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Commentary: Supplying 60% of Asia’s crude, GCC cannot ignore South China Sea tensions
Philippine foreign secretary Theresa Lazaro said in June the region did not want a situation like the Strait of Hormuz, where a single chokepoint can disrupt vital trade
- PUBLISHED: Tue 18 Aug 2026, 11:50 AM
- By:
- Dr Imran Khalid
The author is a geostrategic analyst and senior fellow at Foreign Policy In Focus - USA. His work centres on international affairs and global security.
A year ago, a Chinese coast guard cutter chasing a Philippine patrol boat near Scarborough Shoal rammed one of its own navy destroyers. The cutter, hull number 3104, was left inoperable. At least two Chinese sailors died. Beijing said nothing at the time, then honoured the two men as martyrs earlier this month – the first time it has publicly honoured deaths in these waters since the pilot lost in a collision with an American surveillance plane in 2001.
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Most of the coverage read the anniversary as a China-Philippines dispute. From a desk in Dubai, that is the wrong lens. The sharper question is who else had cargo on that water while two navies traded paint. A large part of the answer loads at Das Island, Zirku and Fujairah.
A UAE oil company sold more than 30 million barrels of spot crude to Asian refiners in a matter of weeks this summer – cargoes of Das, Upper Zakum and Umm Lulu bound for buyers in China, Japan, South Korea and India. The UAE left OPEC on the first of May to pump beyond the cartel's caps, and by June its crude exports were running at about 3.7 million barrels a day, a record by ship-tracking estimates, much of the extra volume moving east.
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The Middle East already supplies more than 60 per cent of Asia's crude imports. Every one of those eastbound barrels has to clear two chokepoints, not one. It clears the Strait of Hormuz, and then it has to clear the Malacca Strait and the South China Sea to reach the refineries that pay for it. More than 30 per cent of the world's seaborne crude passes through that sea, and by the Energy Information Administration mapping of the route, Middle Eastern oil makes up the largest share of it.
Solving the first chokepoint
The UAE has already spent real money solving the first chokepoint. The pipeline from Habshan to the port of Fujairah lets roughly 1.5 to 1.8 million barrels a day load on the Gulf of Oman side of Hormuz, outside the strait entirely. When fighting between Iran, Israel and the United States erupted in late February and ran through March, and Tehran threatened shipping through Hormuz, that infrastructure earned its cost. Shuttle tankers move crude past the strait, and Asian refiners paid premiums for anything that could reach them. More than a fifth of global oil flows were suddenly priced as if they might not arrive.
There is, however, no Fujairah route around the second chokepoint, the Malacca Strait. Nothing the Gulf can build can reroute a tanker around the South China Sea. That is why Philippine foreign secretary Theresa Lazaro told The Straits Times in June that the region did not want a situation like the Strait of Hormuz, where a single chokepoint can disrupt vital trade. She was not reaching for a metaphor. She was identifying the same underlying vulnerability: one chokepoint standing in for another, with oil importers downstream of both.
Here, the Gulf reading should part company with the standard one. The danger is not that China closes the sea. Beijing depends on those lanes more than anyone, since the bulk of its own imported oil crosses them, and it has no interest in choking a route that feeds its refineries.
The danger is subtler: The slow hardening of a contested sea into administered, patrolled, militarised space, where a single miscalculation carries a price and where whoever controls the water holds quiet leverage over everyone who uses it.
Watch how the dispute is changing shape. In September last year, China declared the northern reef a national nature reserve of some 3,500 hectares, with core and experimental zones, which it frames as coral protection and lawful marine administration. On the first of August this year, it brought new management rules into force, banning fishing and other activity there, and staged naval and coast-guard drills around the shoal. That show of force followed Manila's own move days earlier, when the Philippines lodged a submission at the United Nations on the territorial-sea baselines around the shoal, which Beijing rejected within hours as illegal, null and void.
‘Destabilising’ pretext for coercion
Both Chinese and Philippine governments are now fighting with paperwork as much as with hulls, each embedding its claim in law and administration. Washington has called China's reserve a "destabilising" pretext for coercion; Beijing rejects the 2016 arbitration ruling that went against it as invalid and calls its own steps routine governance. That argument will not be settled, and a Gulf exporter does not need it settled. It needs the sea calm, which exactly is what is thinning out.
According to the Asia Maritime Transparency Initiative, a run-in between Chinese and Philippine ships near Scarborough was recorded on about 19 days a month in the first half of this year.
A sea that is busy with confrontation, dotted with barriers and buoys and legal decrees, becomes a standing risk premium on every cargo that crosses it. Insurers price permanence. Shipowners plan around it. None of it requires a shot to be fired.
The quiet of that sea cannot be taken as given. Washington's own posture is guarded. Elbridge Colby, US undersecretary of defence for policy, recently spoke in Manila and pointedly declined to name China or mention Scarborough, insisting the US was "digging in" in Asia while stepping around the flashpoint, two days after the State Department had condemned the reserve, and weeks before an expected meeting between the American and Chinese presidents. That is a power managing its own risk and keeping its options open, not a guarantor.
Risk premium
The Gulf's exposure here is commercial, and so is its answer. If the sea stays this tense, that risk premium becomes a fixed cost on every eastbound cargo – which argues for the things a large supplier can actually do about it: Holding strategic stocks alongside its Asian buyers, spreading routes and customers, and leaning on its weight as one of Asia's biggest crude suppliers rather than assuming the lanes stay cheap.
The Philippines, chairing the Association of Southeast Asian Nations (ASEAN) this year, is pushing to conclude a long-delayed code of conduct with China before the year is out — an agreement intended to set rules for behaviour in these waters. Gulf states are not parties to it and never will be. But they are among the biggest economic beneficiaries of the sea’s trade routes, and their ability to engage with Washington, Beijing and Tehran gives them a legitimate stake in saying that an open, stable and predictable South China Sea is a Gulf interest too.
The UAE engineered its way around Hormuz because it understood a chokepoint it could see. The second one, farther from home and harder to picture, carries the same barrels to the same customers. It has no bypass - and unlike the first, it is not one the Gulf can engineer its way around alone.