In terms of geopolitical risks, the Syrian and Iranian situations are well known, but what seems to be less appreciated is the flare up of tensions in the South and East China Seas.
The Chinese frigate that ran aground on a shoal near the Philippines was refloated over the weekend and this helped to avoid a more intense crisis. However, the unresolved territorial dispute was evident at the recent ASEAN summit, which for the first time in 45 years failed to agree on a statement, reportedly because of this precise issue.
The tensions in the East China Sea remain at a high level. Ishihara, the governor of Tokyo is delivering Prime Minister Noda a fait accompli.
Noda cannot distance himself from Ishirara’s offer for Tokyo to buy the disputed Senkaka Islands, or what the Chinese call the Diaoyu. Noda appears to have exhausted his political resources in securing passage of the controversial increase in the retail sales tax.
Some observers do not expect him to remain prime minister for more than a few more months.
In any event, the potential nationalization of the islands, elicited a strong reaction by Chinese officials.
The Japanese ambassador to China warned that the sale of the islands could spark an extremely grave crisis and has been recalled home for further consultation. In the middle of last week, Japan protests China state fisheries patrol vessels in the disputed waters.
There are various forces at play that seem to prevent Chinese officials from being able to back down very much. Any compromise now, China officials seem to recognise, will weaken their negotiating hand in the other numerous unresolved territorial disputes.
In the middle of a transition period in China is a difficult time to show anything that can be interpreted as weakness in pursuing national interest. Recall the dispute over this area led to a souring of Japanese-Chinese relations in 2010.
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