With what may be the beginning of a repeat of the 2014 diplomatic dispute between Vietnam and China, the Vietnamese Ministry of Foreign affairs has claimed that on 16 January China moved its Haiyang Shiyou 981 oil rig '21.4 nautical miles' east of the 'assumed median line' between the two countries.

While China has denied that the oil rig is operating in disputed waters, the timing of the incident is interesting, considering the Communist Party of Vietnam is just about to open its 12th National Party Congress that will decide the country's next leader. It's all the more interesting considering the Congress is expected to be contentious, with Vietnam's current Prime Minister Nguyen Tan Dung, a strong and vocal critic of China's policies in the South China Sea, a strong contender for leader.

The incident also reminds us that China's state-owned enterprises don't operate in the same way as other corporations, particularly in terms of restrictions due to liabilities and insurance. Julian Snelder, a regular contributor to The Interpreter, pointed this out in May 2014 and it's worth revisiting these few paragraphs again: 

But my second point is the more important one. The owner and operator of rig 981 is China National Offshore Oil Corporation (CNOOC), the company which failed in 2005 to acquire America's Unocal and in 2012 did acquire Canada's Nexen. There was much Chinese anger about CNOOC's treatment in both cases. American politicians were concerned about economic and security threats posed by a Beijing-controlled oil company; CNOOC strenuously argued that it was a rational, commercial actor acting like any other multinational company. Likewise, in the face of Canadian hostility to the Nexen bid, China's envoy famously pronounced that 'business is business, it should not be politicized.'

Whatever the case for China's claims to an oilfield inside Vietnam's EEZ or the wisdom of acquiring Nexen (both are questionable), there can be no doubt that CNOOC now is acting politically. Accompanied by a flotilla of 80 ships (reportedly including seven government agency vessels), the 981 is being pushed into deployment in a reckless manner that no private commercial operator would undertake. Politics and operational risk aside, the insurance liabilities alone would likely stop a private deep-sea driller before he or she even left port.

This should be a crucial piece of the Chinese foreign investment debate in Australia, which deserves a fuller treatment on The Interpreter in the future. The fact is, state-owned companies (SOEs) do behave differently from private sector ones. It is quite natural for foreigners to question the motives of SOEs, and it is disingenuous for SOEs to downplay or dismiss their provenance. The ongoing 981 incident is proof that politics and business might be best kept separate, but often aren't.

Photo courtesy of Flickr user Stuart Rankin.