Conflict Prevention

In March 2015, the author wrote an update to this memo to reflect recent developments in Venezuela. Read the update. Introduction In the coming months, Venezuela could experience significant political unrest and violence that lead to the further curtailment of democracy in the country. Presidential elections are scheduled to take place on October 7, 2012. President Hugo Chavez is in the midst of a tough reelection campaign against Henrique Capriles Radonski—the young and energetic governor of the state of Miranda—who enjoys multiparty support and appears to have a better chance of defeating the incumbent than earlier challengers. Over the course of the past year, Chavez and several of his most senior associates have asserted that there will be instability and violence if he is not reelected. At the same time, Chavez is battling cancer, but he has shared little information with the public about the state of his health beyond the fact that he has twice been treated for the disease since spring 2011. Speculation about Chavez's health problems has generated considerable uncertainty among his supporters, especially since he has not anointed a successor. Should Chavez appear to be losing the election, die suddenly, or withdraw from public life for health reasons, tensions are likely to rise in Venezuela, especially if the public suspects that Chavez has used extra-constitutional means to preclude or invalidate an opposition victory in order to sustain his regime's hold on power. Protests over such actions, which could turn violent, may in turn lead to the imposition of martial law and the further curtailment of democratic rights in Venezuela. This would almost certainly trigger a major political crisis in the Western Hemisphere that pits countries seeking to restore democracy and the rule of law in Venezuela—including the United States—against those who support Chavez and the principle of noninterference in the internal affairs of other states. Longstanding U.S. efforts to promote good governance in Latin America as well as cooperation on a range of political, economic, and security challenges in the region would be threatened as a consequence. Accordingly, the United States should seek free and fair elections in Venezuela. If Chavez or a replacement candidate is defeated, it should offer to help promote an orderly, peaceful transition. If Chavez is reelected in a process judged acceptably free and fair, the United States should seek to reset the bilateral relationship with an eye toward the eventual renewal of high-level communication on areas of mutual interest. If the election results appear fraudulent or apparently legitimate results are nullified, the United States should encourage international pressure to restore democracy and suspend bilateral business as usual until a legitimate government is restored. The Contingency Political unrest leading to a suspension of democracy before or after the upcoming elections in Venezuela is not inevitable. If Chavez can participate in the campaign and win convincingly in what is accepted as a free and fair election, while seeming sufficiently healthy to govern, the opposition will likely concede and violence will be avoided. If Capriles wins convincingly, is recognized internationally as the victor, and can reassure Chavistas of his intention to work for the benefit of all, trouble also may be averted. Although Chavez has indicated he will respect the results of the election, most plausible scenarios for instability and conflict in Venezuela derive from the premise that the Chavistas will not willingly surrender power and would be willing to provoke violence, orchestrate civil unrest, or engage in various forms of armed resistance to avoid doing so. This is the real danger surrounding the current campaign and it extends beyond the election itself because of the questions concerning Chavez's health. There is nothing to indicate the opposition has the will, wherewithal, or weapons to challenge the Chavistas through violence. That said, student-led protests over the closing of the national television channel RCTV set the stage for the defeat of the Chavez-sponsored constitutional referendum of 2007. There is no evidence to suggest any opposition effort to arm or organize militarily. Chavez, on the other hand, has worked assiduously to inculcate supporters with the notion that a Capriles victory would be achievable only through deception, collusion with the remaining independent media, and covert U.S. support. The Chavez government also insists that an opposition victory would result in the termination of the popular Chavista social programs known as Misiones Bolivarianas (commonly known as misiones) and would return to power the elites who had earlier governed Venezuela. Chavez has added huge numbers of workers to the government payroll and extended direct government benefits to many other low-income Venezuelans. Further complicating matters, Chavez has announced an economic plan for his next term that would accelerate dismantling the private sector economy, putting those who defend democratic pluralism, free enterprise, and private property on notice of his intention to complete Venezuela's transformation into a socialist state. More than a year ago, his brother Adan Chavez, governor of the state of Barinas, publicly advised Chavez's supporters that they might need to defend the Bolivarian Revolution by force of arms. Given current circumstances in Venezuela, several plausible scenarios could trigger significant political unrest that degenerates into violence: Chavez's defeat on October 7 looks likely before the election. Street violence erupts either spontaneously or at the instigation of Chavez's allies in the government. The government declares a state of emergency and postpones the election. The suspension of civil liberties following such a declaration may last for ninety days and can be renewed. The state-controlled media would likely endorse the temporary imposition of martial law as necessary to preserve order and the revolution. Such actions, however, could precipitate widespread clashes with opposition supporters, particularly where there are military and National Guard deployments. Chavez wins the election—or plausibly claims to win—and almost immediately dies or withdraws from public life for health reasons. A state of emergency is declared. New elections are required but also new candidates. Since none of Chavez's chief lieutenants appears to enjoy sufficient public support to assure election, cracks begin to appear in the Chavista movement that prove difficult to reconcile. It is also possible that the opposition splinters. In many respects Chavez holds the opposition together much as he does his own coalition. The election is held and Capriles wins. Government workers and the beneficiaries of misiones riot before Capriles can be inaugurated. An apparently lame-duck Chavez declares a state of exception and postpones the inauguration. The perception that the government had manufactured a justification for setting aside a Capriles victory would lead to widespread demonstrations by Capriles supporters. An angry, resurgent opposition, convinced it was in danger of having its triumph stolen, would be vulnerable to Chavista provocation. Clashes between opposition supporters and the Chavista faithful would occur. Capriles wins and is inaugurated. Strikes by Petroleos de Venezuela (PDVSA) oil workers paralyze oil production. Chavistas at all levels of government resist the new administration's efforts to implement its own programs and/or jettison moribund Chavista projects. Government workers are encouraged by Chavista media to see Capriles's efforts to cut the government's swollen payroll as a purge. This is particularly likely at PDVSA, the state oil company, which has doubled its workforce since the strike of 2003 even though oil production has stagnated at well below pre-strike levels. The military intervenes, and supporters of the new government take to the streets. The election is held and the results are too close to call or are unacceptable to the government. The Electoral Tribunal delays announcing the results. Both the opposition and Chavez's supporters take to the streets. The Chavista base fears a loss while the government seeks a way to avoid acknowledging a defeat. The opposition fears a manipulated outcome. The Council of State or the somewhat vaguely constituted Anti-Coup Command denounces efforts to subvert the election or destabilize the country while Chavez or an interim president declares a state of exception. Street violence erupts and is attributed to the opposition. Although the government has enjoyed extraordinary advantages in terms of both resources and media access, most observers expect the vote count on election day to be largely accurate given the experience of the legislative elections of 2010 and the referenda votes of 2007 and 2009. The great unanswered question is how the government will react if it appears Chavez has lost. Unrest and violence, should it occur, is likely to be concentrated in the cities and to take the form of a rise in street protests and a spike in violent criminal activity—Venezuela has one of the world's highest homicide rates—accompanied by political hooliganism and possibly sabotage of public services. The point of instigated violence would be the creation of circumstance sufficient to justify a suspension of civil liberties, postponement of the election, or, following a vote, invalidating the results of October 7. Spontaneous violence emanating from Chavez's supporters remains a real possibility if it appears that the Bolivarian movement has or is about to suffer a reverse at the polls. A preemptive move by the military cannot be categorically ruled out but seems unlikely unless the security situation in the major cities threatens to unravel. Another possible aim of any Chavista-choreographed instability, if recognition of defeat were unavoidable, would be to force a brokered transition to an opposition administration such as occurred in Nicaragua following the election of Violeta Chamorro. Warning Indicators A range of developments could indicate one of the aforementioned scenarios for violence. Chavez dies or an announcement is made that his death is imminent. The possibility of violence would be particularly high if Chavez died or announced his resignation for medical reasons after being reelected. Violent crime is allowed to surge in the major cities before the election. Irregular armed groups violently harass the opposition and/or seek to disrupt Capriles's political events. Weapons are distributed to the militia. Military units are repositioned. After the abortive coup of 2002 (though not immediately after), Chavez created a national militia, organized outside the formal military chain of command and drawn from the social and economic strata in which Chavez's support is strongest. Weapons for the militias, however, remain under the control of the regular military. Arming the militia would be tantamount to putting military weapons in the hands of the Chavista base. Basic food items disappear. Private businessmen are accused of hoarding and their businesses are expropriated. Stocks of staples are perpetually low at present in Venezuela because of Chavista penalties for hoarding in reaction to price controls. Remaining independent media are closed and/or prominent journalists are detained. The independent media have been under pressure by Chavez since 2006. Most that remain are critical of the government. Sharp divisions within Chavismo surface publicly, suggesting insiders know Chavez is failing. There are persistent rumors of tensions among prominent senior Chavistas, several of whom have been perceived as jockeying to position themselves as Chavez's logical successor. A senior political figure close to either Chavez or Capriles is assassinated. Though the homicide rate in Venezuela is high, political assassination is rare. Local supplies of gasoline are interrupted. Most Venezuelans, especially poorer Venezuelans, consider cheap (pennies per gallon) gasoline a birthright. Efforts to raise prices in 1989 caused violent riots in the capital. The government via PDVSA controls the supply of gasoline, and an interruption of supply would likely enrage segments of the population. Implications for U.S. Interests Political instability and violence in Venezuela would damage U.S. efforts to promote democracy, increase regional cooperation, combat narcotics, and protect its economic interests in the region. Democracy Promotion: The United States has worked for decades to promote democracy in the Western Hemisphere. In recent years, Chavez has become increasingly authoritarian, undermining important political institutions, giving more powers to the presidency, and weakening both civil society and the independent media. The United States should view a suspension or further deterioration in the quality of Venezuela's democracy as a setback for U.S. policy and for the hemisphere. The emergence of a military junta or a compromised Chavez regime would also likely increase Iranian and Cuban influence in Venezuela. It already has a close relationship with Iran from which it reportedly receives advanced weapon systems and other assistance. Cuba sends thousands of teachers and technical, medical, and security advisers in exchange for an estimated ninety to one hundred thousand barrels of oil per day. Regional Cooperation: The United States has an interest in nurturing regional cooperation particularly under the auspices of the Organization of American States (OAS), of which it is a core member. While often disappointing to both the United States and Latin America, the OAS provides the only regional forum in which all of the countries with democratically elected governments participate. A failure by the OAS to play an effective role in Venezuela if it appears democracy is at risk would further undermine support for the organization both in the region and in the United States. How the United States manages its relations with Venezuela if violence does break out would likely affect U.S. relations with others in the hemisphere, especially Brazil, which has cordial relations with Chavez and reacts badly to perceived U.S. efforts to dictate to Latin America. A repetition of the acrimony that characterized the hemisphere's efforts to resolve the Honduras crisis of 2009 would be corrosive to U.S. relations with the region. Counternarcotics: Venezuela does not cooperate with the United States on counternarcotics, except at the most minimal level. Drug trafficking has, consequently, surged. A number of Venezuelan military officers, including the current minister of defense, have been plausibly accused by the U.S. Treasury of cooperating with the Colombian insurgent group Fuerzas Armadas Revolucionarias de Colombia (FARC) and facilitating drug shipments through Venezuela, especially from Apure State. Venezuelan recalcitrance in counternarcotics clearly undermines other regional efforts to combat the drug trade. Even low levels of violence would create new opportunities for the FARC and other drug traffickers to retrench and extend their reach. Economic Interests: A significant number of U.S. companies have operations in Venezuela; it remains an important market for U.S. goods and some services, especially oil services. Many of these companies could be at risk if violent internal conflict broke out. Venezuela is consistently among the five largest foreign suppliers of oil to the United States. The United States is Venezuela's largest market, buying up to nine hundred thousand barrels of oil daily, up to 45 percent of Venezuela's total oil exports. Around six hundred thousand barrels of Venezuelan crude per day are refined at CITGO facilities in the United States. Although a cut off of Venezuelan oil to the United States is theoretically possible, it is unlikely given Venezuela's dependence on the U.S. market. The United States is now less vulnerable to a cut off of supply from Venezuela as U.S. domestic production has risen and imports from elsewhere could relatively quickly replace Venezuelan oil. Venezuela's economy, on the other hand, has become more dependent on petroleum. Although production has stagnated since 2003, oil accounts for over 95 percent of Venezuela's export earnings, and export revenue pays for nearly 50 percent of the government's budget. Thus, although Venezuela is vulnerable to pressure via its dependence on its oil exports generally and the U.S. market and refineries specifically, global markets would likely react negatively to either an interruption of Venezuelan production or a crisis in U.S.-Venezuelan relations that threatens the bilateral trade in oil. Preventive Options Two factors seem most likely to dissuade leading Venezuelan actors from violence: scrutiny of the electoral process and a clear sense that the rest of the Western Hemisphere would not countenance an attempt to subvert or set aside the outcome of a legitimate vote. All Western Hemisphere international organizations make having a fully functioning democracy a necessary precondition to full participation. Chavez's influence (beyond oil revenue) has always rested in large part on the perception that he is legitimately elected and enjoys a popular mandate. The options to prevent instability in Venezuela include the following: Regional/Bilateral: The United States could urge Brazil, Colombia, and other countries in the region to press for transparency and compliance with the highest possible standard of election administration and to press Venezuela to permit exit polling, quick counts, and other mechanisms for independent validation of the electoral results. Brazil, in particular, has influence with the Chavez government and seeks to play more of a leadership role globally and in the hemisphere. Instability, violence, or an interruption of democracy in Venezuela would hurt Brazil's geopolitical ambitions as well as its extensive business interests. It would also be problematic for the Southern Common Market (Mercosur), which recently made Venezuela a full member. (Mercosur requires members to be fully functioning democracies and recently suspended Paraguay after the Senate there removed the sitting president under circumstances that other members considered questionable.) Extra-regional: The EU (and especially Spain), Japan, and China all have significant investments in Venezuela that would be at risk in the event of an internal conflict. Interested stakeholder countries could be encouraged to make clear that free and fair elections in Venezuela, and an orderly transition if Chavez loses, are important to the global community. (China, however, while having a growing stake in the Venezuelan economy, is unlikely to agree to pressure Caracas.) Electoral authorities in democratic capitals could be encouraged to review with the media the criteria for judging the quality of election administration. Multilateral: The Venezuelan government declined to invite substantial international observation and the deployment of a robust international mission is most likely impractical now except for the Union of South American Nations (UNASUR). Nevertheless, the United States and other hemispheric partners could press the OAS to insist that the Venezuelan government permit the accreditation of interested diplomats and other volunteers as election observers and to permit international media–facilitated access to voting sites. In the event a new election was necessary for any reason, the OAS could push for early deployment of an international observer mission. (International observation and other steps to guarantee transparency were precisely the elements Chavez considered necessary for a free and fair election when he first ran for the presidency in 1998.) Mitigating Options In the event that the government either orchestrates or takes advantage of a violent popular reaction to Chavez's defeat, death, or incapacitation to suspend civil liberties and govern under a renewable state of exception, the United States could take or encourage several steps in order to accelerate a return to democracy. The likelihood of success for unilateral U.S. efforts is low; multilateral efforts that include other important regional players are far more likely to influence Venezuelan behavior. Diplomatic Options Together with like-minded nations, the United States could demand that the OAS declare Venezuela in breach of its obligations as a signatory of the Inter-American Democratic Charter and encourage a secretary-general–led mission to Caracas. (Note: It would be difficult to generate a consensus condemnation of Venezuela at the OAS but the secretary-general can undertake such a mission on his own authority. A secretary-general–led mission would still require Venezuelan acquiescence to enter the country.) Venezuela would understand that if regional and subregional organizations determine that the country is no longer a functioning democracy, it will be suspended, as has happened recently with both Honduras and Paraguay. The United States could bring the issue of Venezuelan democracy to the United Nations Security Council and urge the UN to endorse a fact-finding mission or to explicitly endorse regional efforts to restore democracy. With other international partners, including the European Union, the United States could support offers to mediate. If it proves difficult to get the OAS or UN involved in mitigation efforts, the United States could propose a delegation of foreign ministers to travel to Caracas to engage the Venezuelan authorities. The United States could suspend visas for all individuals (officials and nonofficials, government and opposition) perceived to be involved in precipitating violence or undermining democracy; or suspend normal visa adjudication services at the U.S. embassy pending a resolution of the crisis. Economic and Financial Options In the event of violence or an interruption of democracy, the United States could freeze individual bank accounts of key figures involved or responsible and seize assets in the United States. It could also arrange for the proceeds of Venezuelan government–owned corporate entities like CITGO to be held in escrow accounts until democracy is restored and encourage other important trading partners (i.e., Canada, Spain, France, Brazil) to do the same. If other forms of pressure fail to have an effect, the United States could block access to CITGO's refining facilities in the United States and consider prohibiting PDVSA oil sales to the United States while the government's status is uncertain. Military Options The United States could encourage other Latin American militaries, as well perhaps as the Spanish, to communicate to the Venezuelan military the importance of complying with constitutional mandates, respecting human rights, and preserving democracy. While Chavez loyalists dominate the Venezuelan high command, it is not clear to what extent they control the middle ranks. Nor is it clear to what extent the military's loyalty to Chavez's Bolivarian movement would trump other considerations. In the abortive coup of 2002 the military temporarily removed Chavez but also restored him to power. Direct military involvement appears inappropriate. The United States has never unilaterally intervened militarily in a South American internal conflict (criticisms of Plan Colombia notwithstanding) and to do so now would likely unite most of South America behind Chavez and/or his successor. Most Latin American countries are profoundly reluctant to intervene or even comment on the internal affairs of their hemispheric neighbors. Even multilateral military intervention in any but the direst circumstances (Haiti) is all but unthinkable. Recommendations As the election approaches, the United States needs to emphasize publicly as well as privately the importance for the hemisphere of free and fair elections in Venezuela. The United States should restate its interest in renewing cooperation in areas such as counternarcotics and emphasize the continuing complementarities of the U.S. and Venezuelan economies. While the United States should emphasize the U.S. view that only Venezuelans can solve Venezuela's political problems, it should also encourage democratic countries in the region to make clear the hemisphere's concern that democracy be preserved, basic political liberties be respected, including press freedom, and violence be avoided. The importance of transparency in administration of the elections and verification of results should be stressed. At the same time, U.S. policymakers should avoid feeding the Chavista narrative that the United States is plotting the overthrow of the Bolivarian Revolution. More specifically, the United States should take the following steps as soon as possible: Reach out to important regional and extra-regional partners now to gauge their likely response to instability, particularly those countries that would be most directly affected (i.e., Brazil, Colombia, and the EU), and convey a sense of the range of options the U.S. government would entertain in the event of an outbreak of violence and/or interruption of democracy. It will be particularly important to engage Brazil and its Mercosur partners early because of their close relations with Chavez to minimize the possibility of misunderstandings arising between them and the United States. This should include proactively sharing information that would signal Venezuelan preparations for violence or manipulation of the electoral outcome. Begin identifying important actors (military and civilian officials as well as opposition figures) now whose visas would be canceled and accounts frozen in the event that they are linked to political violence and/or an interruption of democracy. Work to build awareness at the UN, in Europe, and in Japan of what is happening in Venezuela and attempt to organize a coalition of partners to limit an illegitimate Venezuelan administration's access to government assets held abroad as well as to the international financial system. Continue to stress directly to the Venezuelan government as well as publicly that the United States will accept and be prepared to work with a legitimately elected government, including one headed by Hugo Chavez or a Chavista successor, provided the election is free, fair, and constitutional. Leverage defense department contacts in Latin American and Spanish armed forces to communicate to the Venezuelan military leadership that they are obliged to uphold their constitution, respect human rights, and protect their country's democratic tradition.

In April 2015, the author wrote an update to this memo to reflect recent developments in the South China Sea. Read the update. Introduction The risk of conflict in the South China Sea is significant. China, Taiwan, Vietnam, Malaysia, Brunei, and the Philippines have competing territorial and jurisdictional claims, particularly over rights to exploit the region's possibly extensive reserves of oil and gas. Freedom of navigation in the region is also a contentious issue, especially between the United States and China over the right of U.S. military vessels to operate in China's two-hundred-mile exclusive economic zone (EEZ). These tensions are shaping—and being shaped by—rising apprehensions about the growth of China's military power and its regional intentions. China has embarked on a substantial modernization of its maritime paramilitary forces as well as naval capabilities to enforce its sovereignty and jurisdiction claims by force if necessary. At the same time, it is developing capabilities that would put U.S. forces in the region at risk in a conflict, thus potentially denying access to the U.S. Navy in the western Pacific. Given the growing importance of the U.S.-China relationship, and the Asia-Pacific region more generally, to the global economy, the United States has a major interest in preventing any one of the various disputes in the South China Sea from escalating militarily. The Contingencies Of the many conceivable contingencies involving an armed clash in the South China Sea, three especially threaten U.S. interests and could potentially prompt the United States to use force. The most likely and dangerous contingency is a clash stemming from U.S. military operations within China's EEZ that provokes an armed Chinese response. The United States holds that nothing in the United Nations Convention on the Law of the Sea (UNCLOS) or state practice negates the right of military forces of all nations to conduct military activities in EEZs without coastal state notice or consent. China insists that reconnaissance activities undertaken without prior notification and without permission of the coastal state violate Chinese domestic law and international law. China routinely intercepts U.S. reconnaissance flights conducted in its EEZ and periodically does so in aggressive ways that increase the risk of an accident similar to the April 2001 collision of a U.S. EP-3 reconnaissance plane and a Chinese F-8 fighter jet near Hainan Island. A comparable maritime incident could be triggered by Chinese vessels harassing a U.S. Navy surveillance ship operating in its EEZ, such as occurred in the 2009 incidents involving the USNS Impeccable and the USNS Victorious. The large growth of Chinese submarines has also increased the danger of an incident, such as when a Chinese submarine collided with a U.S. destroyer's towed sonar array in June 2009. Since neither U.S. reconnaissance aircraft nor ocean surveillance vessels are armed, the United States might respond to dangerous behavior by Chinese planes or ships by dispatching armed escorts. A miscalculation or misunderstanding could then result in a deadly exchange of fire, leading to further military escalation and precipitating a major political crisis. Rising U.S.-China mistrust and intensifying bilateral strategic competition would likely make managing such a crisis more difficult. A second contingency involves conflict between China and the Philippines over natural gas deposits, especially in the disputed area of Reed Bank, located eighty nautical miles from Palawan. Oil survey ships operating in Reed Bank under contract have increasingly been harassed by Chinese vessels. Reportedly, the United Kingdom-based Forum Energy plans to start drilling for gas in Reed Bank this year, which could provoke an aggressive Chinese response. Forum Energy is only one of fifteen exploration contracts that Manila intends to offer over the next few years for offshore exploration near Palawan Island. Reed Bank is a red line for the Philippines, so this contingency could quickly escalate to violence if China intervened to halt the drilling. The United States could be drawn into a China-Philippines conflict because of its 1951 Mutual Defense Treaty with the Philippines. The treaty states, "Each Party recognizes that an armed attack in the Pacific Area on either of the Parties would be dangerous to its own peace and safety and declares that it would act to meet the common dangers in accordance with its constitutional processes." American officials insist that Washington does not take sides in the territorial dispute in the South China Sea and refuse to comment on how the United States might respond to Chinese aggression in contested waters. Nevertheless, an apparent gap exists between American views of U.S. obligations and Manila's expectations. In mid-June 2011, a Filipino presidential spokesperson stated that in the event of armed conflict with China, Manila expected the United States would come to its aid. Statements by senior U.S. officials may have inadvertently led Manila to conclude that the United States would provide military assistance if China attacked Filipino forces in the disputed Spratly Islands. With improving political and military ties between Manila and Washington, including a pending agreement to expand U.S. access to Filipino ports and airfields to refuel and service its warships and planes, the United States would have a great deal at stake in a China-Philippines contingency. Failure to respond would not only set back U.S. relations with the Philippines but would also potentially undermine U.S. credibility in the region with its allies and partners more broadly. A U.S. decision to dispatch naval ships to the area, however, would risk a U.S.-China naval confrontation. Disputes between China and Vietnam over seismic surveys or drilling for oil and gas could also trigger an armed clash for a third contingency. China has harassed PetroVietnam oil survey ships in the past that were searching for oil and gas deposits in Vietnam's EEZ. In 2011, Hanoi accused China of deliberately severing the cables of an oil and gas survey vessel in two separate instances. Although the Vietnamese did not respond with force, they did not back down and Hanoi pledged to continue its efforts to exploit new fields despite warnings from Beijing. Budding U.S.-Vietnam relations could embolden Hanoi to be more confrontational with China on the South China Sea issue. The United States could be drawn into a conflict between China and Vietnam, though that is less likely than a clash between China and the Philippines. In a scenario of Chinese provocation, the United States might opt to dispatch naval vessels to the area to signal its interest in regional peace and stability. Vietnam, and possibly other nations, could also request U.S. assistance in such circumstances. Should the United States become involved, subsequent actions by China or a miscalculation among the forces present could result in exchange of fire. In another possible scenario, an attack by China on vessels or rigs operated by an American company exploring or drilling for hydrocarbons could quickly involve the United States, especially if American lives were endangered or lost. ExxonMobil has plans to conduct exploratory drilling off Vietnam, making this an existential danger. In the short term, however, the likelihood of this third contingency occurring is relatively low given the recent thaw in Sino-Vietnamese relations. In October 2011, China and Vietnam signed an agreement outlining principles for resolving maritime issues. The effectiveness of this agreement remains to be seen, but for now tensions appear to be defused. Warning Indicators Strategic warning signals that indicate heightened risk of conflict include political decisions and statements by senior officials, official and unofficial media reports, and logistical changes and equipment modifications. In the contingencies described above, strategic warning indicators could include heightened rhetoric from all or some disputants regarding their territorial and strategic interests. For example, China may explicitly refer to the South China Sea as a core interest; in 2010 Beijing hinted this was the case but subsequently backed away from the assertion. Beijing might also warn that it cannot "stand idly by" as countries nibble away at Chinese territory, a formulation that in the past has often signaled willingness to use force. Commentaries and editorials in authoritative media outlets expressing China's bottom line and issuing ultimatums could also be a warning indicator. Tough language could also be used by senior People's Liberation Army (PLA) officers in meetings with their American counterparts. An increase in nationalistic rhetoric in nonauthoritative media and in Chinese blogs, even if not representing official Chinese policy, would nevertheless signal pressure on the Chinese leadership to defend Chinese interests. Similar warning indicators should be tracked in Vietnam and the Philippines that might signal a hardening of those countries' positions. Tactical warning signals that indicate heightened risk of a potential clash in a specific time and place include commercial notices and preparations, diplomatic and/or military statements warning another claimant to cease provocative activities or suffer the consequences, military exercises designed to intimidate another claimant, and ship movements to disputed areas. As for an impending incident regarding U.S. surveillance activities, statements and unusual preparations by the PLA might suggest a greater willingness to employ more aggressive means to intercept U.S. ships and aircraft. Implications for U.S. Interests The United States has significant political, security, and economic interests at stake if one of the contingencies should occur. Global rules and norms. The United States has important interests in the peaceful resolution of South China Sea disputes according to international law. With the exception of China, all the claimants of the South China Sea have attempted to justify their claims based on their coastlines and the provisions of UNCLOS. China, however, relies on a mix of historic rights and legal claims, while remaining deliberately ambiguous about the meaning of the "nine-dashed line" around the sea that is drawn on Chinese maps. Failure to uphold international law and norms could harm U.S. interests elsewhere in the region and beyond. Ensuring freedom of navigation is another critical interest of the United States and other regional states. Although China claims that it supports freedom of navigation, its insistence that foreign militaries seek advance permission to sail in its two-hundred-mile EEZ casts doubt on its stance. China's development of capabilities to deny American naval access to those waters in a conflict provides evidence of possible Chinese intentions to block freedom of navigation in specific contingencies. Alliance security and regional stability. U.S. allies and friends around the South China Sea look to the United States to maintain free trade, safe and secure sea lines of communication (SLOCs), and overall peace and stability in the region. Claimants and nonclaimants to land features and maritime waters in the South China Sea view the U.S. military presence as necessary to allow decision-making free of intimidation. If nations in the South China Sea lose confidence in the United States to serve as the principal regional security guarantor, they could embark on costly and potentially destabilizing arms buildups to compensate or, alternatively, become more accommodating to the demands of a powerful China. Neither would be in the U.S. interest. Failure to reassure allies of U.S. commitments in the region could also undermine U.S. security guarantees in the broader Asia-Pacific region, especially with Japan and South Korea. At the same time, however, the United States must avoid getting drawn into the territorial dispute—and possibly into a conflict—by regional nations who seek U.S. backing to legitimize their claims. Economic interests. Each year, $5.3 trillion of trade passes through the South China Sea; U.S. trade accounts for $1.2 trillion of this total. Should a crisis occur, the diversion of cargo ships to other routes would harm regional economies as a result of an increase in insurance rates and longer transits. Conflict of any scale in the South China Sea would hamper the claimants from benefiting from the South China's Sea's proven and potential riches. Cooperative relationship with China. The stakes and implications of any U.S.-China incident are far greater than in other scenarios. The United States has an abiding interest in preserving stability in the U.S.-China relationship so that it can continue to secure Beijing's cooperation on an expanding list of regional and global issues and more tightly integrate China into the prevailing international system. Preventive Options Efforts should continue to resolve the disputes over territorial sovereignty of the South China Sea's land features, rightful jurisdiction over the waters and seabed, and the legality of conducting military operations within a country's EEZ, but the likelihood of a breakthrough in any of these areas is slim in the near term. In the meantime, the United States should focus on lowering the risk of potential armed clashes arising from either miscalculation or unintended escalation of a dispute. There are several preventive options available to policymakers—in the United States and other nations—to avert a crisis and conflict in the South China Sea. These options are not mutually exclusive. Support U.S.-China Risk-Reduction Measures Operational safety measures and expanded naval cooperation between the United States and China can help to reduce the risk of an accident between ships and aircraft. The creation of the Military Maritime Consultative Agreement (MMCA) in 1988 was intended to establish "rules of the road" at sea similar to the U.S.-Soviet Incidents at Sea Agreement (INCSEA), but it has not been successful. Communication mechanisms can provide a means to defuse tensions in a crisis and prevent escalation. Political and military hotlines have been set up, though U.S. officials have low confidence that they would be utilized by their Chinese counterparts during a crisis. An additional hotline to manage maritime emergencies should be established at an operational level, along with a signed political agreement committing both sides to answer the phone in a crisis. Joint naval exercises to enhance the ability of the two sides to cooperate in counter-piracy, humanitarian assistance, and disaster relief operations could increase cooperation and help prevent a U.S.-China conflict. Bolster Capabilities of Regional Actors Steps could be taken to further enhance the capability of the Philippines military to defend its territorial and maritime claims and improve its indigenous domain awareness, which might deter China from taking aggressive action. Similarly, the United States could boost the maritime surveillance capabilities of Vietnam, enabling its military to more effectively pursue an anti-access and area-denial strategy. Such measures run the risk of emboldening the Philippines and Vietnam to more assertively challenge China and could raise those countries' expectations of U.S. assistance in a crisis. Encourage Settlement of the Sovereignty Dispute The United States could push for submission of territorial disputes to the International Court of Justice or the International Tribunal for the Law of the Sea for settlement, or encourage an outside organization or mediator to be called upon to resolve the dispute. However, the prospect for success in these cases is slim given China's likely opposition to such options. Other options exist to resolve the sovereignty dispute that would be difficult, but not impossible, to negotiate. One such proposal, originally made by Mark Valencia, Jon Van Dyke, and Noel Ludwig in Sharing the Resources of the South China Sea, would establish "regional sovereignty" over the islands in the South China Sea among the six claimants, allowing them to collectively manage the islands, territorial seas, and airspace. Another option put forward by Peter Dutton of the Naval War College would emulate the resolution of the dispute over Svalbard, an island located between Norway and Greenland. The Treaty of Spitsbergen, signed in 1920, awarded primary sovereignty over Svarlbard to Norway but assigned resource-related rights to all signatories. This solution avoided conflict over resources and enabled advancement of scientific research. Applying this model to the South China Sea would likely entail giving sovereignty to China while permitting other countries to benefit from the resources. In the near term, at least, such a solution is unlikely to be accepted by the other claimants. Promote Regional Risk-Reduction Measures The Association of Southeast Asian Nations (ASEAN) and China agreed upon multilateral risk-reduction and confidence-building measures in the 2002 Declaration on the Conduct of Parties in the South China Sea (DOC), but have neither adhered to its provisions (for example, to resolve territorial and jurisdictional disputes without resorting to the threat or use of force) nor implemented its proposals to undertake cooperative trust-building activities. The resumption of negotiations between China and ASEAN after a hiatus of a decade holds out promise for reinvigorating cooperative activities under the DOC. Multilaterally, existing mechanisms and procedures already exist to promote operational safety among regional navies; a new arrangement is unnecessary. The United States, China, and all ASEAN members with the exception of Laos and Burma are members of the Western Pacific Naval Symposium (WPNS). Founded in 1988, WPNS brings regional naval leaders together biennially to discuss maritime security. In 2000, it produced the Code for Unalerted Encounters at Sea (CUES), which includes safety measures and procedures and means to facilitate communication when ships and aircraft make contact. There are also other mechanisms available such as the International Maritime Organization's Regulations for Preventing Collisions at Sea (COLREGS) and the International Civil Aviation Organization's rules of the air. In addition, regional navies could cooperate in sea environment protection, scientific research at sea, search and rescue activities, and mitigation of damage caused by natural calamities. The creation of new dialogue mechanisms may also be worth consideration. A South China Sea Coast Guard Forum, modeled after the North Pacific Coast Guard Forum, which cooperates on a multitude of maritime security and legal issues, could enhance cooperation through information sharing and knowledge of best practices. The creation of a South China Sea information-sharing center would also provide a platform to improve awareness and communication between relevant parties. The information-sharing center could also serve as an accountability mechanism if states are required to document any incidents and present them to the center. Advocate Joint Development/Multilateral Economic Cooperation Resource cooperation is another preventive option that is underutilized by claimants in the South China Sea. Joint development of petroleum resources, for example, could reduce tensions between China and Vietnam, and between China and the Philippines, on issues related to energy security and access to hydrocarbon resources. Such development could be modeled on one of the many joint development arrangements that exist in the South and East China seas. Parties could also cooperate on increasing the use of alternative energy sources in order to reduce reliance on hydrocarbons. Shared concerns about declining fish stocks in the South China Sea suggest the utility of cooperation to promote conservation and sustainable development. Establishing a joint fisheries committee among claimants could prove useful. Fishing agreements between China and its neighbors are already in place that could be expanded into disputed areas to encourage greater cooperation. Clearly Convey U.S. Commitments The United States should avoid inadvertently encouraging the claimants to engage in confrontational behavior. For example, Secretary of State Hillary Clinton's reference in November 2011 to the South China Sea as the West Philippine Sea could have unintended consequences such as emboldening Manila to antagonize China rather than it seeking to peacefully settle their differences. Mitigating Options If preventive options fail to avert a crisis from developing, policymakers have several options available to mitigate the potential negative effects. Defusing a U.S.-China Incident The history of crisis management in U.S.-China relations suggests that leaders in both countries go to great lengths to prevent a crisis from escalating to military conflict. Nevertheless, pre-crisis steps could be taken to limit the harmful consequences of a confrontation. Political agreements could be reached that would increase the possibility that communication mechanisms in place would be employed in a crisis. Steps should be taken to enhance operational safety at sea between U.S. and Chinese ships. Confidence-building measures should also be implemented to build trust and promote cooperation. Mitigating a Regional Crisis with China Dispatching air and naval forces to the immediate vicinity of an armed clash to defend U.S. interests and deter further escalation should always be considered an option. Such actions, however, must be balanced against the possibility that they will produce the opposite effect, encouraging an even stronger response from China and causing further escalation of a confrontation. A less risky option would be to threaten nonmilitary consequences—diplomatic and economic sanctions––to force China to back off and deter further military action. But here again such measures may only inflame hostilities and escalate the crisis. It is also doubtful in any case whether such measures would be supported by many in the region given China's economic importance. Several less provocative responses might contain a budding crisis while avoiding further escalation. One option for the United States would be to encourage a mediated dialogue between involved parties. However, while Southeast Asian states may welcome a neutral mediator, China would probably oppose it. Thus, such an effort would likely fail. Direct communication between military officials can be effective in de-escalating a crisis. States involved should establish communication mechanisms, include provisions for both scheduled and short-notice emergency meetings, and mandate consultation during a crisis. Emergency meetings would focus on addressing the specific provocative action that brought about the crisis. Operational hotlines, including phone lines and radio frequencies with clear protocols and points of contact, should also be set up. To be effective, hotlines should be set up and used prior to a crisis, though even then there is no guarantee that they will be used by both sides if a crisis erupts. China and Vietnam have already agreed to establish a hotline; this could be a model for other states in the region and China. The goal would not be to resolve underlying issues, but to contain tensions in the event of a minor skirmish and prevent escalation. Recommendations Against the background of rebalancing U.S. assets and attention toward the Asia-Pacific region, the United States should takes steps to prevent a conflict in the South China Sea and to defuse a crisis should one take place. Although the possibility of a major military conflict is low, the potential for a violent clash in the South China Sea in the near future is high, given past behavior of states in the region and the growing stakes. Therefore, both U.S. and regional policymakers should seek to create mechanisms to build trust, prevent conflict, and avoid escalation. First, the United States should ratify UNCLOS; though it voluntarily adheres to its principles and the Obama administration has made a commitment to ratify the convention, the fact that the United States has not yet ratified the treaty lends credence to the perception that it only abides by international conventions when doing so aligns with its national interests. Ratifying UNCLOS would put this speculation to rest. It would also bolster the U.S. position in favor of rules-based behavior, give the United States a seat at the table when UNCLOS signatories discuss such issues as EEZ rights, and generally advance U.S. economic and strategic interests. Second, nations with navies active in the South China Sea—including the United States, China, Vietnam, and the Philippines—should better utilize the CUES safety measures and procedures to mitigate uncertainty and improve communication in the event of a maritime incident. Under current arrangements, observing CUES procedures is voluntary. Participating countries should consider making compliance compulsory in order to guarantee standardized procedures. Countries should also engage in multilateral and bilateral maritime exercises to practice these procedures in a controlled environment before a contingency unfolds. Third, the United States should make clear its support for risk-reduction measures and confidence-building measures among claimants in the South China Sea. The United States should continue to voice its support for full implementation of the China-ASEAN DOC and subsequent agreement on a binding code of conduct. Beijing needs a favorable regional security environment and therefore has important incentives to work out a modus vivendi with its neighbors, but will not likely do so absent pressure. Agreement on a binding code of conduct will require unity among all members of ASEAN and strong backing from the United States. In the meantime, cooperation should be further developed through expanded ship visits, bilateral and multilateral exercise, and enhanced counter-piracy cooperation. In addition, cooperation on energy and fisheries should be further promoted. Fourth, the creation of new dialogue mechanisms—such as a South China Sea Coast Guard Forum, an information-sharing center, and a joint fisheries committee—would provide greater opportunity for affected parties to communicate directly and offer opportunities for greater coordination. Fifth, the United States should review its surveillance and reconnaissance activities in the air and waters bordering China's twelve-mile territorial sea and assess the feasibility of reducing their frequency or conducting the operations at a greater distance. Any modification of U.S. close-in surveillance and reconnaissance activities requires assessment of whether those sources are uniquely valuable or other intelligence collection platforms can provide sufficient information about Chinese military developments. The United States should not take such a step unilaterally; it should seek to obtain a concession from Beijing in return lest China interpret the action as evidence of U.S. decline and weakness. Sixth, the Military Maritime Consultative Agreement process should be made effective or abandoned. There is a pressing need for the United States and China to agree on operational safety rules to minimize the possibility of a conflict in the years ahead. A more formal "incidents at sea" agreement should be considered. Seventh, Washington should clarify in its respective dialogues with Manila and Hanoi the extent of the United States' obligations and commitments as well as the limits of likely U.S. involvement in future disputes. Clarity is necessary both to avoid a scenario in which regional actors are emboldened to aggressively confront China and to avert a setback to U.S. relations with regional nations due to perceptions of unfulfilled expectations.