Malaysia’s Meek South China Sea Approach

On August 29, the Philippine Daily Inquirer published a report that shot the long-simmering South China Sea disputes to the top of the domestic political agenda in Malaysia.

The report, which was authored by Kurt Dela Peña and bore the title “Malaysia gets a taste of China West Philippine Sea bullying,” centered on a leaked diplomatic note that China had sent to the Malaysian embassy in Beijing on February 18. In the note, China’s Ministry of Foreign Affairs expressed “serious concern” and “strong dissatisfaction” over Malaysia’s oil and gas exploration activities near Luconia Shoals.

It then demanded that Malaysia immediately halt all oil and gas exploration and production activities in the area, including at the recently completed Kasawari gas field, the country’s largest. “The Chinese side, once again, urges the Malaysian side to genuinely respect the territorial sovereignty and maritime interests of China [and] immediately stop the above mentioned activity,” the note said.

The publication of the note reignited a controversy that has smoldered since Anwar Ibrahim took office in November 2022. During that time, China has quietly made repeated incursions into Malaysia’s exclusive economic zone (EEZ), which it claims under its expansive “nine-dash line” maritime claim. Most incursions have taken place around the Luconia Shoals, an expansive series of reefs around 80 nautical miles off the coast of Sarawak, close to a number of major Malaysian oil and gas projects.

In a recent report, the U.S.-based Asia Maritime Transparency Initiative (AMTI) documented near-constant patrols by the China Coast Guard (CCG) around the shoals. According to AMTI, the CCG patrols proceeded “like clockwork” in 2024, with nine different CCG vessels spending time patrolling inside Malaysia’s EEZ and continental shelf.

“At least one CCG vessel was on station nearly every day, remaining in the area for up to six weeks before being relieved by another ship,” the AMTI report stated. CCG vessels also made visits to both new exploratory wells and to the gas production platforms at Timi, Kasawari, and Jerun, in some cases “passing as close as 1,000 meters” to the operations. All three of these platforms were named in the February diplomatic note.

Unlike the Philippines, which has responded to frequent Chinese incursions into its own EEZ by assertively publicizing the CCG’s actions and attempting to rally international opinion to its side, Anwar’s government has remained mostly publicly silent about the CCG’s patrols. At the same time, the Malaysian leader has gone out of his way to downplay the importance of the incursions, presumably to avoid destabilizing the economic relationship between Malaysia and China.

In this context, the report appeared to reinforce domestic political criticisms that Anwar’s administration was turning a blind eye to China’s increasingly assertive actions. Not only did Malaysia make no public announcement of the Chinese diplomatic note, but shortly afterward, Anwar actually downplayed the extent of the disputes with China.

In March, he gave a speech in Melbourne in which he implied that the issue had been inflamed by U.S. pressure for Southeast Asian nations to take sides in its geopolitical competition with China. “If they have problems with China,” he said, “they should not impose them upon us. We do not have a problem with China.”

The publication of the diplomatic note forced Anwar’s administration to clarify its position on the South China Sea. Describing the leaking of the note as a subject of “grave concern,” the Malaysian Foreign Ministry asserted that the nation’s position on the South China Sea “remains unchanged” and that Malaysia would “continue to defend its sovereignty, sovereign rights, and interests in its maritime areas.”

Speaking to reporters in Vladivostok in early September, Anwar described China as a “great friend” but asserted that Malaysia had a sovereign right “to operate in our waters and secure economic advantage, including drilling for oil in our territory.”

This is not the first time that the South China Sea issue has dogged Anwar. In April 2023, shortly after returning from a state visit to China, Anwar told Parliament that Chinese officials had expressed concerns about the state energy firm Petronas’ involvement in the Kasawari gas field. The Malaysian leader then said that he was open to negotiations with Beijing over disputed areas. “If the condition [from Beijing] is that there must be negotiation, then we are ready to negotiate,” Anwar said.

As Ganesh Sahathevan noted in an article for The Diplomat in May, this appeared to mark a break with the policies of past administrations, which “never spoke of negotiations with China as an avenue for addressing disputes in the South China Sea.” Instead, they “pursued a policy of asserting sovereignty by building its [Malaysia’s] own installations in the South China Sea while using international instruments… to defend its claims.”

Unsurprisingly, Anwar’s opponents wasted no time in accusing him of selling out Malaysian interests. “This statement is reckless and should never be issued by a prime minister,” said opposition leader Muhyiddin Yassin. “The indirect implications of this statement have indirectly acknowledged the Chinese claim to territories that are already Malaysian territory that must be defended.”

These various controversies have forced Anwar to assert that Petronas will continue to conduct oil and gas exploration activities inside Malaysia’s EEZ, despite China’s objections. In early October, he said that Malaysia “will not back down from its claims.”

At the same time, there is every indication that his goal, like Vietnam’s, is to quarantine the China-Malaysia relationships from the maritime disputes. It is for this reason that the Malaysian government chose not to publicize the diplomatic note sent by China in February. There is something to be said for this approach, which has allowed Malaysia to avoid the sort of tumult that has engulfed China-Philippines relations. But as a result, the country has also appeared to accept a near-constant Chinese presence within its waters.

While AMTI noted that the scale of the Chinese patrols at Luconia Shoals did not come close to the CCG’s deployment in waters claimed by the Philippines in the Spratly Islands, the recent controversies raise the question of how long the country can continue to maintain that it has “no problem” with China, when the latter is in near-constant violation of its EEZ and continental shelf.

As the Washington Post noted in an investigation in May, this issue will only become more pressing as time goes by. The pending exhaustion of the oil and gas reserves in the shallow waters close to Malaysia’s shores are increasing its reliance on new “deepwater” fields in more remote parts of its EEZ, where Petronas has awarded a raft of new exploration permits since 2021. According to the Post, this has raised the likelihood of “direct confrontation with Chinese forces in the South China Sea.”

In mid-October, the two sides held their first bilateral dialogue on the management of maritime issues in the South China Sea. According to media reports, the meeting ended with a consensus on promoting “pragmatic maritime cooperation.” Whether or not this dialogue results in a reduction of Chinese incursions into Malaysia’s EEZ remains to be seen. But with its existing oil and gas projects beginning to run dry, it is probably only a matter of time before Malaysia has to confront the issue more directly.