# Managing Great Power Politics

ASEAN, Institutional Strategy, and the South China Sea

Kei Koga

### Global Political Transitions

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Kei Koga

# Managing Great Power Politics

ASEAN, Institutional Strategy, and the South China Sea

Kei Koga School of Social Sciences Nanyang Technological University Singapore, Singapore

ISSN 2522-8730 ISSN 2522-8749 (electronic) Global Political Transitions ISBN 978-981-19-2610-5 ISBN 978-981-19-2611-2 (eBook) https://doi.org/10.1007/978-981-19-2611-2

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## Preface

### Role of Regional Security Institutions Under Power Shifts

The ongoing power shift in the global geopolitical landscape has created strategic uncertainty in the future configuration of the balance of power. In the post-Cold War era, the United States as the sole superpower largely shaped an international order based on its "liberal" principles—democratic system of governance, rule of law, and fundamental rights, notably human rights—but it increasingly faced a number of strategic challenges in the twenty-first century. Most notably, China's increasing economic and military presence in East Asia and beyond has become the most significant geopolitical phenomenon in the world. While the preponderance of the United States is expected to remain in the near future, its individual capabilities to define an international order would likely decline in relative terms.

In this power shift, realists argue that the most important variable is strategic rivalry and alignment between great powers. From the 2010s, China, the European Union, India, Japan, Russia, and the United States can be considered existing and potential great powers; thus, examining their shifting relations would offer us important implications for the global strategic outlook. Nevertheless, what is missing in the examination of these relationships is the role of non-great powers and their institutions—regional security institutions (RSIs).

Existing in many places around the world, RSIs explore ways to shape the regional order by nurturing the region's own principles, norms, and rules. They can assume such a role simply because great powers cannot always reach every corner of the world to install their aspirational global order. Under a power shift, great powers' tendency to do the latter becomes less acute because they prioritize the protection of their own national interests over regional order-building. As a result, great powers are unable to provide sufficient public goods for security in less prioritized regions. It is in this context that RSIs play a significant role in constructing and reconstructing regional order with its own political resources.

Indeed, RSIs—such as the Association of Southeast Asian Nations (ASEAN), African Union, Economic Community of West African States, Gulf Cooperation Council, and the South Asian Association for Regional Cooperation—have attempted to nurture their respective region's interstate relationship and increase their capacities to address regional political and security issues. Some institutions, like the Asian and Pacific Council and the 1967 East African Community, failed to sustain themselves, but the survivors have contributed to stabilizing regional security when they face security crises ranging from political tensions among member states to internal conflicts in regional states to non-traditional security.

Too often, their success has been dismissed quickly. This is largely because RSIs do not have material capabilities to enforce rules and norms, and the achievements are attributed to other factors such as a change in great powers' behavior. However, military and economic punishment is not the only means to measure institutional effectiveness. While greatpower-led institutions with substantial material capabilities often fail to enforce their rules and norms, RSIs navigate or direct members or nonmembers to comply with or to not violate the rules. This is why many regional states invest their time and resources in nurturing their own institutions despite a lack of material capabilities.

Under a power shift, RSIs move toward safeguarding their own interests because as great powers compete with each other over international rules, norms, and standards, this can potentially marginalize the role of non-great powers in the rule-making process. To this end, RSIs act as a bloc of international constituencies who have a casting vote to legitimize the rules and norms that serve their member states' interests. Accordingly, while RSIs do not have the authority to determine regional rules and norms, they have sufficient diplomatic influence to shape great powers' behavior and preferences.

In this context, this book focuses on ASEAN as an RSI in Asia and explores institutional strategies that ASEAN and ASEAN-led institutions have employed to manage great-power politics in the South China Sea (SCS). Constructing a theoretical model of institutional strategy, the analysis aims to contribute both academically and practically. Academically, the analysis fills a critical gap between international institutions and strategic behavior in international relations (IR) literature. Traditionally, most IR literature focuses on great-power politics because great powers have material capabilities, and often soft power, to shape international politics. However, RSIs can no longer be ignored in international politics, as secondary powers collectively act through the institutions to influence regional security affairs, setting their security agendas, and legitimizing their rules and norms. In this sense, an analysis of the strategic utility of RSIs contributes to the advancement of the theoretical model of institutional strategy and provides an in-depth understanding of regional security dynamics.

Practically, the theoretical model provides policymakers with an analytical tool to clarify how RSIs, particularly ASEAN, are able to shape the regional strategic environment and construct a regional order. While many question whether ASEAN's strategic posture tilts toward one particular great power—the United States or China—the question does not consider the diplomatic power of ASEAN to prevent its member states from making such a choice. This book contributes to a better, more nuanced understanding of RSIs' strategic role and behavior, which helps policymakers assess the degree to which ASEAN is capable of managing great-power politics.

Singapore Kei Koga

# Acknowledgments

This book is the outcome of my research project on ASEAN's institutional strategy for the South China Sea disputes. To date, there are many studies on both ASEAN and the South China Sea, but there is scarce literature on the role of regional institutions led by non-great powers in managing traditional-security issues including territorial disputes. Starting from this question, I published the article, "ASEAN's Evolving Institutional Strategy: Managing Great Power Politics in South China Sea Disputes," in *The Chinese Journal of International Politics* in 2018, with very helpful comments and suggestions that I received from the Association for Asian Studies in 2016 and the International Studies Association annual convention in 2017. But since the article only focused on the role of the East Asia Summit (EAS), the ASEAN Defence Ministers' Meeting (ADMM), and the ADMM-Plus, I expanded my research by broadening the time span to 1990–2020, contextualizing the strategic dynamics of the South China Sea from the end of the Cold War, and including other important ASEAN-led institutions, namely, the ASEAN Foreign Ministers' Meeting, the ASEAN Summit, ASEAN–China dialogues, and the ASEAN Regional Forum in addition to the EAS and the ADMM/ADMM-Plus.

As a result, extensive research was necessary, and I am indebted to many for their valuable comments and suggestions, particularly Tan See Seng and Collin Koh, and to Han Wen Chou, Mathew Yeo Jie Sheng, Melvin Ho, Ng Jiaming Jeremy, Patwardhan Nandini Rajesh, Tan Kai Wen Aaron, Teo Ang Guan, and Wang Shuqi for their dedicated research assistance. I also thank Fiona Lim for meticulously editing my draft, and Vishal Daryanomel, the editor of Palgrave Macmillan, who has been extremely patient about the prolonged delay of this book manuscript. This work is supported by the Singapore Ministry of Education AcRF Tier 1 Grant.

Finally, I would like to thank my wife, Nozomi, and my son, Shota, for being patient and for their encouragement. This book could not have been completed without their generous support.

#### Praise for Managing Great Power Politics

"Kei Koga is one of Asia's most thoughtful observers of regional security architecture. At a time when commentators question ASEAN's effectiveness and the viability of multilateralism more generally, he demonstrates its ability to shape great power behaviour in one of this region's most intractable flashpoints - the South China Sea. Theoretically rigorous and empirically rich, this book is required reading for Asian security scholars and practitioners alike."

> —Prof. Brendan Taylor, *Professor of Strategic Studies, Australian National University, Australia*

"An empirically rich and distinctive study of small-state agency at the group level. Focusing on the "quasi-division of labor" among the ASEAN-led mechanisms, the book unpacks the ASEAN states' institutional strategy of maintaining stability in the South China Sea. A timely contribution to understanding weaker-state hedging and the debate on the roles and limits of regional multilateralism amidst the growing big power rivalry in the Indo-Pacific era."

—Prof. Cheng-Chwee Kuik, *Associate Professor, National University of Malaysia (UKM), Malaysia*

"The South China Sea literature is increasingly dominated by the role of the great powers with too little attention given to other actors. This book fills this gap by bridging security studies and the role of regional institutions. It offers conceptual innovation and convincingly studies the strategic utility of the ASEAN-led institutions in managing great power politics and curbing their ambitions in the disputed waters."

—Prof. Ralf Emmers, *Dean of S. Rajaratnam School of International Studies, Nanyang Technological University, Singapore*

## Contents

# List of Figures

# List of Tables

# Introduction: ASEAN's Strategic Utility Redefined

Does ASEAN play a role in managing security issues in Southeast Asia and beyond? ASEAN is considered one of the most successful regional security institutions (RSIs), particularly after the end of the Cold War. The end of the Cold War created a power vacuum in East Asia, and there was political momentum in the region to establish multilateral economic and security organizations to fill that vacuum. Indeed, non-ASEAN member states, such as Australia and Japan, have successfully created a multilateral economic institution, the Asia–Pacific Economic Cooperation. However, it was ultimately ASEAN that shaped the regional multilateral architecture in the post-Cold War Asia–Pacific. Building on ASEAN's Post Ministerial Conferences (PMCs) to interact with external actors, it started to establish a number of affiliated institutions, including the ASEAN Regional Forum (ARF) in 1994, ASEAN Plus Three (APT) in 1997, East Asia Summit (EAS) in 2005, and the ASEAN Defence Ministers' Meeting Plus (ADMM-Plus) in 2010. This was possible because the 1992 ASEAN Summit decided to expand its institutional agenda by including political and security issues in ASEAN forums (ASEAN Secretariat, 1992). In short, ASEAN, as the core of regional multilateralism, encompassing small, medium, and great powers in the region, became *the* RSI in East Asia.

Nevertheless, the strategic environment created by ASEAN through the construction of regional multilateral architecture in East Asia has been gradually changing because of the emerging strategic competition

<sup>©</sup> The Author(s) 2022

K. Koga, *Managing Great Power Politics*, Global Political Transitions, https://doi.org/10.1007/978-981-19-2611-2\_1

between China and the United States. China's vast economic market attracted regional states and created significant trade and financial dependence on the country. Its Belt and Road Initiative provided an alternative development assistance to developing states that were unable to meet the high international standards set by global institutions such as the Organisation for Economic Co-operation and Development. China's increasing military presence in East Asia also placed strategic pressure on regional states, such as Brunei, Indonesia, Japan, Malaysia, the Philippines, and Vietnam, particularly over the East and South China Seas. Institutionally, China proactively established non-ASEAN institutional frameworks, including the Asian Infrastructure Investment Bank and the Shanghai Cooperation Organisation. As such, China's military, economic, and political rise has altered the US unipolar system in the region.

The United States, on the other hand, has long considered ASEAN's multilateral institutions in Asia–Pacific to be "supplementary" to the US-led bilateral security arrangement, the hub-and-spokes system (Goh, 2004). However, facing new security challenges in the 2000s, particularly the rise of international terrorism after September 11, 2001, and China's strategic challenges in the 2010s, the United States and its allies began to transform its hub-and-spokes system into a more networked system, so that the "spokes" can cooperate more deeply. Examples include the US–Australia–Japan Trilateral Strategic Dialogue, the US–India–Japan framework, and the US–Australia–Japan–India quadrilateral framework, the so-called "Quad." These trilateral and minilateral frameworks began to comprehensively enhance cooperation among major powers in the region. In fact, the United States has pushed for the "Free and Open Indo-Pacific" concept since 2017, expanding its geostrategic focus from the traditional "Asia-Pacific" to the area ranging from the "west coast of India" to the "western shores of the United States" (The White House, 2017, pp. 45–46).

As new strategic groupings such as the Quad emerge, new, non-ASEAN institutional frameworks would be further created in the region based on these trilateral and minilateral frameworks. While the United States, China, and other major powers have repeatedly highlighted the importance of "ASEAN centrality"—the principle that ASEAN plays a central role in regionalism—the newly emerged frameworks, if fully developed, would potentially marginalize ASEAN's institutional raison d'être (Koga, 2022). In other words, the current great-power rivalry between the United States and China would diminish the diplomatic viability of ASEAN as the RSI in Asia, and ASEAN would risk losing its central position.

Considering the increasing importance of these geopolitical and traditional-security trends, is ASEAN destined to be institutionally marginalized? Or can ASEAN continue to play a significant role in shaping the regional security landscape? Responding to these questions, scholars and practitioners have long debated over the effectiveness and utility of ASEAN, particularly in the political-security field, and their opinions are divided.

Those who view ASEAN's utility positively focus on intra-regional relations, regional norms, and non-traditional security issues. First, they attribute to ASEAN the long-lasting, peaceful relationship among member states. Since ASEAN's establishment in 1967, there has been no major conflict among member states despite the political and military tensions among them (Kivimaki, 2012; Mahbubani & Sng, 2017; Natalegawa, 2018). While ASEAN has yet to resolve the fundamental interstate problems, it has facilitated stability through conflict management (Acharya, 2014; Collins, 2007; Koga, 2014; Scott, 2012). Second, they argue that the diffusion of ASEAN's institutional norm, the "ASEAN Way," transcends Southeast Asia to East Asia and beyond through ASEAN-led institutions. The ASEAN Way includes norms and practices of informality, the non-interference principle, consultation, non-use of force, and consensus decision-making process. This set of norms has been nurtured and practiced by ASEAN member states and diffused to regional states, including the great powers, through regional institutions (Acharya, 1997; Ba, 2006, 2009; Katsumata, 2004, 2006; Nabers, 2003; Roberts, 2012; Severino, 2006; Shambaugh, 2005; Suzuki, 2021; Tan, 2013; Terada, 2003). Third, ASEAN facilitates economic cooperation and provides forums for regional states to conduct multilateral dialogues, build confidence, coordinate policy, and create norms and rules (Ba, 2006; Kawasaki, 2006; Shoji, 2012; Simon, 1998; Tang, 2012; Yoshimatsu, 2006). In this context, non-traditional security issues, such as natural disasters, piracy, and international terrorism, which are transnational in nature and require international cooperation, become an important cooperative agenda in ASEAN meetings. These are the essential utility of ASEAN in shaping the regional order in Southeast Asia and beyond.

On the other hand, those who view ASEAN's utility negatively tend to focus on ASEAN's political disunity and its lack of capabilities. They argue that the member states' pursuit of their own national interests, mutual distrust, limited material capabilities, the inflexible "ASEAN Way" as an institutional norm, and the shallow cooperative framework create the illusion of, or at best conditional, cooperation among member states and with external states (Haacke, 2003; Hsueh, 2016; Jetschke & Ruland, 2009; Leifer, 1999; Narine, 2008; Nischalke, 2000, 2002; Odgaard, 2003; Ruland, 2000; Sharpe, 2003; Yuzawa, 2006). Even for non-traditional security issues, ASEAN was unable to reach a deeper agreement among member states, such as information- and intelligence-sharing against disease, international terrorism, and environmental matters including Indonesia's haze issue (Collins, 2013; Funston, 1998; Jones & Smith, 2007; Nurhidayah et al., 2015; Simon, 2008). Most fundamentally, critics argue that ASEAN has never been capable of addressing traditional-security issues, such as great-power politics and territorial disputes (Beeson, 2019; Buszynski, 2003, 2012; Buzan, 2003; Emmers, 2003, 2014; Emmers & Tan, 2011; Goh, 2011; Heller, 2005; Kausikan, 2017; Koga, 2010; Lim, 1998; Narine, 1997; Yates, 2017). They argue that great powers, such as China, Japan, and the United States, accepted ASEAN's central role in regional multilateralism not because they considered ASEAN the best actor to facilitate interstate cooperation, but because ASEAN was convenient for preventing any one great power from dominating regional institutions (Caballero-Anthony, 2014; Sukma, 2010). In other words, it was the great-power strategic rivalry that pushed ASEAN to the center, not its effectiveness.

Debates between these two camps on the strategic utility of ASEAN have become a tradition of ASEAN studies. Questions range from whether ASEAN needs to relax the ASEAN Way, such as the principles of non-interference and consensus decision-making; to whether ASEAN has become a security community; to whether ASEAN can maintain unity among its member states (e.g., Ba, 2020; Beeson, 2020; Stubbs, 2020). To be sure, scholars and practitioners are generally cautious in evaluating ASEAN's utility in Southeast Asia and beyond and thus do not categorically reject or affirm its strategic utility. Their analyses provide a more nuanced and balanced understanding of ASEAN, taking into account the historical development of its objectives, functions, and raison d'être. These multiple perspectives generate alternative theoretical analyses and different assessments of ASEAN, which enable us to examine the association multidimensionally.

However, there is one common understanding between both camps: ASEAN's inability to effectively manage great-power politics. They recognize that ASEAN's strategic utility in great-power politics is extremely limited, and that even if ASEAN is able to shape the behavior of great powers, the effect is rather marginal and it is for non-strategic issues. In this sense, a general, long-held consensus is that ASEAN's strategic utility rests not on material—military or economic—capabilities, but at best the normative power of the ASEAN Way, the ideational factor that constructivists emphasize, in shaping great powers' behavior. Some realists who analyze the strategic utility of institutions concur with this limitation, highlighting the normative element by devising strategic concepts such as "soft balancing" and "institutional balancing" (He, 2008; Paper, 2005; Paul, 2005). Among them, He (2008) specifically analyzes the strategic utility of international institutions and provides three types of institutional strategy—inclusive institutional balancing, exclusive institutional balancing, and inter-institutional balancing—whereby a group of states attempts to prevent existing or emerging great powers from attaining more power to dominate a region or the world. As such, the strategic role of international institutions is generally based on normative and diplomatic elements, and these analyses, particularly He's conceptual frameworks, help us gain a deeper understanding of the utility of ASEAN and ASEAN-led institutions.

Still, there remain unanswered questions regarding both the theoretical framework and the ASEAN-specific case. The theoretical issue is two-fold. First, the concept of institutional balancing does not take into account the entirety of institutional strategy. While "balancing" is an imperative component of state strategy, the existing literature's sole focus on balancing excludes other important strategies—notably, bandwagoning and hedging—employed by international institutions. Conceptual clarification of these strategies is thus necessary to comprehend the strategic utility of international institutions. Second, the logic of institutional balancing largely neglects the degree of flexibility in strategy shifts, considering the dynamics of intra-institutional politics on decision-making. This is partly because strategies are either given or considered easy to formulate in the face of a rise of strategic threat. However, it is always difficult for any international institution to come to an agreement quickly because of the diverging interests among member states, particularly if they employ a consensus decision-making process.

Also, in the existing literature on ASEAN, there is a gap between theoretical explanations and empirical evidence. On the one hand, constructivists assert the importance of ASEAN's role in norm creation and diffusion in Southeast Asia and beyond, but if they are correct, it is puzzling why ASEAN has yet to concentrate its diplomatic and financial resources on one pivotal institution to consolidate and diffuse its institutional norms. Many examine the role of one particular ASEANled institution, such as the ARF, yet there is little literature that conducts a comparative analysis of the role of each ASEAN-led institution, such as the EAS and the ADMM-Plus. On the other hand, realists emphasize ASEAN's ineffectiveness in managing and resolving traditional-security issues, but they do not explain why ASEAN member states and major powers have been discussing both traditional and non-traditional security issues since 1992 and continue to do so. In fact, the number of ASEANled institutions that discuss security issues increased significantly—from the ASEAN Foreign Ministers' Meeting (AMM) to the ASEAN Summit to the ARF, APT, EAS and the ADMM-Plus. These two sets of facts—the proliferation of ASEAN-led institutions and the spread of security agendas among them—need to be clearly explained because both relate to the strategic utility of ASEAN.

The other important factor that is often neglected in the literature is ASEAN's institutional change and its strategy shifts. Simply put, ASEAN as an RSI has changed significantly since its inception. ASEAN today is not the same as ASEAN in 1967 (Koga, 2017). Its institutional format and strategy evolved over time. During the Cold War, its geopolitical scope was confined to Southeast Asia, and its strategic influence in the region was very much limited because of the strong presence of great powers, namely the United States, China, and the Soviet Union. However, in the post-Cold War era, ASEAN's functionality and geopolitical scope expanded to East Asia by including the Indochina states as members and by creating political and security linkages with external powers through institution-building. ASEAN member states now have more strategic tools than before to shape the broader Asian regional order. Admittedly, this is not to say that ASEAN has transformed into a completely different institution. There still is institutional continuity, and the origin of ASEAN's fundamental institutional principles and raison d'être is imperative for understanding the potential and limitations of its institutional and strategy changes. However, it is also important to acknowledge ASEAN's institutional changes and strategy shifts that reconstruct itself and create new affiliated institutions.

This book aims to fill these theoretical and empirical gaps on the evolution of ASEAN's institutional strategy for managing great powers with regard to a regional traditional-security issue—the SCS disputes. Here, institutional strategy refers to the collective policy that RSI member states pursue under the belief that such a policy can enhance their security. RSIs employ four types of institutional strategy—institutional balancing, institutional bandwagoning, institutional hedging, and institutional co-option—in order to mitigate the negative effects from the regional strategic environment. The strategy likely shifts when member states expect either a radical or moderate change in the regional balance of power.

With this concept of institutional strategy, the book's core argument is that, since the 1990s, ASEAN and ASEAN-led institutions have individually devised and/or shifted their own institutional strategy to manage the great-power politics pertaining to the SCS disputes, and that each institutional strategy aims to constrain great powers' behavior and avoid being entrapped by their strategic competition so as to ensure member states' interests. Strategy creation or shifts generally occur when member states perceive a change in the strategic environment relating to the SCS. But when ASEAN faces difficulty changing its strategy, it establishes a new institution to expand its strategic tools, which assumes a different functionality, geopolitical scope, and raison d'être. In doing so, ASEAN nurtures a quasi-division of labor among its institutions to manage the great-power politics in the SCS, creating a "strategic institutional web."

The rest of this book consists of four chapters. Chapter 2 conceptualizes the types of institutional strategy and constructs a theoretical model based on agent-centered historical institutionalism to understand the timing of its strategy shifts. This theoretical model analyzes how RSI member states perceive and assess their immediate security environment and create or change the institutional strategy. Since member states' perception is generally affected by the regional distribution of power, the chapter emphasizes the importance of analyzing the regional strategic environment as well as agent's decisions. The methodology of the analyses is briefly discussed through case studies on the role of ASEAN and ASEAN-led institutions regarding the SCS issue. The chapter also provides an overview and assessment of the general trend of the strategic environment in East Asia from 1990 to 2020 over four phases: 1990– 2002, 2003–2012, 2013–2016, and 2017–2020. These four phases will be used as a principal indicator to understand the change and continuity of institutional strategies employed by ASEAN and ASEAN-led institutions.

Chapter 3 chronologically explores the strategic trend of the SCS situation from 1990 to 2020 over four phases as discussed in Chapter 2. The main purpose of this chapter is to understand the timing of changes in the subregional power configuration in the SCS in a more nuanced way. Of course, environmental changes are not the sole determinant of institutional strategy shifts among RSIs. However, without understanding the subregional trends in the context of China's increasing military and economic capabilities, it becomes difficult to clarify the responses or non-responses of ASEAN and ASEAN-led institutions to the changing environment. The chapter serves as a useful reference for institutional strategy shifts, which are discussed in detail in Chapter 4.

Chapter 4 examines the institutional strategy of each ASEAN and ASEAN-led institution: (1) AMM, (2) ASEAN Summit, (3) ASEAN– China dialogues, (4) ARF, (5) EAS, and (6) ADMM and ADMM-Plus. All these frameworks, either formally or informally, discuss salient traditional-security issues in East Asia, including the SCS disputes (see Tables 1.1, 1.2 and 1.3). Moreover, these institutions experience different institutional growths, and the specific timing and function of their institutional development highlight the divergences in the evolution of institutional strategy. The APT and the ASEAN-PMC are excluded in the analysis because the APT has not been actively discussing the SCS issue while the ASEAN-PMC only began to touch on the issue since the mid-2010s.

Chapter 5 discusses the validity of the conceptual and theoretical frameworks of institutional strategy, providing a quick overview of all the cases. It also compares the six cases and analyzes how the institutional division of labor among ASEAN member states was operationalized. The conclusion then discusses the future of the role of ASEAN and ASEAN-led institutions vis-à-vis the SCS situation as well as the strategic implications of an emerging geographical concept—the Indo-Pacific.

**Table 1.2** Discussions on the SCS issue in ASEAN and ASEAN-led institutions, 2000–2009

\*"X" indicates existence of discussion on the SCS issue

\*\*Both consensual and non-consensual documents were referred to, such as chairman's statements, joint press statements, and joint declarations (chairman's statements are non-consensual)

\*\*\*Blacked-out boxes indicate non-existence of the institution or meeting

Compiled by the Author

X 0 X 0 X X X X \*"X" indicates existence of discussion on the SCS issue \*\*Both consensual and non-consensual documents were referred to, such as chairman's statements, joint press statements, and joint declarations (chairman's statements are non-consensual) \*\*\*Blacked-out boxes indicate non-existence of the institution or meeting Compiled by the Author

### References

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# The Concept of Institutional Strategy and Change

Mainstream international relations (IR) theories—neorealism, institutionalism, and social constructivism—have different analytical foci on international security institutions. Neorealists argue that international institutions reflect a hierarchical order in the international politics of the day and that states strategically establish institutions to manage the balance of power (Mearsheimer, 1994/1995; Waltz, 1979). Essentially, these institutions are ephemeral because in an anarchic world where states are the primary actors and there is no world government that can enforce international rules and norms, institutions can only exist through their shared security interests, which are altered by a shift in the balance of power (Mearsheimer, 1994/1995). Furthermore, among many international institutions, great-power-led institutions matter most because they have the material capabilities to shape international politics (Mearsheimer, 1994/1995).

Institutionalists focus on intra-member political dynamics and international cooperation generated by institutions. While sharing the same assumptions with neorealists, institutionalists argue that international institutions help egoistic states cooperate and collaborate with each other even under an anarchic system. This is because international institutions are instrumentally useful for protecting or pursuing member states' interests as they provide functional benefits such as reduced transaction costs, creation of regulatory norms and rules, and provision of monitoring and punishment, albeit imperfectly. These institutional functions increase the probability of cooperation among member states (Keohane & Martin, 1995).

Social constructivists discuss both the creation and outcomes of constitutive norms that shape member states' identities and worldviews. Through a "structuration" process, by which agents and the structure simultaneously interact, agents play a role in shaping the social structure. They do this by disseminating ideas and creating new norms, and institutions become the essential tool for agents to internalize the norms through repetitive practice (Giddens, 1984; Johnston, 2002). In doing so, agents take the norms for granted and believe that they need to follow the norms as it is "appropriate" to do so. Beyond intra-institutional interactions, institutions also help diffuse norms to external actors and make these norms part of their identity (Acharya, 2009).

While these theoretical insights have significantly advanced our understanding of international institutions, existing IR literature rarely discusses the evolving strategic utility of security institutions, let alone institutional strategy. This is because literature on institutional strategy and change is scarce, and these topics have been undertheorized (Cottrell, 2016; Holsti, 1998; Keohane, 2011; Koga, 2017; Wan, 2018). One of the few studies that attempted to explain institutional strategic utility was conducted by Wallander and Keohane (1999). They sought a nuanced understanding of evolving institutional raison d'être by conceptualizing two types of institutional objectives—counter-threat and counter-risk—and explaining the shift between the two (Wallander & Keohane, 1999, p. 23). However, as the institutionalist tradition demonstrates, this analytical framework is confined to explaining intra-member dynamics of the security institution and its institutional sustainability, instead of focusing on institutional strategy toward the external environment. Further, their use of NATO's experience as the sole empirical case is not necessarily applicable to other regional security institutions (RSIs) led by non-great powers (Koga, 2017, pp. 9–10; Wallander & Keohane, 1999, pp. 25, 33–34).

In this context, Ikenberry (2001) expanded the scope of the study on institutional functionality, focusing on the strategic utility of international institutions, such as the United Nations, the International Monetary Fund, and the World Bank. Employing the concept of historical institutionalism, he argues that institutions can "lock in" the existing international order led by a hegemon or great powers. This is because great powers can impose favorable rules and norms through institutions, but these rules and norms also constrain their behavior, giving smaller states an opportunity to diplomatically influence great powers' behavior. Generating mutually beneficial interests for both great and small powers, institutions contribute to sustaining hegemonic stability or the domination of great powers. Treating the United States as the current global hegemon, Ikenberry argues that US behavior has been constrained by norms and rules created through these international institutions, yet at the same time these norms and rules have been built on US liberal values and have been diffused to the world through institutions such as the United Nations. In doing so, the United States has been able to embed its value system in the international community and sustain its global leadership. Whereas insightful, this argument also neglects the agency of RSIs. It centers solely on great powers' use of international institutions and does not analyze how RSIs led by non-great powers have been utilized strategically.

There is another academic attempt to deepen our understanding of international institutions by employing historical institutionalism. Fioretos (2017), for instance, employs the major concepts of historical institutionalism, such as path dependence and critical juncture, to analyze persistence and change in international politics and the proliferation of international institutions in the post-World War II era. Nevertheless, the research defines international institutions too broadly to analyze the strategic role of RSIs. Admittedly, this broad definition of international institutions may be necessary to understand the general characteristics of institutional continuity and change. However, the definition becomes too general, losing analytical edge in generating a theoretical model of international institutions, let alone institutional strategy. In this sense, existing IR studies still face a severe lack of conceptual and theoretical frameworks on institutional strategy.

On the other hand, branching off from the neorealist school of thought, some IR scholars have begun to explore the strategic role of international institutions based on the balance-of-power theory. Most notably, "institutional balancing" has gained currency in the literature on international institutions. Building on the "soft balancing" theory, which suggests that states can engage in a tacit balancing act to limit target states' strategic options without engaging military means, He (2008) argues that an institution can be used as a tool for soft balancing under the condition that states have high economic interdependence. Institutional balancing can be either inclusive or exclusive. The former refers to "binding the target states in the institution" through regulatory norms and rules, and the latter means to "consolidate [member states'] political and economic unity to resist pressures from outsiders" (He, 2008, p. 493). States engage in institutional balancing when they have a high degree of economic interdependence with target states, because conventional military balancing is "not a sensible strategy" and is of a "less friendly nature" (He, 2008, p. 494). The third type of institutional balancing—inter-institutional balancing—aims to "counterbalance the pressure from the institution that excludes the state" by "support[ing] another or initiating a similar institution" (He & Feng, 2019, pp. 159–160).

However, this analytical framework faces five theoretical and empirical weaknesses. First, it is unclear whether economic interdependence is truly a necessary condition for institutional balancing. Even without economic interdependence, it is entirely possible for secondary powers to subtly conduct institutional balancing against a great power, which is less provocative than military balancing because secondary powers constantly fear the potential diplomatic, military, and economic retaliation.

Second, the primary intention of inclusive institutional balancing is not always about "balancing." Regional institutions have multiple strategic motivations to be inclusive. For example, norms and rules created through the ASEAN Regional Forum (ARF) aim to not only constrain member states' behavior but also enable them to cooperate with each other. If the ARF's objective was to constrain the behavior of great powers such as the United States and China with pre-existing ASEAN norms and rules, its consultative role in norm- and rule-making would not have to be inclusive, and ASEAN could have fewer discussions on how to nurture cooperative norms with ARF member states. While there were strategic motivations among several member states that were eager to include the United States and China for constraining their behavior, the establishment of the ARF was not driven purely by the member states' strategic motivation for institutional balancing. This example illustrates the difficulty in clarifying whether an RSI aims to balance against, hedge against, or bandwagon with great powers.

Third, it is also difficult to clarify the sustainability of institutional balancing. For example, according to He (2019, p. 215), the Trans-Pacific Partnership (TPP) is defined as an exclusive institutional balancing against China under the Obama administration. While this is true, it does not capture the evolving strategic role of the TPP. The TPP grouping was originally formulated in 2005 by small powers in Asia–Pacific, such as Brunei and Singapore, and the United States joined in 2008. The original members had needed the United States to boost the political and economic relevance of the TPP; thus, TPP as a group was bandwagoning with the United States rather than balancing against China. The original members might not have expected the evolution of the TPP into a strategic tool to counterbalance China's economic influence, let alone the Trump administration's withdrawal from the institution in 2017. Therefore, it becomes unclear to what extent such an institutional strategy can persist over time.

Fourth, there is little discussion on the internal political dynamics in formulating institutional balancing. Compared with state strategy, institutional balancing is generally more difficult to conduct because decisions need to be made in agreement among sovereign states, and there is no legal hierarchy in their decision-making process unlike in the domestic arena. This is particularly true for RSIs led by secondary powers where there is no dominant player with sufficient material and political power to impose normative preferences on other member states. In this sense, institutional balancing assumes member states' consensus on such an institutional strategy. However, this is not always the case in reality. The failure to adopt a joint communiqué in 2012 for the first time in the history of the ASEAN Foreign Ministers' Meeting (AMM) shows, for instance, that member states' strategic interests are not always congruent, and institutional balancing is not automatically operationalized by exogenous conditions. Rather, the 2012 AMM failure implies that differing interests among member states make it difficult, if not impossible, to quickly alter its institutional posture and strategy. The existing literature on institutional balancing fails to grasp these political dynamics.

Fifth, institutional balancing also assumes that there is a coherent and coordinated institutional strategy even in multiple institutional frameworks. For example, ASEAN has established different ASEAN-led institutions, such as the ARF, the APT, and the East Asia Summit (EAS), since the 1990s, and their strategic foci are not the same. While the APT focuses on economic and financial cooperation, the ARF is centered on security, and the EAS has broader strategic foci. Without carefully examining the responses of these institutions to particular events and crises, we face the danger of oversimplification which creates a misunderstanding of the nature of each ASEAN-led institution.

With these limitations in the existing literature on the role of international security institutions and institutional balancing, the concept and logic of institutional strategy require significant refinement. More specifically, a broader conceptualization and theorization of institutional strategy is necessary by incorporating the entire spectrum of strategy, from balancing to hedging to bandwagoning. To this end, this book constructs an analytical model based on two underlying assumptions regarding the basic functions of security institutions. First, the primary objective of a security institution is to ensure the security of its member states (Jervis, 1982, p. 357). Given the anarchic international environment, security is considered a scarce commodity, and thus member states of a security institution value the institution's security utility. Second, because both the concept of "security" and the degree to which it is satisfactorily ensured depend on the actors' subjective judgment, an institution's sustainability is also subject to the member states' belief in its institutional credibility (Baldwin, 1997; Koga, 2017). Accordingly, if this belief weakens or collapses, member states will consider either initiating an institutional change or discarding the institution altogether (Koga & Nordin, 2020).

Also, in the light of the plasticity of institutional strategy, it is important to analyze RSIs' institutional history and design which create a common belief in institutional utility among the member states. Ahistorical theories are likely to miss the evolutionary process of institutional raison d'être and strategic functionalities. In this sense, a theory that incorporates strategic calculations and history becomes necessary.

### 2.1 Theoretical Approach: Agent-Centered Historical Institutionalism

In constructing an analytical model to capture the evolving nature of institutional strategy, historical institutionalism offers useful concepts: path dependence, critical junctures, and lock-in effects. "Path dependence" refers to the period during which a limited degree of freedom constrains "the range of current possibilities and/or options in institutional innovation" (Nielsen et al., 1995, p. 6). This explains how "the strategies induced by a given institutional setting" may "ossify over time into a world view" (Hall & Taylor, 1996, p. 940). Unlike the ahistorical nature of major IR theories, this concept emphasizes the relevance of history which generates the patterns of institutional reproduction (Capoccia & Kelemen, 2007; Streeck & Thelen, 2005, pp. 6–9).

"Critical junctures" refer to "relatively short periods of time during which there is a substantially heightened probability that agents' choices will affect the outcome of interest" (Capoccia & Kelemen, 2007, p. 348; Collier & Collier, 1991; Thelen & Steinmo, 1992, p. 27). Such a situation can be triggered by an exogenous shock that causes an institutional crisis or dysfunction, resulting in new institutional arrangements (Krasner, 1984). In contrast to path dependence, this concept embodies change. It is "critical" because the change affects the long-term consequences of institutional arrangements. Critical junctures generally span a relatively short period of time because institutions are typically stable for longer periods of time (Hall & Taylor, 1996; Pierson, 1996; Thelen, 1999, 2004; Thelen & Steinmo, 1992). After a critical juncture, the lock-in period emerges, consolidating the status quo and representing the initial period of stasis—path dependence—within the institution (Fioretos, 2011, p. 377). With these three concepts, historical institutionalism aims to strike an "effective and satisfying balance" between understanding the general logic of institutional change and the specific characteristics of each institution (Capoccia, 2016, p. 1096; Pierson, 2004, 178).

The most popular criticism against historical institutionalism, however, is that it overemphasizes institutional continuity instead of change. Given its assumption that institutions are generally considered "sticky," they are likely to remain the same unless a crisis or an exogenous shock takes place (Bell, 2011, p. 886; Hay & Wincott, 1998, pp. 951–957; Olsen, 2009, p. 3). This deterministic logic invites a well-known critique of historical institutionalism: "[institutions] explain everything until they explain nothing" (Thelen & Steinmo, 1992, p. 15). Critics have also argued that historical institutionalism ignores the notion that an agent's idea, and not the institutional setting, produces and reformulates preference sets leading to institutional change (Hay, 2008, 64). To avoid

this criticism, the concept of endogenous institutional change—coalitionbuilding, norm defection, and norm reinterpretation—is introduced (e.g. Mahoney & Thelen, 2010). Still, even with these new foci, the questions of how institutions produce constraints and how empowering effects on actors break such institutional constraints tend to be unanswered. Rather, such concepts render institutions "plastic" and unstable as endogenous changes driven by agents are overemphasized in the analysis of how and when structural factors affect agents' choices (Capoccia, 2016, p. 1096).

In this context, Bell proposes an agent-centered historical institutionalism (Bell, 2011, pp. 888–889). This theoretical approach focuses on "active agency within institutional setting[s] and sees the agents in question as being shaped (though not wholly determined) by their institutional environments" and argues that institutions shape agents' behavior, thought, and function as both constraints and empowerment (Bell, 2011, p. 889). At the same time, while institutions are "ontologically prior to agency," the theory emphasizes that agency is "a prime mover in institutional change processes" (Bell, 2011, p. 891; 2012, p. 716). Accordingly, it does not give complete precedence to agents over institutions or the environment. Agents do not act on a *tabula rasa* when there is an environmental change; rather, they act strategically under the influence of previous and existing institutional rules and norms. In this way, the approach clarifies the roles of both institutions and agents in institutional change (Bell, 2011, p. 892; Thelen & Steinmo, 1992, p. 17). The role of the agent is limited by institutional constraints, but because institutions only provide ambiguous principles, rules, and norms that are subject to reinterpretation, the agent can continue to utilize this space to empower itself (Mahoney & Thelen, 2010, p. 10; Schmidt, 2012, p. 709). Therefore, agent-centered historical institutionalism goes beyond the conventional institutional "change v. stasis" dichotomy and refuses to give particular primacy to agents or structure (Bell, 2012, p. 717; Streeck & Thelen, 2005, p. 8).

As such, agent-centered historical institutionalism avoids overemphasizing exogenous factors. Exogenous factors, or external shocks, certainly create change in the existing equilibrium, enabling agents to come up with new ideas and affording them the opportunity to implement the ideas in the existing institution, thus promoting change. Yet, the initial phase of a new institutional setting, including norms and strategy, is never optimal and agents continually finetune the ideas as the source of new institutional norms and strategies. Once this period of fine-tuning ends, the ideas "fade into the background and relatively [sic] obscurity until something provokes a reevaluation of the policy" (Goertz, 2003, p. 51). It becomes costly for agents to break the new institutional setting, and the ideas then become the standard operating procedure. Agent-centered historical institutionalism thus focuses on the process of institutional change by explaining the dynamic transition between equilibrium and disequilibrium. Although the concept of exogenous shocks must be clarified, this comprehensive approach enhances its explanatory power regarding institutional change beyond what is offered by the structureor agent-focused approaches alone.

Using the historical institutionalist approach, the next section discusses the concept and typology of institutional strategy as well as strategy shift.

### 2.2 Conceptual and Theoretical Framework of Institutional Strategy

Institutional strategy is embedded in institutional design. In the traditional-security field, states construct a security institution such as a military alliance and/or diplomatic coalition to formulate a political strategy that shapes the balance of power in their favor. Institutional strategy thus refers to a set of collective security policies that member states of a security institution pursue under the belief that such policies can enhance their short- or long-term security. There are four main types of institutional strategy: institutional balancing, bandwagoning, hedging, and co-option (e.g., He, 2008; Khong, 2004; Koga, 2018; Pape, 2005; Posen, 2013).

Institutional balancing refers to the collective action by members of a security institution which aims to neutralize or at least minimize the current and expected power differences against rival states, including a hegemon and/or rising power. This concept is similar to the realists' idea of "external balancing" whereby a security institution mobilizes its political, economic, and military resources to balance against a target state(s) (Liff, 2016; Mearsheimer, 2001, pp. 156–157; Waltz, 1979, pp. 126, 168). However, because of their limited military capabilities, mediumor small-power-led RSIs such as ASEAN generally use political means to conduct balancing. This strategy can send a political signal not only to the target state(s), but also to the international community, that the target state is behaving "illegitimately" or "unjustly." In doing so, member states aim to attract international diplomatic or possibly military support, including that of external great powers. Such a signal may increase the possibility of the international community raising concerns, internationalizing the issue, and imposing material punishment on the target states, which can function as a threat. ASEAN's unified criticism of Vietnam's invasion of Cambodia in 1979 through a joint statement is a case in point.

Institutional bandwagoning refers to the collective alignment with a great power(s), including the source of a threat, to gain benefits and/or to ensure security at the expense of opportunities to cooperate with other great powers. Institutionally, member states attempt to adopt a common stance toward a target state(s), or at least not to object to such a stance, thus enhancing military, economic, and political cooperation. Member states also incorporate a target state(s) into the institution, providing an opportunity to lead the institution so that the members can mitigate the threat from the target and benefit from the target's greater military, economic, and political resources. An example of this is the TPP, which originated from a 2005 economic agreement entered into by four small powers in Asia–Pacific—Brunei, Chile, New Zealand, and Singapore. In 2008, the TPP included the United States, thus increasing the framework's security, economic, and political influence in Asia–Pacific and beyond.<sup>1</sup>

Institutional hedging attempts to maintain strategic ambiguity to reduce or avoid risks associated with the negative consequences of failed institutional balancing or bandwagoning. On the one hand, failed institutional balancing can lead balancing institutions to experience severe punishment by the target state(s), because such actions provoke them. On the other hand, failed bandwagoning can lead bandwagoning institutions to confront the targeted actors' domination and face a potential loss of autonomy and security. Both strategies also risk facing a lack of commitment from the ally or bandwagoned state. In order to mitigate such risks, institutions make the most of its "institutional power," which aims to "exercise [control] indirectly over others through diffuse relations of interaction," with the mobilization of material, symbolic, or normative resources (Barnett & Duvall, 2005, pp. 43, 50). To operationalize this

<sup>1</sup> Under the Trump administration, however, the United States withdrew from the TPP in 2017.

power, a security institution incorporates a target state(s) into the institution as a member state, attempting to constrain that state's behavior by creating or consolidating its own institutional norms and rules. An example of this is ASEAN's inclusion of great powers into an ASEAN-led institution to constrain them through the "ASEAN Way," which consists of norms such as non-interference and consensus decision-making. Since inclusion would risk members being dominated by the target powers, member states create additional normative mechanisms such as "ASEAN centrality" in ASEAN-led institutions, which gives ASEAN the privileges of agenda-setting and chairpersonship (Koga, 2021, pp. 94–95).

Institutional co-option nurtures cooperative norms and rules by incorporating a target state(s) in the hope of changing its preference. As with institutional hedging, this strategy is conducted by incorporating a target state(s) as a member(s) and providing opportunities for members to interact with each other more frequently. Of course, it is entirely possible that this strategy is motivated toward creating security norms and principles that are advantageous to core member states. However, unlike institutional hedging, it does not aim to immediately constrain the behavior of the target state by imposing regulative norms. Rather, it expands channels of communication, facilitates cooperation in non-contested areas, and increases the possibility of nurturing mutually acceptable cooperative norms and rules. An example of institutional co-option is a "cooperative security" arrangement that emphasizes the importance of confidencebuilding measures through diplomatic interactions and policy discussions toward potential cooperation. At the same time, such an arrangement also gives target states leeway to shape institutional norms and rules, which is an incentive for them to join.

According to agent-based historical institutionalism, institutional strategy is not static. The strategy can shift in times of environmental change, yet such a shift needs to be carefully examined by taking into consideration both intra-institutional politics among member states as well as the external strategic environment. Indeed, the timing of the change generally depends on both external and internal factors, and agent-centered historical institutionalism offers a clue to understanding how these two factors interact with each other.

In the conventional realist logic, the distribution of power shapes state behavior and a shift in the strategic landscape determines institutional change. However, RSIs require intra-institutional political processes to decide the type of institutional strategy that they need to respond to environmental change. Therefore, a change in the distribution of power serves as a trigger, not a determinant, in shifting institutional strategy, and it is ultimately member states' implicit and explicit agreement that changes the strategy. To be sure, institutional strategy is relatively inflexible. This is due to the collective action problem among sovereign states: Changing institutional strategy is more difficult than changing state strategy as it is difficult for member states to achieve consensus quickly. In fact, a change in institutional strategy may alter the institutional design and format, which makes member states highly cautious of such a move. For example, a cooperative security institution based on institutional co-option will find it difficult to transform itself into a collective self-defense system based on institutional balancing unless there is a radical shift in the strategic environment.

In this context, some changes in institutional strategy are relatively easier than others, and there are two types of institutional strategy shift radical and moderate—as illustrated in Fig. 2.1. The diagram shows more moderate changes than radical ones. There is only one type of radical change: a shift from institutional balancing to bandwagoning, and vice versa. In a shift from institutional balancing to bandwagoning, an RSI abruptly includes a target state that the institution was balancing against and gives it an opportunity to lead the institution. In a shift from institutional bandwagoning to balancing, an RSI excludes a target state from the institution that it was bandwagoning with. These radical shifts in institutional strategy are usually inconceivable; they require a radical change in the strategic environment, such as war or the collapse of a great power. On the other hand, an RSI can take various moderate changes. A moderate shift occurs when the institution faces either an abrupt or a gradual change in the strategic environment. Under a gradually changing environment, institutions are likely to avoid a radical strategy shift because it would invite political and military confrontation; instead, they gradually modify their institutional strategy from bandwagoning or balancing to hedging or co-option, or lean toward bandwagoning or balancing from hedging or co-option. At the same time, RSIs may conduct institutional hedging and co-option simultaneously as these strategies do not require substantial change to the institutional design and format.

Again, a strategic environmental change is not a determinant of strategy shift because the latter ultimately occurs from within, by agents.

**Fig. 2.1** Radical and moderate change in institutional strategy

As agent-centered historical institutionalism suggests, an environmental change provides only a window of opportunity for a change in institutional strategy. In addition, given the importance of agents, member states need to recognize such a change in the regional balance of power in order to shift institutional strategy. Therefore, an environmental change should be either actual or perceptual, and this could be the emergence of a power vacuum or a change in a major power's foreign policy. Once member states recognize that the existing institutional strategy may need changes to adequately respond to the changing environment, they will discuss a potential strategy shift. Specifically, with the existing utility of institutional strategy as a reference point, members reassess the institution's utility vis-à-vis the changing strategic environment and decide whether they will enact an institutional strategy shift.

### 2.3 Methodology

Using such a theoretical framework, this book focuses on ASEAN's management of great powers vis-à-vis the SCS disputes from 1990 to 2020. The SCS issue is one of the most important cases to be examined for East Asian security and ASEAN institutional strategies for four reasons. First, Brunei, Indonesia, Malaysia, the Philippines, China, and Taiwan have contested maritime borders, islands, and islets, and there have been naval and para-military clashes and standoffs between claimant states in the contemporary period, particularly in 1974, 1988, 1995, and 2012. These have been a source of instability in East Asia.

Second, the SCS stability is vital for East Asia's economic prosperity. The sea lines of communication (SLOCs) through the SCS are geo-economically important. According to the US Energy Information Administration, approximately 11 billion barrels of oil and 190 trillion cubic feet of liquefied natural gas passed through the SCS in 2012 (USEIA, 2013). It was also estimated that USD 3.37 trillion worth of shipping (China Power Team, 2017) and 4.7 trillion cubic feet of liquefied natural gas passed through the sea in 2016 (USEIA, 2017), while 15 million barrels of oil did so per day in 2017 (USEIA, 2018). The SCS is at a strategically important location that connects the Pacific and the Indian oceans through several choke points.

Third, the SCS disputes are a rare and prominent security issue that ASEAN has attempted to manage since the 1992 ASEAN Declaration on the SCS. The issue presents not only traditional, but also non-traditional, security aspects including piracy, transnational crimes, maritime environment, and maritime safety. Although ASEAN has a track record of avoiding in-depth discussion of territorial disputes such as North Borneo, Pedra Branca, and the Preah Vihear Temple, the SCS issue has consistently been on its agenda since the end of the Cold War. Therefore, the issue serves as a test case for the future strategic behavior of ASEAN.

Fourth, regional great powers, particularly China and the United States, have been involved in the SCS disputes. While China is one of the claimant states, other regional major powers, including Australia, Japan, and the United States, are committed to stability in the seas primarily because of the importance of SLOCs as well as their strategic allies and partners such as the Philippines. ASEAN has attempted to manage not only the disputes among claimant states, but also tensions involving external great powers, aiming to prevent an escalation into full-blown conflict. In this sense, the SCS issue is the most useful case for analyzing ASEAN's ability to manage great-power politics.

For the time frame, this book examines ASEAN's institutional strategies in the post-Cold War era from 1990 to 2020. The end of the Cold War led to significant changes in the regional balance of power because of the demise of the Soviet Union and weakening US military presence in the region (Baker, 1991; Betts, 1993; Friedberg, 1993; Katzenstein, 2005; Koga, 2011; Stuart & Tow, 1995; Tow, 1991). The 1997 Asian Financial Crisis also caused a temporary decline in Asian economies as well as Asia's skepticism regarding US political commitment to ensuring regional economic stability, while 9/11 generated US unilateral action in the Middle East, resulting in the lack of diplomatic attention in Asia (Acharya, 1999; Alagappa, 2003; Bowles, 2002; Christensen, 1999; Posen & Ross, 1996; Zheng, 2005). The 2008 Global Financial Crisis sparked public, academic, and policy debates over the relative decline of the United States and the rise of other powers, particularly China (Brooks et al., 2013; Layne, 2008; Mearsheimer & Walt, 2016; Nye, 2010; Posen, 2013; Wu, 2010; Zakaria, 2008). The 2016 SCS Arbitral Tribunal's award, which ruled overwhelmingly in favor of the Philippines, provided the Philippines and ASEAN with a legal means to resolve the territorial disputes. Although China rejected the ruling entirely, the denial heavily affected the regional states' perception of China's strategic posture as it challenged the existing international legal order, and this would have a long-term implication for the political balance of power in Southeast Asia and beyond (Davenport, 2016; Koga, 2016; Zhang, 2017).

The frequency of these changes in the regional strategic environment is partly related to the development of material capabilities in a larger strategic landscape. The United States still possesses the largest military force in the world, yet China has gradually narrowed the gap (Fig. 2.2). There was a drastic increase in US military expenditure between 2001 and 2009, but this was mainly caused by US military involvement in the Middle East, particularly in Afghanistan and Iraq, after the 9/11 terrorist attacks in 2001. From 2010, after the 2008 Global Financial Crisis, the United States steadily cut down its defense spending; by 2016, it had returned to the level of expenditure in 2000, although military expenditure began to gradually increase again from 2017. Whereas the gap between the United States and China has been consistently shrinking, the gap between China and Southeast Asian states has been exponentially widening since 1999. More remarkably, China made this possible without drastically increasing its share of GDP for military expenditure there was, in fact, a decrease in its share of GDP for military expenditure from 2.5 percent in 1990 to 1.9 percent in 2019.2 The dramatic increase in military expenditure is therefore attributed to China's strong economic

<sup>2</sup> SIPRI Military Expenditure Database, 1949–2019.

growth in the post-Cold War period. According to the World Development Indicator, China's economic growth has remained well above six percent since 1991. Its growth rate hovered at approximately 10 percent from the 1990s to 2000s and at seven percent in the 2010s (The World Bank, 2020). The economic gap between the United States and China has been steadily shrinking since 1992, while Southeast Asian states could not match China's economic might (Fig. 2.3).

Admittedly, military expenditure and GDP growth alone do not adequately account for a shift in the distribution of capabilities. Other factors such as the geographical allocation of military assets, quality of military, existence of alliances, and the degree of security commitment significantly influence the configuration of the balance of power. Nonetheless, given these trends of changing material resources and China's geographical location in East Asia, China's military and economic commitment to the region has remained stable, and its strategic influence in the region and beyond has increased. If we take a realist standpoint, ASEAN member states need to militarily align with the United States or other regional great powers to counterbalance the rise of China. Yet, this is not the case. The Philippines and Thailand are still the only two Southeast Asian states that have a formal defense treaty with the United

**Fig. 2.2** Growth of military expenditure in East Asia, 1989–2020 (*Source*  SIPRI, 2021)

**Fig. 2.3** GDP growth in East Asia, 1989–2020 (*Source* World Development Indicator, 2020)

States, and they constantly face the alliance dilemma: entrapment or abandonment. Other ASEAN member states need to find alternative ways to manage this power shift in East Asia. This constant change in material capabilities in East Asia illustrates the gradual change in the regional distribution of power.

Based on the theoretical model of agent-centered historical institutionalism, it is important to understand how ASEAN member states have perceived this general trend, and this requires a closer examination of the subregional trend for the SCS situation. To this end, this book examines the 30 years in the post-Cold War era by dividing it into four phases— 1990–2002, 2003–2012, 2013–2016, and 2017–2020—in accordance with major changes in the regional strategic environment and with events such as ASEAN's critical declaration on the SCS and other major maritime incidents. More specifically, the first phase, from 1990 to 2002, was when ASEAN and China concluded the Declaration on the Conduct of Parties in the South China Sea (DOC) after experiencing several tensions among the claimant states. The second, from 2003 to 2012, was when the Scarborough Shoal naval standoff between the Philippines and China led to ASEAN disunity despite institutional efforts to maintain the SCS stability in the 2000s. The incident resulted in the AMM's failure to issue its joint communiqué for the first time in its history. The third, from 2013 to 2016, was when the Philippines took legal action against China at the SCS Arbitral Tribunal, which eventually issued the award largely in favor of the Philippines. The fourth, from 2017 to 2020, was when the SCS code of conduct discussion became active and was seriously considered by China and ASEAN.

This book mainly uses official documents including ASEAN's joint communiqués and declarations, while examining media reports such as newspapers and magazines to understand the nuances in those documents. Given ASEAN's strict consensus decision-making mechanism, the documents reflect ASEAN's institutional stance and strategy. This is because ASEAN-led institutions will not issue any formal institutional document if there is a clear disagreement by any member state, although ASEAN can utilize peer pressure to create a unified political stance (Tan, 2013).

In addition, the book focuses not only on ASEAN's security institutions such as the ARF and the ASEAN Defence Ministers' Meeting Plus (ADMM-Plus), but also on political ones including the AMM and ASEAN–China dialogues. This is because ASEAN as a whole had already become a security-oriented institution in the post-Cold War era. Most notably, from 1992, the association formally included political and security agendas and proliferated ASEAN-led institutions. Since its establishment in 1994, the ARF has played a significant role in updating the SCS situation yearly in one way or another, drawing much scholarly attention. Other ASEAN institutions also discussed or were beginning to discuss the SCS issue. The AMM issued a joint communiqué mentioning the SCS disputes every year except for 2012. The ASEAN Summit has also consistently addressed the SCS situation since 2010 and issued joint statements, while many affiliated institutions, such as the ASEAN Post Ministerial Conference (ASEAN-PMC), EAS, ADMM, and ADMM-Plus, did the same (see Chapter 1). As such, it was not only ASEAN's security institutions, but also other ASEAN-led institutions, that attempted to address the issue. Confining strategic issues to only ASEAN security institutions therefore significantly limits a broader understanding of the strategic utility of ASEAN.

Also, with the proliferation of ASEAN-led institutions, member states have been able to opt for "forum shopping," whereby they intensively engage particular institutions to ensure their own interests (Chou et al., 2016, pp. 54–55; Murphy & Kellow, 2013).3 As a result, each ASEAN and ASEAN-led institution gradually assumed different roles in managing the SCS disputes. For example, the APT does not touch on the SCS issue, while the AMM is generally more assertive in that regard. Additionally, while many ASEAN-led institutions review the situation, the joint statements and press releases on the SCS disputes have been issued predominantly by the AMM and ASEAN–China dialogues, including the Summit, PMC, and Senior Officials' Meetings (SOM) (Table 2.1). This indicates the implicit institutional division of labor among ASEAN and ASEAN-led institutions.

Accordingly, this book analyzes six major institutions in ASEAN relating to the SCS issue: AMM, ASEAN Summit, ASEAN–China dialogues, ARF, EAS, and ADMM/ADMM-Plus. The first four institutions are examined from 1990 to 2020, while the EAS and the ADMM/ADMM-Plus are analyzed from Phase 2 because they were established after 2002 (Table 2.2). The APT and the ASEAN-PMC are excluded. The APT has not touched on the SCS issue since its inception except for the 2002 summit and the 2014 Foreign Ministers' Meeting; even then, there were only brief statements issued.4 The APT has focused more on socioeconomic cooperation and long avoided traditional-security issues. Admittedly, there is still a possibility that the APT would table the SCS issue as a regular agenda in the future, but given that there has yet to be a serious discussion, the APT is considered irrelevant for examining the SCS disputes. On the other hand, the ASEAN-PMC has actively discussed the SCS issue since the 2010s. However, the most important meetings are the ASEAN–China dialogues, which have existed since the mid-1990s. Therefore, the book focuses on ASEAN–China dialogues rather than the other ASEAN+1 institutions.

The next chapter provides an overview of the historical development of the SCS situation through each of the four phases.

3 Forum shopping refers to "the multiple, reiterative use of various arenas, including returning an issue to the original arena, and thus building (or blocking) support for policy action" (Murphy & Kellow, 2013, p. 139).

4 In 2002, the APT Summit touched on the DOC but did not issue any political statement. In 2014, the APT Foreign Ministers' Meeting discussed the importance of peaceful resolution of the SCS disputes for the first time (ASEAN Secretariat, 2002, 2014).

### References

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# Four Phases of South China Sea Disputes 1990–2020

This chapter overviews the development of the South China Sea (SCS) situation, focusing on the interstate interactions between regional great powers, particularly China and the United States, the claimant states, and ASEAN member states from 1990 to 2020. To clearly illustrate the strategic context in the SCS where each ASEAN and ASEAN-led institution formed and altered its own institutional strategy, the chapter examines the developments over four phases: 1990–2002, 2003–2012, 2013–2016, and 2017–2020.

### 3.1 First Phase: Framing the Disputes (1990–2002)

### *3.1.1 1990–1996: The Emerging SCS Issue in the Post-Cold War Era*

The change in the global strategic environment which was facilitated by the US-Soviet détente in the late 1980s was not necessarily positive for all regions in the world. In East Asia, the end of the US-Soviet confrontation and the eventual collapse of the Soviet Union created strategic uncertainty over US security commitment. The SCS situation was also precarious, with naval skirmishes between China and Vietnam over Johnson South Reef in the Spratly Islands in March 1988. Consequently, the regional states expressed concern over the prospect of stability in the SCS, suggesting that it could be a potential flashpoint in the post-Cold War era (e.g., Prakash, 1990).

© The Author(s) 2022 K. Koga, *Managing Great Power Politics*, Global Political Transitions, https://doi.org/10.1007/978-981-19-2611-2\_3

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Indeed, in June 1990, Malaysia began to enhance its naval presence in the northern Borneo state of Sabah by creating a naval base, which would increase Malaysia's power projection capability in the SCS (Prashanth, 1990). Chinese Foreign Minister Qian Qichen expressed China's willingness to become a dialogue partner of ASEAN, but insisted on its sovereignty over the SCS islands (*Xinhua*, 1991). Also, in 1991, China's military spokesperson stated that the SCS oil and natural gas reserves had become a strategic focal point as the Gulf War had increased awareness of the necessity of risk diversification in oil reserves (Gangadharan, 1991a).

Amid the gradual rise in tension, Indonesia organized the informal workshop, "Managing Conflicts in the South China Sea," in January 1990. Indonesia saw the situation as increasingly unstable and was compelled to diffuse the tension before the rivalry between claimant states, including China and Taiwan, escalated into open conflict. Although China refused to attend the first workshop, Indonesia emphasized its informality and successfully included China in the second session held in June 1991 (Gangadharan, 1991a). Since Indonesia had no explicit territorial disputes in the SCS, it played a mediator role by inviting to the workshop all six claimant parties—Brunei, China, Malaysia, the Philippines, Taiwan, and Vietnam—with four observers—Indonesia, Laos, Singapore, and Thailand (Gangadharan, 1991b). The workshop resulted in a positive atmosphere as China proposed a joint exploration for the Spratlys' oil and gas reserves (Gangadharan, 1991b). Thus, Vietnam and Malaysia agreed in April 1992 to joint development in the overlapping territories—areas claimed by both states—by splitting benefits evenly (*Platt's Oilgram News*, 1992).

However, 1992 also saw the emergence of strategic distrust over the SCS issue. In February 1992, China enacted a new maritime law: the Law of the People's Republic of China on the Territorial Sea and the Contiguous Zone (The National People's Congress of the People's Republic of China, 1992). This law explicitly stipulated that the Spratly Islands were part of China's territory, and thus China's domestic maritime laws applied to these areas. Although the other claimant states were concerned about the new law, their initial reactions were largely quiet, without strong diplomatic protests.1

<sup>1</sup> Philippine General Lisandro Abadia expressed concerns not specifically about China but about the five parties' reinforcement of their claims, and emphasized the necessity for

The strong response from some ASEAN and non-ASEAN member states, particularly Vietnam, came after negotiations for China's proposed joint development collapsed. This is because China had unilaterally given the right to exploration to a US oil company, Crestone Energy Corporation, in May 1992 (*The Age*, 1992b). China insisted that it had the sovereign right to conclude the deal and indicated its resolve to use force to defend the company, if necessary (*The Age*, 1992b). Given these trends, China's behavior was seen to protect its own maritime interests by consolidating its position in the SCS through domestic law and by including a US company to hedge against US government involvement, which some have described as the emergence of "China's new assertiveness" (Yeong, 1992). Faced with China's coercive diplomacy, other claimant states also began to employ fait accompli strategies by sending troops and building structures in the SCS. This renewed tension led ASEAN to adopt the "ASEAN Declaration on the South China Sea" in July 1992 (ASEAN Secretariat, 1992).

Although it represented ASEAN's united position on the SCS issue, the declaration did not completely alleviate the tension. China continually asserted its stance, advocating for bilateral talks on the SCS disputes, instead of multilateral negotiations. Malaysia and the Philippines expressed concern about the future development of the situation which could potentially trigger an arms race in Southeast Asia (*ST* , 1993a, 1993b).

Indeed, China announced in July 1993 that it had developed an airstrip in the Paracel Islands, and Malaysian Defense Minister Najib Razak responded by demanding the non-militarization of the seas (Chai & Pereira, 1993). The United States also responded indirectly: At the ASEAN-US Post Ministerial Conference (PMC), US Secretary of State Warren Christopher stated that the United States would not accept the use or threat of force in the SCS as this would likely affect the stability of the sealines of communication (SLOCs), which the United States considered "most seriously" (Kassim et al., 1993). To alleviate the situation, Indonesia proposed to officialize the SCS workshop, placing it on Track-1, but the idea was immediately rejected by China because of Taiwan's participation and the potential inclusion of non-claimant states (Jacob, 1993a, 1993b).

the Philippines to develop its own defense capabilities to fend off other states' intrusions in the seas (see *The Age*, 1992a; *UPI* , 1992).

Nevertheless, after the 1992 ASEAN declaration, the SCS situation somewhat stabilized. From 1992 to 1994, there were no major maritime skirmishes or confrontations that altered the status quo (Isberto, 1993).

Tensions re-emerged in June 1994 when the Philippines unilaterally allowed a US-Philippines consortium to explore hydrocarbons in the SCS, which China fiercely opposed (*Platt's Oilgram News*, 2014). In the following month, Chinese naval fleets blocked a Vietnamese oil rig in the SCS, which China considered an encroachment on its sovereignty (Murdoch, 1994). In addition, China rejected the internationalization of the SCS issue by taking it off the agenda of the newly established security institution, the ASEAN Regional Forum (ARF). However, Brunei, Malaysia, the Philippines, and Vietnam considered the discussion of the issue at the ARF to be inevitable (Kassim, 1994). Eventually, the ARF discussed the SCS matter, and China assured ASEAN of its commitment to peace and stability, non-use of force in the SCS, and peaceful negotiations, but it also added that the time was not ripe for negotiations (*Xinhua*, 1994).

The situation further deteriorated in 1995 when the Philippines confirmed China's newly constructed structures and troop presence on Mischief Reef on February 8 (*AFP*, 1995). Philippine President Fidel Ramos accused China of this fait accompli, but Chinese Foreign Ministry spokesperson Chen Jian denied any naval intrusion, troop presence or attempts to build a naval base in the Spratlys (*UPI* , 1995). Ramos then ordered the enhancement of military presence in the Spratlys, stating that the Philippines needed to "prepare for the worst" (Teves, 1995). Faced with this incident, Malaysia's Foreign Minister Abdullah Ahmad Badawi also accused China of creating regional tension (*APW* , 1995a). China subsequently insisted that the structures on Mischief Reef were shelters for fishermen and that there was no military structure or naval presence (Chandra, 1995).

Although the Philippines was a US ally, the United States did not send a clear signal to deter China. In the context of US disengagement from Subic Bay and Clark Air Base—a political decision by the Philippines—US Admiral Ronald Zlatoper argued that the US policy on China should be based on engagement rather than isolation or confrontation (Soh, 1995). State Department Assistant Secretary Winston Lord also stated on March 10 that the SCS issue was not "of immediate danger to the United States certainly, given their general level of defense abilities… [the United States does not] see any immediate reason for attention or concern by any means" (*Federal News Service*, 1995). Thus, the United States avoided being entrapped by the SCS disputes.

In this context, ASEAN garnered political support from member states to form a unified stance on the SCS issue. Before the ASEAN ministerial meetings in April, the six member states held a closed session on March 17, and issued a joint statement, "Statement by the ASEAN Foreign Ministers on the Recent Developments in the South China Sea," on March 18, which expressed "serious concern" over the development of the SCS situation, explicitly referring to the Mischief Reef incident, and the importance of peaceful resolution (ASEAN Secretariat, 1995; Whiting, 1995). Vietnam, a non-ASEAN member state at the time, supported ASEAN's stance, expressing that "[s]tability should be maintained on the basis of the status quo" (*APW* , 1995b). With regional diplomatic support, Philippine navy destroyed China's structures and markers on March 25 and continued to detain Chinese fishermen and boats on the charge of violating its maritime boundaries (Reid, 1995; *ST* , 1995).

Likewise, the United States responded by issuing a slightly stronger statement. While reaffirming the importance of freedom of navigation and international law, including the United Nations Convention on the Law of the Sea (UNCLOS), and advocating against the threat or use of force, the United States expressed "serious concern," aiming to "reassure US allies in Southeast Asia" (Lobe, 1995). Such diplomatic pushbacks from ASEAN and the United States, however, might not be fully effective. In May, a Philippine naval vessel and two Chinese fishing boats engaged in a 70-minute standoff. President Ramos reacted by sending a special envoy to China to seek a peaceful resolution, while China stated that it would "always be a positive factor for world peace and development" (Cumming-Bruce, 1995).

After the ARF in July 1995, China's diplomatic stance on the SCS shifted subtly. Although China still rejected multilateral negotiations, Foreign Minister Qian Qichen agreed to three points: holding multilateral talks with the seven ASEAN member states; respect for international law, including UNCLOS; and freezing sovereignty issues and promoting joint development (Kassim, 1995). In addition, the Philippines and China reached an agreement on a bilateral code of conduct (COC) on August 10, 1995, issuing the "Joint Statement between the People's Republic of China and the Republic of the Philippines Concerning Consultations on the South China Sea and on Other Areas of Cooperation." As such, the SCS situation began to stabilize.

This positive trend somewhat continued between the Philippines and China in 1996. Both sides reaffirmed the importance of dialogue in resolving the territorial disputes. In fact, President Fidel Ramos and Premier Li Peng at the Asia-Europe Meeting in April that year agreed to keep their naval vessels away from the Spratlys, and in November, President Ramos and President Jiang Zemin agreed to "shelve the disputes and conduct peaceful consultation so as to achieve common programming and development" in the SCS (*AFP*, 1996a, 1996b). Furthermore, China ratified UNCLOS on May 15, which would become an important legal tool for resolving the SCS disputes peacefully. Yet, despite dialogues between the Philippines and China, the situation in the Spratlys, particularly Mischief Reef, remained unchanged as China insisted on its sovereignty there, while the Philippines renovated an airstrip on Thitu Island (*API* , 1996).

On the other hand, the China-Vietnam maritime tension remained. From February 1996, China attempted to conduct drilling operations in the Spratly Islands, and its escorting naval ships fired warning shots at a Vietnamese ship (Sugiyama, 1996). In turn, Vietnam licensed a US oil company, Conoco, Inc., to explore oil and gas in the Spratlys in April 1996, which drew China's criticism (Hayton, 2014, pp. 61–89; Phuong, 1997; *UPI* , 1996; Wilhelm, 1996). Furthermore, China unilaterally delineated straight baselines around the Paracel Islands on May 15, the same day that China ratified UNCLOS. China banned foreign warships from entry without its permission, resulting in strong criticism from ASEAN claimant states, particularly Vietnam and the Philippines, which questioned China's behavior at the ARF (*DPA*, 1996; *JEN*, 1996; Valencia, 2000). In response, China's Foreign Ministry spokesperson Shen Guofang insisted that the baselines were "in accordance with international law and Chinese domestic law" (Ngoo, 1996).

During this period, because ASEAN member states attempted to tackle the SCS issue formally and informally, and UNCLOS was ratified by four ASEAN claimant member states and China by 1996, there was some optimism that international law would be able to regulate state behavior in the SCS. Nevertheless, tensions remained without any guiding principles agreed upon by the claimant states.

#### *3.1.2 1997–2002: Asian Financial Crisis and Road to DOC*

The tension between Vietnam and China gradually re-emerged in 1997. In March, Vietnam protested China's oil exploration with the *Kantan-3*  semi-submersible drilling platform "within [Vietnam's] continental shelf" and the violation of "Vietnamese sovereignty" (*API* , 1997a; Phuong, 1997). This made Vietnam determined to refuse any joint exploration with China in the near future (*API* , 1997b). Eventually, China and Vietnam engaged in bilateral negotiations to defuse the tension, and China backed down by withdrawing its oil rig, stating that it had completed the planned exploratory work (*API* , 1997c; Richardson, 1997; *SCMP*, 1997). This incident illustrates that the lingering tension in the SCS was not easily mitigated despite the 1995 ASEAN statement and UNCLOS.

Further, the bilateral tension between the Philippines and China rose again from May 1997. The Philippines accused China of sending four vessels, including a hydrographic survey ship and a *Yantai*-class vessel, and building new structures in the Spratlys (Baker, 1997; Ghosh, 1997; Son, 1997). Philippine Secretary of Foreign Affairs Domingo Siazon, Jr. criticized China's behavior as a violation of the 1995 bilateral COC, while Defense Minister Renato de Villa openly expressed concern about China's military presence in the sea (Baker, 1997; *The Australian*, 1997b). After some Chinese officials had initially dismissed the accusations as "fabrication," China stated that it had a legal right to maintain its vessels "within the waters of its own jurisdiction" (Son, 1997). China's Foreign Affairs spokesperson Shen Guofang countered by accusing the Philippines of violating China's sovereignty when it dispatched naval vessels and surveillance planes near Scarborough Shoal in April 1997 (Kwang, 1997; *The Age*, 1997). In response, the Philippines arrested 40 Chinese fishermen for fishing near the Spratlys (*The Australian*, 1997c). Facing these tensions, ASEAN attempted to discuss the SCS issue with China by holding a meeting in mid-April 1997, but China refused to discuss a potential resolution (*The Australian*, 1997a).

At the same time, ASEAN was not a monolith. On the one hand, Singapore's Senior Minister Lee Kuan Yew had warned China in May 1995 that "if China were to attack Vietnam after its admission to Asean, we would close ranks with Vietnam against China." Two years later in May 1997, the city-state's Ambassador Tommy Koh said that "ASEAN [was] not afraid to stand up to China" (*ST* , 1997). On the other hand, Malaysian Prime Minister Mahathir Mohamad maintained a softer approach, stating in April 1997 that "China [was] committed to economic expansion and [would] not foolishly go into a war of aggression and conquest because such an idea is outdated" (*API* , 1997d). As such, ASEAN member states did not share a common diplomatic posture toward China's maritime behavior.

Following the outbreak of the Asian Financial Crisis (AFC) in July 1997, the SCS tensions remained, but the crisis inevitably relegated the SCS issue to a lower priority in ASEAN. As such, pessimism among ASEAN claimant states emerged—the crisis was seen as an opportunity for China to conduct fait accompli. For example, despite Premier Li Peng's reassurance on the importance of dialogue and international law in resolving the disputes, Philippine Foreign Affairs Secretary Siazon stated at the ARF that the principles of peace and restraint were not enough (Torode, 1997).

However, contrary to the pessimistic expectations, the AFC created political momentum for ASEAN member states and China to enhance cooperation between them, as shown by the ASEAN-China informal summit held in December 1997 (see ASEAN-China dialogues section in Chapter 4). The summit produced a joint statement that reiterated principles such as self-restraint and non-use of force, resulting in the softening of their diplomatic attitudes toward each other on the SCS disputes. On December 15, China and the Philippines organized a bilateral summit where Chinese President Jiang Zemin and Philippine President Fidel Ramos restated their promise of peaceful resolution on the SCS issue through consultations, while China emphasized promoting economic cooperation and shelving the disputes (*Xinhua*, 1997). Singapore's Senior Minister Lee Kuan Yew also mentioned that China was unlikely to exploit the AFC to advance its interests in the SCS, and that China would likely maintain the status quo (*ST* , 1998).

Nevertheless, this positive prospect was short-lived, lasting less than a year. In April 1998, the Philippines discovered a Malaysian structure on Investigator Shoal and protested against Malaysian navy vessels' intrusion near the shoal, which the Philippines said was within its exclusive economic zone (EEZ) (*API* , 1998a). In response, Malaysia dismantled the structure, and both the Philippines and Malaysia eventually agreed to continue the dialogue for peaceful resolution. The incident was a reminder of divergent interests among ASEAN claimant states (*API* , 1998b).

In October 1998, the Philippines again found a newly built Chinese structure as well as navy ships escorting cargo ships at Mischief Reef and accused China of violating the 1995 bilateral COC (Ghosh, 1998). China in turn stated that the structure was a shelter that was being renovated for fishermen and rejected the Philippines' accusation as "groundless" (*Xinhua*, 1998). The Philippines' Department of National Defense then issued a rebuttal by releasing photos and video clips showing that China's new permanent structure had military value. Defense Secretary Orlando Mercado revealed "concrete bunkers, concrete piers and headquarters" constructed by China on Mischief Reef and on other reefs (Baguioro, 1998a). To deter China's further encroachment, Philippine President Joseph Estrada emphasized the importance of enhancing its alliance with the United States and to engage in multilateral diplomacy, particularly ASEAN (*API* , 1998c; Baguioro, 1998b). Singapore Prime Minister Goh Chok Tong also urged China not to exploit the economic crisis, while Vietnamese Foreign Minister Nguyen Manh Cam urged claimant states to exercise self-restraint (*API* , 1998d, 1998e).

At this point, the Philippines was facing difficulty ensuring US commitment. In February 1999, the United States clarified its position on the SCS, showing unwillingness to become involved in the disputes. According to James Foley from the US State Department, the United States did not consider that China's construction activities, while provocative, had "thus far hindered freedom of navigation" and harmed "fundamental interest" for the United States (*Federal News Service*, 1999). The United States also indicated that it would not take sides on the sovereignty issue in the SCS. In response, in January 1999, President Estrada proposed a meeting with the parties concerned and the United States to mitigate the tension over the Spratlys, but China and Malaysia contended that external powers should not be involved (Gomez, 1999; Teves, 1999).

Additionally, Estrada proposed bringing the disputes to the International Tribunal on the Law of the Sea (ITOLS), which would forcibly launch a compulsory arbitration case for the disputant states (*The Nikkei Weekly*, 1999). Still, considering the potential intensification of tensions among the claimant states, Estrada became hesitant about a legal solution and decided to pursue peaceful resolution through bilateral dialogue and the creation of a multilateral COC via ASEAN (*The Nikkei Weekly*, 1999).

Despite these diplomatic efforts, the Philippines encountered additional challenges from China and Malaysia in June 1999. The Philippines again discovered Malaysia's construction activities on Investigator Shoal. Malaysian Prime Minister Mahathir employed a diplomatic logic similar to that of China, emphasizing its right to build structures, but the Philippines flatly rejected this (*JEN*, 1999a, 1999b). Foreign Affairs Secretary Siazon suspected that there was a tacit understanding between China and Malaysia on Malaysia's action, given that China and Malaysia had just issued a joint statement in May highlighting the importance of bilateral consultation and that China did not immediately and openly protest Malaysia's construction on Investigator Shoal (*ST* , 1999). Although China eventually protested against Malaysia a few weeks later in July, Malaysia's encroachment continued as it built another structure on Erica Reef in the Spratlys in August, which drew further criticism from the Philippines (*AFP*, 1999; *API* , 1999).

Given the persistently rising tensions in the SCS among claimant states, ASEAN-led forums, particularly the ARF in July 1999, announced ASEAN's efforts to create a COC in the SCS. This was not surprising as this had been agreed among ASEAN member states in October 1998 when ASEAN assigned the Philippines and Vietnam to draft a COC. The move was also necessary because China was not involved in crafting the 1992 ASEAN Declaration (Lugo, 2000). In drafting the COC, the main foci were: legality; geographical scope; specification; a moratorium on the construction of structures; and permission for conducting maritime research, shipping, and communications among the claimant states (Khumrungroj, 2000). However, the drafting process was not smooth. In addition to the Philippines-Vietnam proposal, another draft COC was proposed by China, but the latter's focus and contents, such as the geographical scope, differed from ASEAN's draft (see AMM, ARF, and ASEAN-China dialogues sections in Chapter 4). Also, China was not entirely willing to create a COC as it regarded the 1997 joint statement of the ASEAN-China Summit as the highest guidelines for the SCS. Therefore, China refrained from pursuing a legally binding agreement (ASEAN Secretariat, 1997). The issue was further complicated when the Philippines submitted its own COC proposal at the ASEAN meeting, and Malaysia abruptly argued that the ASEAN forum was not the right place to discuss the COC (*The PRS Group/Political Risk Services*, 2000). Such diplomatic divisions among claimant states hampered the COC formulation.

Eventually, the draft COC had five contentious points. The first was the geographical scope. China argued for a COC that focused only on the Spratlys, while Vietnam was eager to include the Paracels (*AFP*, 2000a). Yang Yanyi, China's Foreign Ministry Counselor on Asian Affairs, stated that China had sovereignty over the Paracels, and that there was no room for negotiation (Hin, 2000). Malaysia also wanted to limit the area to the Spratlys because a COC with a broader scope would potentially include Sabah and Borneo, which Malaysia considered to have no territorial disputes and including them might trigger an intensification of disputes with neighboring states (Deogracias, 2000). The second was China's proposal to ban military exercises and patrols. This was revealed in February 2000, when the Philippines and the United States resumed their joint military exercise, Balikatan, last conducted in 1995. China was concerned because future military exercises in the SCS was highly likely, which would give the United States justification to be near the contested areas (Gomez, 2000; Stone, 2000). Also, the Philippines conducted frequent patrols, and tension between the Philippines and China often increased when the former detained Chinese fishing boats during patrols (Gomez, 2000; Stone, 2000). The third was the COC's legality. From the outset, China had stated that a COC was "not a legal document but a political one," while other states, such as Vietnam, wanted a legally binding one (Hin, 2000). The fourth was civilian access to the Spratlys. China proposed a ban on "coercive measures" to seize, detain, and arrest "fishing boats or other civilian vessels engaged in normal operations in the disputed areas, [or] against nationals of other countries thereon" (*Jiji Press*, 2000). The fifth was the wording. Particularly, China was concerned about the use of the term "occupation" because it connotes illegality in Mandarin. Also, by including such a term, China feared the retroactive effect on existing Chinese structures (Cerojano, 2000). These five issues impeded agreement among ASEAN member states and China.

In addition, the COC negotiation process did not place a moratorium on developments in the SCS, and it was unable to prevent claimant states' fait accompli. In September 1999, Vietnam and Taiwan reinforced their structures on Cornwallis South Reef and Alison Reef, and Itu Aba Reef, respectively (*JEN*, 1999c). In October, the Philippines protested Vietnam's reinforcement of the structures, while a Vietnamese military plane fired at the Philippines' OV-10 Bronco ground attack plane because the plane was "flying too low," which the Philippines formally protested against (*JEN*, 1999d, 1999e). Among claimant states, the tension between the Philippines and China increased rapidly. In May 1999, a Chinese fishing vessel collided into a Philippine patrol ship, the BRP *Rizal* (PS74), and subsequently sank near Second Thomas Shoal, and in July 1999, Philippine patrol vessel, the BRP *Emilio Jacinto* (PS-35), rammed into a Chinese fishing boat near Thitu Island (*BBC*, 1999; *The PRS Group/Political Risk Services*, 2000). In January 2000, Philippine Defense Secretary Orlando Mercado made a formal diplomatic protest against China for its intrusion near Scarborough Shoal by Chinese fishing vessels, and in February, the Philippine navy detained two Chinese fishing boats and their crews who were fishing illegally because they did not respond to the navy's warning (Dwyer, 2000; Williamson, 2000). Immediately, Chinese Foreign Ministry spokesperson Zhu Bangzao responded by stating that the Philippines had "no sovereignty and no sovereign right over [Scarborough Shoal] … and [had] no right to administer [its adjacent waters]" and sent two diplomatic notes criticizing the Philippines' actions (Dwyer, 2000). In April 2000, China found that the Philippines had also erected simple structures on Scarborough Shoal (*JEN*, 2000b). In March 2001, the Philippine navy boarded 10 Chinese fishing vessels near Scarborough Shoal, confiscated their catches, and drove them out of the area, which led to both the Philippines and China issuing diplomatic protests (*AFP*, 2001a).

Other claimant states were also active during this period. In August 2000, Malaysia decided to acquire submarines as part of its defense plan to create a new naval base at Teluk Sepanggar Bay in Sabah. However, as the submarines could be used as deterrents to defend Malaysia's maritime claims, the move triggered concern from China (*The Nation*, 2000). Additionally, Chinese and Vietnamese fishermen were present near Philippine-claimed islands, such as Nanshan Island, while two Chinese fishing vessels anchored at Thitu Island in August 2002 (Agnote, 2002).

Since there was no effective deterrence mechanism in the SCS, the situation worsened, and thus ASEAN and China attempted to accelerate the COC's conclusion. In March 2000, the ASEAN Senior Officials' Meeting (SOM) on the COC was held in Thailand. States agreed that a COC should be adopted, which would not be legally binding but would help build trust. According to Sihasak Phuangketkeow, Deputy Director-General of the Thai Foreign Ministry's East Asia Department, the COC consisted of measures for trust- and confidence-building, marine issues, environmental protection, and modes of consultation; however, its primary objective was not a strict regulation of behavior but to "create a friendly atmosphere" between ASEAN and China (Sivasomboon, 2000). Chinese Foreign Ministry Counselor Yang Yanyi highlighted the latter point, stating China's concerns about military exercises held near the disputed areas and the existence of US bilateral alliances, which would not be constructive for the SCS issue (*JEN*, 2000a).

Accordingly, some progress was made. China agreed in principle with the clause of "no new occupation structures" in the SCS, although it was particularly concerned about the terminology (*BusinessWorld*, 2000). In May 2000, Philippine President Estrada made a state visit to China and met with President Jiang Zemin, and both sides agreed to the early conclusion of the COC (Lugo, 2000). By July, the major sticking points were the geographical scope and the phrasing of the clause on creating new structures in the disputed areas, but ASEAN and China consolidated it into the following sentence:

… the parties concerned undertake to exercise self-restraint in the conduct of activities that affect peace and stability (geographical area) [sic], including refraining from action of inhabiting or erecting structures in presently uninhabited islands, reefs, shoals, cays and other features and to handle their differences in a constructive manner. (Cerojano, 2000)

The draft indicated that China's proposals to allow civilian access to the disputed areas and ban military exercises were dropped, but instead included: "notify, on a voluntary basis, other parties concerned of impending joint military exercise" (Cerojano, 2000). In July, Chinese Foreign Ministry spokesperson Zhu Bangzao stated that China was ready to agree to the COC that ASEAN and China drafted (*AFP*, 2000b). Malaysian Foreign Minister Syed Hamid Albar and Vietnamese Foreign Minister Nguyen Dy Nien also indicated that the COC would likely be signed by the end of 2000 (*AFP*, 2000c; *API* , 2000).

However, a point of disagreement arose in the second ASEAN-China SOM held on August 24–25, 2000, in China. Philippine Foreign Affairs Undersecretary Lauro Baja clarified that China had demanded to drop the following clause in the draft: "halt to any new occupation of reefs, shoals, and islets in the disputed area" (*AFP*, 2000d). Instead, China requested a weaker clause: "refrain from any action that would complicate the situation." Consensus was not reached, and discussions continued. The third ASEAN-China SOM was held on October 11 in Vietnam. At the meeting, China pointed out that some ASEAN members still had differing views on the COC's scope, referring to Vietnam's request to include the Paracels (*Xinhua*, 2000b). Because of these disagreements, the COC's conclusion was delayed.

In July 2001, the Philippines altered the wording in the draft COC and proposed a new one that omitted the controversial clause on geographical references (*JEN*, 2001a). However, given that the draft had been significantly diluted at this point, it became less likely that the COC would be able to constrain claimant states' behavior. Consequently, rather than relying on the COC, some states attempted to increase their defense capabilities. For example, Philippine President Gloria Arroyo reiterated the importance of Philippines–US alliance as a "strategic asset to the Philippines" and the enhancement of the alliance to defend its claims in the SCS (*AFP*, 2001b).

Despite the Philippines' newly crafted draft, claimant states still debated over the geographical scope, whether it should cover the SCS entirely or only the Spratlys. As China said that it no longer contested the scope, the other ASEAN claimant states—namely, Vietnam and Malaysia—were the ones that were unable to reach consensus (*JEN*, 2001b). Another round of ASEAN SOM in August 2001 failed to reach consensus, and subsequently the issue was referred to the ministerial level, which further delayed the COC negotiation process (Aquino, 2001).

It was only a year later that the SOM finally agreed to a draft that the Philippines provided—which did not specify the geographical scope—but they decided to term the document a "declaration," that is, a political document (Abbugao, 2002a; *JEN*, 2002; *Malaysia General News*, 2002). This was because Malaysia had long demanded to limit the geographical scope to the disputed areas, and if the geographical scope was not specified, it was not in Malaysia's interests to make it legally binding or to call it a COC (Pereira, 2002). Further, at the last minute, Malaysia also proposed including a clause on the peaceful use of the disputed areas for the parties involved as China had demanded previously (*Malaysia General News*, 2002). Consequently, ASEAN titled the proposal "Declaration on the Conduct of Parties" (Abbugao, 2002b). Following a study of the proposal by China and ASEAN member states, ASEAN and China finally adopted the "Declaration of the Conduct of Parties in the South China Sea" (DOC) on November 4, 2002.

The DOC was a significant achievement for ASEAN and China as it indicated appropriate behavior in the SCS. This became not only a stepping stone to a COC, but also a test case for the effectiveness of non-binding agreements in stabilizing the SCS situation. However, there were many challenges. As the road to adopting the DOC illustrates, there were clear divergent interests not only between ASEAN member states and China, but also among ASEAN member states themselves, which complicated the negotiation process. Also, there were marked differences between policy discussions and the SCS situation on the ground. While some saw the positive aspects of policy dialogue, there were still skirmishes between fishermen and between coastguards and fishermen from claimant states.2 These issues could thus easily negate the diplomatic intentions of the DOC.

#### *3.1.3 Major Strategic Events in the SCS, 1990–2002*

The impact of the end of the Cold War created new strategic dynamics in East Asia, and one of the regional focal points was the SCS issue, which had not been high on ASEAN's agenda in the past. The 1988 China-Vietnam skirmish over Johnson South Reef was the initial indication of the possibility of China's future encroachment in the SCS, and this became more evident from the early to mid-1990s.

Indeed, China began to justify its territorial claims by adopting a domestic territorial law in 1992 and by incrementally increasing its physical presence in the SCS, backgrounded by the strategic readjustment of US policy in East Asia. China's 1992 maritime law that officially included the SCS as its territory and its construction of structures on Mischief Reef in 1995 were two particularly important events that compelled regional states and ASEAN to respond quickly.

In addition, the 1997 AFC resulted in new strategic dynamics in East Asia as the United States was unwilling to bail out the regional crisis while China was seen as an economically benign regional power, which influenced the regional states' perception of great powers. Nevertheless, this did not necessarily translate into the SCS domain, which continued to be contentious among ASEAN claimant states and between China and them, and the United States still distanced itself from the territorial disputes.

As China's military and economic capabilities grew rapidly, the US– China rivalry gradually intensified. The initial indication of the latter was the EP-3E incident in April 2001: US reconnaissance plane EP-3E was

<sup>2</sup> According to Philippine Foreign Affairs Undersecretary Lauro Baja, there had been no new occupation since 1999 when the Philippines proposed its draft COC. However, skirmishes still continued (JEN, 2001a).

**Table 3.1** Major strategic events, 1988–2002

forced to land on Hainan Island by China after it collided with a People's Liberation Army Navy fighter jet, which projected the image of a new great-power rivalry between China and the United States. This strategic trend was, however, suspended in September 2001, when the United States was attacked by Al-Qaeda. The United States shifted its strategic focus to the Middle East and engaged in two wars in Afghanistan and Iraq.

In sum, up until 2002, when ASEAN and China concluded the DOC, seven major international and regional events (Table 3.1) shaped the regional balance of power in the SCS as well as ASEAN member states' perception of the strategic environment.

### 3.2 Second Phase: Emergence of Turbulence (2003–2012)

### *3.2.1 2003–2008: Turbulence After Tranquility*

The 2002 DOC was not a legally binding document, but it created a political moratorium on fait accompli for ASEAN member states and China. In order to consolidate stability in the SCS, joint exploration projects between the claimant states became a focal point. On August 31, 2003, Wu Bangguo, Chairman of China's Parliament, proposed to the Philippines to conduct joint oil exploration and development in the Spratlys (Parameswaran, 2003). Indonesia also utilized this momentum to push ASEAN to activate the "High Council" which would serve as a conflict resolution mechanism for disputes including the SCS issue, while Vietnam continued to pursue the creation of a COC (ASEAN Secretariat, 1976, 2001; *BBC*, 2003; *JEN*, 2003a). Since China was the first country among the external states of the ASEAN Plus Three (APT) countries to sign the Treaty of Amity and Cooperation in October 2003, there was indeed an opportunity to activate the High Council (ASEAN Secretariat, 2003).

However, the SCS situation on the ground remained a factor that hindered the progress of political cooperation. Particularly from late 2003, claimant states returned to being assertive, creating diplomatic tensions and making it more difficult for ASEAN to consolidate cooperation. In November 2003, the Philippines expressed concern about Chinese research and military vessels in the SCS although it did not file a formal protest as China did not construct any new structures (*AFX-Asia*, 2003; *JEN*, 2003b). More critically, in October 2003, Vietnam's Foreign Affairs spokesperson Le Dung informed the public that Vietnam had been considering tourist trips to the SCS, which raised concerns from other claimant states (*DPA*, 2003b). Vietnam then unilaterally conducted the military-run tour to the Spratlys in April 2004, which invited strong criticism from China, the Philippines, and Taiwan (*API* , 2004a; *JEN*, 2004). The criticism against Vietnam stemmed from its violation of the 2002 DOC, but Vietnam rejected it by highlighting its "indisputable sovereignty" over the Spratlys and Paracels (*DPA*, 2003a). In May, China accused Vietnam of violating China's territorial sovereignty when Vietnam decided to renovate its airstrip in the Spratlys, while China also planned to explore and develop natural gas hydrates there (*AFP*, 2004a; Wiest, 2003). In response, in July, the Philippines expressed concerns about China's potential exploration project, stating that "Unilateral actions violative of the [DOC] or any form of bullying are abhorred," and threatening with the possibility of legal action against China (*DPA*, 2004). These incidents quickly revealed the fundamental weakness of the DOC, which proved unable to effectively restrain claimant states' behavior.

However, the tide again changed from September 2004, when the possibility of a joint exploration in the SCS began to be actively discussed. Most notably, Philippine President Gloria Arroyo, in her second term, took a new approach to facilitate cooperation with China. On September 1, Arroyo visited Chinese President Hu Jintao and reached an agreement for joint exploration of the potential oil deposits in the SCS. The agreement was a three-year project in which Chinese and Philippine state firms—China National Offshore Oil Corporation (CNOOC) and the Philippine National Oil Company (PNOC)—would conduct a seismic survey in the SCS, the areas albeit not specified, and they would be "open to the participation of a third party" such as PetroVietnam (*AFP*, 2004b, 2004c). This did not mean that they were compromising their respective territorial claims, but that both had agreed to set them aside. In fact, this was consistent with China's policy declared by then Vice-President Hu in July 2000—"shelving disputes and going for joint development" (*Xinhua*, 2000a). China thus began seeking cooperation with ASEAN claimant states for potential joint explorations (*Xinhua*, 2004b).

Vietnam, on the other hand, expressed dissatisfaction at such a bilateral agreement. On September 9, 2004, Vietnam stated that it had not been consulted with regard to the agreement, and that this was a deviation from the DOC. Further, although Vietnam asked for more information about the bilateral agreement, it was still not fully informed even a week after the agreement had been concluded (*AFP*, 2004d). The Philippines responded by stating that the agreement did not violate the DOC and assured that the project would not conduct drilling for oil or gas (*AFP*, 2004e; Hurle, 2004). Vietnam ignored these signals; instead, it called for an international bidding for oil and gas exploration in nine blocks near the Spratlys in October. Immediately, China accused Vietnam of violating the DOC and China's indisputable sovereignty over the area, while Vietnam insisted on its sovereignty (*API* , 2004b; *Xinhua*, 2004a). China also sent its oil rig, the *Kantan-3* drilling platform, to the SCS, following which Vietnam told China to avoid dispatching it to areas under its sovereignty. In February 2005, when China completed its first survey on coral reefs in the Paracels, Vietnam reiterated its "undisputable [sic] sovereignty" over the Spratlys and the Paracels (*Vietnamese Radio*, 2005; *Xinhua*, 2005a).

Six months after the China-Philippines agreement, a major breakthrough came on March 14, 2005, when the Philippines, China, and Vietnam signed a three-year trilateral agreement on a joint marine seismic undertaking in agreed areas in the SCS (JMSU) through the collaboration of CNOOC, PNOC, and PetroVietnam (Embassy of the People's Republic of China in the Republic of the Philippines, 2005; *JEN*, 2005). This joint exploration aimed to collect data and information about potential oil and gas reserves in the SCS (*Xinhua*, 2005c). Prior to this agreement, the Philippines and Vietnam had made a bilateral deal on March 7 to conduct joint scientific research from Manila's coast to Nha Trang in Vietnam, which cut across the SCS, although China expressed concerns (*AFP*, 2005; *AFX-Asia*, 2005). Having a cooperative link with both China and Vietnam, the Philippines played a coordinator role for the JMSU. As the agreement covered an area of approximately 143,000 square kilometers, it subsumed the Vietnam–Philippines bilateral agreement (*Xinhua*, 2005b). Also, the deal strictly set aside the claimant states' respective position on the SCS as the 2004 Philippines–China agreement did, and it envisioned the possibility of a future joint development among the three.

For the moment, the JMSU shaped the claimant states' diplomatic posture toward the SCS—setting aside territorial disputes and concentrating on cooperation for joint exploration and development. Gaining political momentum, China reiterated this principle, aiming to consolidate it as a general principle of the regional cooperative mechanism—the ASEAN–China Joint Working Group to implement the provisions of the DOC—which was endorsed at the AMM in July 2005 (*Xinhua*, 2005d, 2005e). This positive trend gained traction, and as the JMSU saw steady progress in the implementation of its first phase, new cooperative actions, such as the Vietnam–China joint exploration of the Gulf of Tonkin in October 2005, were also agreed upon (*China Energy Newswire*, 2005).

Seizing this opportunity, the Philippines pushed for the conclusion of a "more legally binding document" to consolidate maritime stability (*APW* , 2005), but little attention was paid to it. Nevertheless, status quo in the SCS was maintained in 2006. ASEAN member states and China continually sought the enhancement of cooperation between them, while praising claimant states' self-restraint in the SCS. For example, in the 2006 Shangri-La Dialogue, Singapore Prime Minister Lee Hsien Loong highlighted China's cooperative behavior, stating that "China has handled [the SCS] disputes in a restrained manner. It has adopted a joint declaration with ASEAN to reduce the risk of a clash and reached bilateral understandings with several of the other claimant states individually" (*ST* , 2006).

Also, President Arroyo mentioned that the Philippines was satisfied with the development of the 2005 JMSU and would seek the enhancement of bilateral security ties with China, which she thought were in a "golden period" (*PS*, 2006; *Xinhua*, 2006a). Other claimant states also began seeking cooperation with each other. For example, Malaysia made a US\$25 billion deal to supply liquefied natural gas to Shanghai, while Vietnam made a deal with China for a joint oil and gas exploration and development in the Gulf of Tonkin during President Hu Jintao's visit to Vietnam (Lee, 2006; Richardson, 2006).