Fan Changlong, vice chairman of China’s Central Military Commission, was scheduled to make a two-day official visit to Hanoi on June 18-19 before joining Vietnam’s defense minister Ngo Xuan Lich for a series of joint military patrols along the Sino-Vietnam land border from June 20 to 22. But something went very wrong because General Fan unexpectedly left Hanoi on June 18 after meetings with Prime Minister Nguyen Xuan Phuc, President Tran Dai Quang, and Defense Minister Lich.

China’s Defense Ministry announced the cancellation of the border exchanges two days later, blaming “reasons related to working arrangements.” The real story seems to be that simmering tensions between Beijing and Hanoi, which has been far more skeptical of Beijing’s recent charm offensive than Manila, erupted due to disagreements over oil and gas exploration.

Unidentified sources told Jane’s on June 20 that Fan left after Vietnamese officials rejected a demand to halt all oil and gas exploration within the nine-dash line. Wu Shicun, president of China’s National Institute for South China Sea Studies, speculated that the meetings broke down because “Beijing sees Vietnam as breaking its promises about not exploiting oil in disputed areas in the South China Sea.” Two areas—Blocks 118 and 136—appear to be at the center of the disagreement.

Activity in two oil and gas blocks off the Vietnam coast, block 118 and block 136, may be a cause for recently heightened tensions between Vietnam and China.

In January ExxonMobil announced plans to tap natural gas reserves off the coast of central Vietnam. The so-called “Blue Whale” project will take place in Block 118, a small portion of which overlaps with China’s nine-dash line. Beijing seems to claim “historic rights” over all oil and gas within the line, despite a ruling from an international tribunal last July rejecting such rights. The site of Exxon’s planned drilling operation lies near the nine-dash line—perhaps as close as 10 nautical miles—but remains outside it.

Of course, gas reserves don’t recognize boundaries, and Exxon’s drilling could be seen by Beijing as draining a basin that straddles the line—the same basin, in fact, that the Haiyang Shiyou 981 (HY981) deep-water drilling rig was exploring in 2014 when it sparked a months-long crisis between China and Vietnam. It is important to note that, while Block 118 overlaps the nine-dash line, it is firmly on Vietnam’s side of any future continental shelf delimitation.

Exxon’s work in Block 118 is likely an irritant for Beijing, but a more immediate trigger for the current spat is Vietnam’s plan to proceed with exploration of oil and gas reserves in Block 136, much farther south. That block sits on Vanguard Bank, an underwater feature that has been a bone of contention between Hanoi and Beijing for almost 30 years. The bank is believed to hold commercially viable hydrocarbon reserves. It is far from any disputed rocks or reefs, but Beijing continues to claim rights to it based on the nine-dash line. In 1992, China sold rights to the small U.S.-based Crestone Energy to explore for oil and gas in a huge block that included Vanguard Bank. That contract, now held by China’s Brightoil, overlaps with Vietnam’s own Block 136, which is currently held by Spain’s Repsol Exploration.

Since acquiring the block two years ago as part of a takeover of Canada’s Talisman Energy, Repsol has surveyed the area in preparation for exploration. Hanoi is rumored to have approved a plan for the company to soon undertake exploratory drilling despite objections from Beijing. Coincidentally (or not), Vice Chairman Fan and his delegation visited Spain immediately before their travel to Vietnam.

An unidentified Vietnamese ship has been operating in block 136 in a manner that suggests a patrol or a survey since June 19, the day after General Fan abruptly departed from Hanoi.

Neither Repsol nor Hanoi have made any officials announcements, but an unidentified Vietnamese ship appears to have been dispatched to patrol Block 136 immediately after Fan’s departure from Hanoi. According to data from Windward, a maritime data and risk analytics firm, the vessel arrived in the area on the morning of June 19 (local time) and has been operating in a pattern consistent with a survey or patrol.

These tensions are also playing out in the context of Vietnam’s steps to deepen security ties with the United States and Japan, no doubt irritating China further. Prime Minister Phuc visited the White House in late May, days after Washington had transferred a decommissioned U.S. Hamilton-class cutter to Vietnam’s Coast Guard.  At the end of his visit, the two countries released a joint communiqué that announced that Vietnam would welcome the first visit by a U.S. aircraft carrier to Cam Ranh Bay, the deep-water seaport expanded by the Americans during the war that ended in 1975.

The United States and Vietnam also agreed to step up intelligence sharing.  “We won’t be sharing intel on Islamic State in the Middle East,” a Vietnamese official joked, hinting at the fact that the information shared would be about maritime domain awareness in the South China Sea. Vietnam also expressed interest in acquiring more defense equipment from the United States, something made possible after Washington lifted its ban on lethal weapons sales a year ago. Vietnam defense minister Lich is also slated to make his maiden trip to Washington to meet Defense Secretary James Mattis in the coming months, possibly in August.

Phuc’s trip to Washington was quickly followed with a visit to Japan. According to a joint statement, Vietnam and Japan agreed on a “broad strategic partnership” and to increase their defense and security cooperation. Tokyo committed over $900 million in aid to Vietnam for various projects, including coast guard activities and the provision of six patrol boats. Shortly after the visit, Japan and Vietnam launched a joint exercise between their two coast guards that focused on combating illegal fishing, which likely prompted some heartburn in China.

From Hanoi’s point of view, Beijing’s objections to exploration in Blocks 118 and 136 are not only unfounded, but offensive. The areas are not in dispute because of overlapping continental shelves, only by virtue of the nine-dash line, which Hanoi and the international community at large do not recognize.

Meanwhile, China continues to explore for oil and gas around the mouth of the Gulf of Tonkin and the disputed Paracel Islands. On June 16, just before Fan arrived in Hanoi, China’s HY981 rig arrived just south of Hainan. According to an announcement by the China Maritime Safety Administration, it will operate in the area until September 15. The rig is on the Chinese side of the median line between the two nation’s coasts and, while the area in question is technically still disputed pending delimitation, it is almost certainly China’s. Blocks 118 and 136 are even more clearly Vietnam’s, and yet it is being told to stand down. That double standard is particularly galling to Hanoi’s leaders.

About Murray Hiebert

Murray Hiebert serves as senior fellow and deputy director of the Sumitro Chair for Southeast Asia Studies at CSIS in Washington, DC. He earlier worked as a journalist in Asia for the Wall Street Journal and the Far Eastern Economic Review.

About Gregory Poling

Gregory B. Poling is senior fellow for Southeast Asia and director of the Asia Maritime Transparency Initiative at CSIS. He oversees research on U.S. foreign policy in the Asia Pacific, with a focus on the maritime domain and the countries of Southeast Asia. His research interests include the South China Sea disputes, democratization in Southeast Asia, and Asian multilateralism.