Identifier
Created
Classification
Origin
08LONDON1151
2008-04-23 15:54:00
CONFIDENTIAL
Embassy London
Cable title:  

(C) BP PREFERS TO MANAGE CHINESE PRESSURE OVER

Tags:  ECON ENRG PBTS PGOV PREL CA VN UK 
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VZCZCXYZ0000
PP RUEHWEB

DE RUEHLO #1151 1141554
ZNY CCCCC ZZH
P 231554Z APR 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC PRIORITY 8351
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 1031
RUEHHI/AMEMBASSY HANOI PRIORITY 0065
C O N F I D E N T I A L LONDON 001151 

SIPDIS

SIPDIS

EAP/MLS BBLACKSHAW, EAP/CM PPENG

E.O. 12958: DECL: 04/23/2018
TAGS: ECON ENRG PBTS PGOV PREL CA VN UK
SUBJECT: (C) BP PREFERS TO MANAGE CHINESE PRESSURE OVER
SOUTH CHINA SEA IN COMMERCIAL CHANNELS

REF: STATE 17315

Classified By: A/ECON MIN COUNSELOR SANDRA CLARK FOR REASON 1.4 B and D

C O N F I D E N T I A L LONDON 001151

SIPDIS

SIPDIS

EAP/MLS BBLACKSHAW, EAP/CM PPENG

E.O. 12958: DECL: 04/23/2018
TAGS: ECON ENRG PBTS PGOV PREL CA VN UK
SUBJECT: (C) BP PREFERS TO MANAGE CHINESE PRESSURE OVER
SOUTH CHINA SEA IN COMMERCIAL CHANNELS

REF: STATE 17315

Classified By: A/ECON MIN COUNSELOR SANDRA CLARK FOR REASON 1.4 B and D


1. (C) SUMMARY The Chinese government has threatened action
against BP assets on the mainland if the company does not
halt new projects in disputed South China Sea waters. BP
would like to keep any reactions to Chinese pressure over the
company's activities in the South China Sea within commercial
channels for the time being, according to the UK Foreign
Office (FCO). Premier Oil, another UK energy company
operating in disputed S. China Sea waters, has no business
activity in China, so does not feel pressure to accommodate
Chinese demands to halt operations. END SUMMARY


2. (C) BP acquired several off-shore projects from ARCO which
were already functioning in disputed South China Sea waters
when BP took them over, FCO's Head of the Far Eastern Group
Stephen Lillie told us on April 21. The Chinese government
chose to turn a blind eye to those projects, however, and
they function without interference or pressure.
Subsequently, BP began to develop new projects in areas where
both China and Vietnam hold claims. In the summer of 2007,
China began to put pressure on British and other companies to
either cease operations or work out a deal between the
individual companies involved, Vietnam and China. To the
FCO's knowledge, China has not raised concerns over the
pre-existing projects, but has made it clear that if BP were
to go forward with the new projects, it would harm other BP
projects in China. FCO takes this threat seriously, and
Lillie noted that BP is one of the largest foreign investors
in China. Concurrently, the Vietnamese government, which
gave BP permission to operate in areas it claims in the South
China Sea, told BP that onshore projects in Vietnam would be
in jeopardy if BP succumbed to Chinese pressure.


3. (C) Neither the Chinese nor the British have raised the
issue with each other diplomatically, despite opportunities
during PM Brown's visit to Beijing in January and FM
Miliband's visit in February. But the Chinese government in
Beijing and in London has raised the issue directly with BP
and Premier Oil, Lillie continued.


4. (C) BP has not asked the UK to intervene yet, but is
looking for a face-saving, commercial way to resolve the
dispute, perhaps by finding reciprocal projects, or areas for
new projects, in other South China Sea regions. Lillie said
that since the problems arose last summer, there has been
little movement either way, and thought Petro Vietnam, CNOC
and BP would be able to work it out. He told us a draft deal
is working its way through the Chinese bureaucracy, but is
being held up by a "hard-line" Foreign Ministry. Lillie said
BP believes the Chinese government, in the end, may feel more
comfortable with BP in those projects rather than an Indian
company (rumored to be in talks with Vietnam to fill a
possible void) which China would be less able to influence.
If the issue cannot be resolved commercially, BP might ask
for help. Premier is unlikely to need assistance, Lillie
said, because they are not "leveraged" by other Chinese
projects. Premier's other investments are in India and
Vietnam.


5. (SBU) The FCO was inexplicably slow to agree to meet with
Econoff. The only hint as to why came from another FCO
official who said they had wanted to get BP clearance to
discuss the issue with the USG. BP gave permission willingly.

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