Vietnam holds live-fire exercises as territorial dispute with China escalates by Tania Branigan

[Guardian] Beijing warns other regional powers not to become involved in row over South China Sea islands and surrounding waters.

Vietnam disputes sovereignty of islands with China

China has warned other countries not to become involved in an escalating sea border dispute with Vietnam that reflects concern over Beijing's increasing international power and confidence.

Experts say the stand-off between China and Vietnam - two of the six powers laying claim to a number of islands and their surrounding waters in the South China Sea - is the worst for more than two decades. Vietnam held live-fire exercises off its coast on Monday, in what analysts said was a response without precedent.

The complex dispute over sovereignty in the 1.2m square miles of sea has been simmering for decades, but has grown increasingly fractious in the past few years. Brunei, Malaysia, the Philippines and Taiwan also lay claim to parts of the sea.

As much as a third of the world's trade passes through the Malacca Strait. Countries are also competing to tap the sea's energy resources and exploit its fish stocks.

Last year, foreign ministers lined up to attack China's stance at an Association of Southeast Asian Nations (Asean) regional forum, in what the Chinese regarded as a Washington-led ambush. The US said it had a national security interest in a peaceful resolution and that it supported a collective solution. Beijing insists the issue should be handled through bilateral deals.

"In a sense [the dispute] has become more complicated because it has become conflated with Sino-US competition in south-east Asia," said Dr Ian Storey, of the Institute of South East Asian Studies in Singapore.

Benigno Aquino, president of the Philippines – which has also accused China of intruding into its waters – told a press conference on Tuesday: "Perhaps the presence of our treaty partner, which is the United States of America, ensures that all of us will have freedom of navigation, will conform to international law."

Washington has played down the issue this year, with both sides seeking to improve relations after 2010's bilateral tensions.

China's foreign ministry spokesman, Hong Lei, told a news conference: "We hope countries not related to the disputes over the South China Sea will respect the efforts of directly related countries to resolve the issue through direct negotiations." In an apparent reference to Vietnam, he added: "Some country took unilateral actions to impair China's sovereignty and maritime rights and interests [and] released groundless and irresponsible remarks with the attempt to expand and complicate the dispute over the South China Sea." Hong added that China would not use force to resolve disputes.

Vietnam alleges that Chinese boats cut a cable from a seismic survey boat off its coast in late May and impeded another last week, while China accuses Vietnam of illegally entering its waters.

Storey warned in a paper two years ago that rivalries were escalating again after easing in the first half of the last decade.

"Failure to address rising tensions could lead to greater regional instability, disruptions to global trade and economic development, environmental degradation and, worst-case scenario, military confrontation," he and his co-author concluded.

Storey said that China saw itself as the aggrieved party, but added: "Despite the rhetoric about its peaceful rise and not seeking hegemony, it is seen that China is becoming more assertive and, in the last few months, aggressive."

Vietnam had reacted with unprecedented stridency by holding the live-fire drill and issuing a decree on the terms of military service, he added. "The increasing frequency of incidents at sea raises the risk of an armed confrontation," said Storey, adding that tensions were at their highest point since a clash in 1988 in which around 70 Vietnamese personnel were killed.

The growing strength of China's navy has also contributed to the concerns of regional powers. It is due to hold naval drills in the western Pacific and official media outlets have suggested it may launch its first aircraft carrier within months, a year earlier than expected.

The renewed tensions come after a Chinese diplomatic charm offensive apparently aimed at undoing the damage from last year's row.

Stephanie Kleine-Ahlbrandt of the International Crisis Group said: "[China has] seven central government agencies, the People's Liberation Army Navy, provincial governments and state-owned enterprises who all have their own interests and claims in the disputed waters. Without very solid inter-agency co-ordination, the multitude of players often make case-by-case policy decisions on the ground in accordance with their individual priorities.

"Some of the harder-line actors can justify their actions with the voices of strident nationalism, contributing to a heated domestic environment and marginalising more moderate voices."

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