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RISK IN CONTEXT

Tensions in South China Sea Increasing Political Risks for Marine Industry

Posted by Marcus Baker 09 February 2017

Political tensions in the East and South China Sea are fuelling concerns for the marine industry, as key shipping routes face a heightened risk of disruption.

Currently, about 30% of the world’s maritime-borne trade has to navigate around several island chains in the South China Sea, the sovereignty of which is disputed among surrounding countries.  While several of these territorial disputes have been ongoing for decades, tensions have increased in the past year, impacting perceived political risks in the region.

As noted in our recent Political Risk Map 2017, produced in partnership with BMI Research, short-term political risks in this region have increased, and there is the potential for disputes between:

  • China and Vietnam, over territorial disputes concerning the Paracel Islands.
  • Japan and China, over islands that Japan calls the Senkaku Islands, but which are known in China as the Diaoyu Islands.
  • South Korea and Japan, over group of islands that the Japanese call Takeshima, and the South Koreans call Dokdo.
  • The Philippines could also find itself caught up in the conflict with China over maritime disputes in the South China Sea.

In addition, recent comments from the Trump administration have suggested that the US may look to prevent China taking over territory in the international waters of the South China Sea.

While tensions have not yet directly impacted the marine industry, concerns remain about their potential to escalate.

Possible impact on shipping

Shipping risks such as hull war or business interruption (should ships be forced to reroute or are restricted from entering certain areas) would be key concerns if tensions lead to something more serious.

We would recommend keeping your marine war risk insurances in place and consider additional or enhanced risks in these waters, in case any tensions escalate into conflict. In addition, you should keep a close eye on developments in the region to be aware of any escalating tensions or possible danger zones that could impact your operations.

Related to:  Political Risk , Marine

Marcus Baker