanent Court of Arbitration’s 2016 ruling, China would agree to be the junior partner in a joint venture to develop gas deposits at the Reed Bank, located within Manila’s Exclusive Economic Zone (EEZ).
“Set aside the arbitral ruling,” Duterte was quoted as telling reporters late Tuesday in remarks provided by his office on Wednesday.
“Set aside your claim,” he said, quoting Xi. “Then allow everybody connected with the Chinese companies. They want to explore. If there is something, they said, we will be gracious enough to give you 60%, only 40% will be theirs. That is the promise of Xi Jinping.”
China’s foreign ministry and its embassy in Manila did not immediately respond to requests for comment on Duterte’s remarks.
The tribunal in The Hague clarified maritime boundaries and the Philippines’ sovereign entitlements, and in doing so, invalidated China’s claims to almost the entire South China Sea. China does not recognize the ruling.
Duterte has sought to befriend Xi, hoping to secure billions of dollars of investment, avoiding challenging China over its activities in the South China Sea, including its militarised artificial islands.
Big setback
Any agreement to forget the arbitral award and team up with China would be a major setback to other claimants, especially Vietnam and Malaysia, which like the Philippines have experienced repeated challenges from China’s coast guard inside their EEZs.
The United States has called that bullying and coercion aimed at denying rivals’ access to their energy assets.
Duterte did not say if he had agreed to Xi’s offer, but said the part of the arbitral award that referred to the EEZ “we will ignore to come up with an economic activity.”
The tribunal said the Philippines had legal rights to exploit gas deposits that China also claims at the Reed Bank, about 85 miles (140km) off the Philippine coast.
The Philippines only accessible gas resources at the Malampaya fields are set to run out by 2024.
A joint project with China has been talked about for decades, but has gone nowhere because of their competing claims. Joint activity could be deemed as legitimising the other side’s claim, or even relinquishing sovereign rights.
Philippine Foreign Secretary Teodoro Locsin on Wednesday told news channel ANC that a preliminary agreement between China and the Philippines would avoid stating which country was entitled to the gas.
“It’s very clear — no legal position is compromised if we enter into this agreement,” Locsin said, adding that putting aside the arbitration case was immaterial, because an international court had already made its decision.
“It’s final and binding,” he added.


Oil surges, stock futures slip after attack on Saudi facility

Updated 8 min 1 sec ago

Oil surges, stock futures slip after attack on Saudi facility

  • Oil prices surge on fears of global supply disruption
  • Safe haven gold, Japanese yen rise, stock futures slip
SYDNEY, AUSTRALIA: Oil prices surged to six-month highs on Monday while Wall Street futures fell and safe-haven bets returned after weekend attacks on Saudi Arabia’s crude facilities knocked out more than 5% of global oil supply.
US crude futures were last up 11% at $61.10 a barrel, coming off highs on expectations other global oil suppliers would step in to lift output. Brent crude soared 13% at $68.06 after earlier rising to $71.95.
Yemen’s Iran-backed Houthi rebel group had claimed responsibility for the attack, which hit the world’s biggest oil-processing facility but a senior US official told reporters on Sunday that evidence indicated Tehran was behind it.
The attacks heightened investor worries about the geopolitical situation in the region and worsening relations between Iran and the United States.
Those fears powered safe-haven assets with prices for gold climbing 1% in early Asian trade to $1,503.09.
Moves in Asian share markets were small, however, with Japan shut for a public holiday.
MSCI’s broadest index of Asia-Pacific shares outside Japan was a tick lower at 515.4. Australian shares were down 0.1% while South Korea’s KOSPI was a tad higher.
E-Minis for the S&P 500 were off 0.4% while those for the Dow eased 0.3%.
“If risk appetite collapses due to fears of worsening middle east tensions in the wake of any retaliation to the drone attacks, some emerging markets could face a double whammy of pressures,” said Mitul Kotecha, Singapore-based senior emerging markets stratgist at TD Securities.
“In Asia, the most risk sensitive currencies are Indian rupee, Indonesian rupiah and Philippine peso .”

Bonds and currencies
Among major currencies, the Saudi news pushed the yen up 0.4% to 107.64 per dollar while the Canadian dollar rose 0.5% in anticipation of higher oil prices.
The euro was little moved near a three-week top while the pound hovered near Friday’s two-month highs. That left the greenback down 0.15% at 98.105 against a basket of six major currencies.
The risk-sensitive Australian dollar was down 0.5% against the yen, snapping nine straight days of gains. The kiwi dollar slipped to a one-week low on the yen.
“One immediate question this (attack) poses for bond markets is whether a further rise in the inflation expectations component of bond yields — which have proved historically sensitive to oil prices — will give this month’s sharp bond market sell-off fresh impetus,” Attrill added.
“Or will safe haven considerations dominate to drive yields lower? Watch this space.”
In early Asian trading, futures for US 10-year Treasury notes rose 0.3%, indicating yields may slip when cash trading begins.
Global bonds were sold off last week, sending yields higher, led by a broader risk rally on hopes the United States and China would soon end their long trade war. Better-than-expected US retail sales data also boosted sentiment.
Chinese data for industrial production, retail sales and fixed asset investment will be released later on Monday, which could help set the tone for this week’s trade.
Investors also await the outcome of the US Federal Reserve’s policy meeting on Wednesday at which it is widely expected to ease interest rates and signal its future policy path.