Explained by Graphics: Tension in the South China Sea
Claims on the South China Sea, the recent ruling, and why China is ignoring it
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Tension in the South China Sea reached a potential inflection point this week.
Days ago, an international tribunal ruled in favor of the Philippines, dismissing China’s sweeping territorial claims to the hotly contested waters in the South China Sea.
Since then, it has become clear that China plans to ignore the ruling, while Chinese Vice-Foreign Minister Liu Zhenmin has threatened to declare an air defense identification zone over the waters to help protect the country’s interests.
But how did we get to this point? How was this ruling determined, and what does it mean moving forwards?
Why the South China Sea matters
The South China Sea is home to 250 small islands, shoals, reefs, sandbars, and other tiny landmasses.
The South China Sea is the second most used sea lane in the world, and home to:
- $5 trillion of annual trade
- 11 billion barrels of oil
- 266 trillion cubic ft of natural gas
Six countries claim parts of the South China Sea as their own: China, Taiwan, Philippines, Vietnam, Malaysia, and Brunei.
However, China has the boldest claim, insisting that over 80% of the sea is their territory based on historical maps.
Island or Rock?
The ruling in the Philippines vs. China hearing is based on the provisions of the United Nations Convention on the Law of the Sea (UNCLOS), which came into force in 1994. All countries disputing claims in the South China Sea are signatories.
UNCLOS defines three types of landmasses, and whether something is a “rock” or an “island” has huge implications for territorial claims.
- Low-tide elevation: A landmass above water only at low tide.
- Rock: A landmass permanently above water, but unable to sustain human habitation or economic life on its own.
- Island: A landmass permanently above water that can sustain human habitation and economic life on its own.
Rocks get some territorial benefits, but islands get 200 nautical miles (370 km) of special economic rights around them in each direction.
- Low-tide elevation: Not entitled to any separate maritime zone.
- Rock: Entitled to territorial sea and contiguous zone. Each are up to 12 nautical miles (22 km) from base line.
- Island: Entitled to territorial sea and contiguous zone, but also entitled to an exclusive economic zone of 200 nautical miles (370 km), and continental shelf rights.
The economic zone confers rights for fishing, drilling, energy production, and other economic activities.
The tribunal ruled that Scarborough Shoal, along with areas occupied by China in the Spratly Islands do not count as “islands”, and therefore do not justify 200 nautical mile (370 km) economic zones around them.
China has rejected the ruling calling it “ill-founded”. Taiwan, which has administered Taiping Island since 1956, also rejected the ruling.
China has argued that the tribunal has no legitimate jurisdiction on this issue since it concerns “sovereignty” – which the text of the UNCLOS explicitly prohibits tribunals from addressing.
What are the consequences?
If China continues to ignore the ruling, likely there will be a “hit” to China’s reputation, but that’s it.
Going back in history, there is a long list of situations where superpowers have ignored international rulings. It is also worth noting that China is a permanent member of the U.N. Security Council and has veto power.
Tension will continue to increase in the South China Sea, creating a situation that could boil over at any time.
Trump’s Relationship with the Price of Oil
What goes through the head of a U.S. president? The tweets of U.S. President Donald Trump reveal a contentious relationship with the price of oil and OPEC.
Visualizing Trump’s Relationship with the Price of Oil
What goes through the head of a U.S. president?
That is a question that both voters and leaders alike would love to know the answer to. As it stands, scores of pundits and analysts already dissect everything from the choice of a tie, to whom a leader sits next to at a state dinner, to glean the potential direction of government policy.
Financial markets rely on the accurate interpretation of government policy to guide investment decisions. But what happens when you’re faced with a world leader who broadcasts his unfiltered thoughts instantaneously and globally? It’s sure to stir up international attention.
This week’s chart is inspired by work done by John Kemp, an energy reporter for Reuters. Kemp tracked all instances of U.S. President Donald Trump’s tweets mentioning oil and OPEC, against the shifting price of oil.
Where’s Your Head At?
U.S. President Donald Trump has actively worked to tie the success of his administration to the fortune of the economy and stock market.
If the economy does well, Trump hopes cheap gas at the pump will help translate into votes at the ballot box in 2020.
Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy! $54, was just $82. Thank you to Saudi Arabia, but let’s go lower!— Donald J. Trump (@realDonaldTrump) November 21, 2018
The key to keeping the economy growing is access to cheap energy, and oil is the critical commodity that’ll keep a fragile economy on the road. This is a line of thinking that can be seen throughout Trump’s tweets on the subject.
Tracking Trump’s Tweets
This week’s chart tracks President Donald Trump’s tweets from April 2018 to March 2019 that mention oil and OPEC.
The tweets start five months before the deadline of sanctions on Iran. During this timeframe, speculation that Trump would place sanctions on the oil-producing nation drove up the price with the prospect of a restricted supply of oil and increased tensions in the Middle East.
Despite the implications of U.S.-imposed sanctions, Trump squarely put the blame on OPEC for this period of rising oil prices. Tweets such as “OPEC is at it again. Not Good!” or “The OPEC monopoly must get price down now!” can be seen in this period.
Whether these tweets had any influence on oil producers is unclear, but they certainly outline a policy preference for cheap oil and a general animosity towards OPEC.
On Nov. 4, 2018, Trump did impose sanctions but excluded Iranian oil exports, deflating a speculative bubble around the price of oil, and the president’s ire towards the region.
In the aftermath of sanctions, repeated news of record oil production and growing energy independence in the U.S. helped drive the price of oil back down. Though the president’s mood lightened, he still persisted in his accusations of OPEC manipulating the price.
Hopefully OPEC will be keeping oil flows as is, not restricted. The World does not want to see, or need, higher oil prices!— Donald J. Trump (@realDonaldTrump) December 5, 2018
Prices continued to fall, plummeting to nearly $50 per barrel by the end of 2018. Cheap oil is a direct threat to the profits of OPEC nations, but higher prices can create an array of challenges for the U.S. economy.
So despite a U.S. alliance with Saudi Arabia, this is a natural tension baked into the relationship.
We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!— Donald J. Trump (@realDonaldTrump) September 20, 2018
So, what would a U.S. foreign policy look like without dependence on the Middle East?
The Middle East has had a considerable influence on U.S. foreign policy since the harsh lessons of 1970s energy crisis. Multiple wars of intervention to protect Saudi oil interests—and in turn, ensuring continued American access to oil—have ravished the region and led to a state of dysfunction and constant tension.
However, with the recent declaration of American energy independence, this relationship may change with a renewed prospect for peace. Trump may work to further undermine the power of OPEC to control oil prices, as well as the Middle East’s influence on U.S. foreign policy.
American energy independence is already challenging established relationships around the world. For example, Ukraine just recently accepted its first shipment of American oil in a move to counter Russia’s influence in the region.
A New Era
Diplomacy by Twitter has yet to prove to be an effective bridge in sustaining good international relations. That said, charting the tweets of world leaders is a unique way to interpret government policy and energy economics in this new era of social media.
It seems that the next time you want to know what is going through a leader’s head, you can simply try checking their tweets.
Visualizing the Wealth of Nations
These 10 countries hold 74% of the world’s $204 trillion in private wealth. How will this wealth of nations change over the next decade?
Visualizing the Wealth of Nations
Just as there exists a longstanding inequality in the distribution of household wealth, so exists a considerable differential in the amount of wealth held by countries on the international stage.
Simply put, some nations are “haves”, while many others are “have-nots”.
“Wherever there is great property, there is great inequality.”
– Adam Smith, The Wealth of Nations
We previously showed you how the ranking of the richest countries in the world has changed over the course of the last 10 years (2008-2018).
Today’s chart keys on a slightly different question.
What are the wealthiest nations today, both in absolute and per capita terms, and how is this list projected to change over the next decade? Let’s see how the wealth of nations stack up.
Private Wealth: Now and in the Future
Using data from the Global Wealth Migration Review, here are the 10 wealthiest nations both now and as forecasted in 2028.
|Rank||Country||Wealth (2018)||Wealth (2028F)||Approx. Growth|
|#1||🇺🇸 United States||$60.7 trillion||$72.8 trillion||20%|
|#2||🇨🇳 China||$23.6 trillion||$51.8 trillion||120%|
|#3||🇯🇵 Japan||$19.1 trillion||$24.9 trillion||30%|
|#4||🇮🇳 India||$8.1 trillion||$22.8 trillion||180%|
|#5||🇦🇺 Australia||$6.0 trillion||$10.8 trillion||80%|
|#6||🇬🇧 United Kingdom||$9.1 trillion||$10.0 trillion||10%|
|#7||🇩🇪 Germany||$8.8 trillion||$9.7 trillion||10%|
|#8||🇨🇦 Canada||$6.0 trillion||$7.8 trillion||30%|
|#9||🇫🇷 France||$5.9 trillion||$6.4 trillion||10%|
|#10||🇮🇹 Italy||$3.8 trillion||$4.2 trillion||10%|
It’s worth noting that these figures are meant to represent wealth, which is defined as the total amount of private wealth held by individuals in each country. It includes assets like property, cash, equities, and business interests, minus any liabilities.
China has been the best performing wealth market in the last decade, and these projections show the country as continuing on that track. In fact, both China and India are expected to see triple-digit growth in private wealth between now and 2028.
As far as developed countries go, it’s not surprising that growth rates are much more modest. In Europe, countries like Great Britain, Germany, France, and Italy are only expected to add 10% to private wealth in 10 years, while Canada (30%) and the U.S. (20%) do marginally better.
One notable exception here is Australia, which is expected to add 80% to private wealth over the timeframe – and it will leapfrog both Germany and the U.K. in the rankings in the process.
Wealth per Capita
Here’s a look at the wealth of nations in a different way, this time with numbers adjusted on a per capita basis.
|Rank||Country||Est. Population||Wealth per capita (2018)|
|#7||🇺🇸 United States||327,200,000||$186,000|
|#9||🇭🇰 Hong Kong||7,392,000||$169,000|
When using per capita numbers, it’s absolutely no contest.
Monaco, the city-state on the French Riviera, is a money magnet with $2.1 million of private wealth per citizen. This means the average Monacan is at least 10 times richer than the average North American or European.
Liechtenstein, a microstate that sits in the Alps between Switzerland and Austria, also has a high average wealth of $786,000 per person. Like Monaco, its population is well under 50,000 people.
Finally, it’s worth mentioning that three countries on the per capita list also made the overall list. Put another way, the countries of Australia, Canada, and the United States can all claim to be among the wealthiest of nations in both absolute and per capita terms.
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