The islands that divide superpowers

Japan's purchase of these uninhabited, barren rocks has enraged China and the US. Why? Peter Popham reports on a battle for influence – and oil

Japan sensationally raised the stakes in its long-running territorial dispute with China yesterday, reportedly agreeing to buy three of the disputed Senkaku islands south-west of Okinawa from their private Japanese owners for 2.05 billion yen ($26m).

The islands, which the Chinese call Diaoyu, form part of a series of barren and largely uninhabited clumps of rock south of China which have assumed an importance out of all proportion to their modest size and unimpressive appearance as China and the US jockey for power and influence in the region. Arguments over the claims and counter-claims have overshadowed a visit to China by the US Secretary of State, Hillary Clinton, which concluded yesterday with both sides admitting their differences with unusual frankness.

Jorge Luis Borges famously described the Falklands War as "two bald men fighting over a comb." The South China standoff may look like more of the same: none of these arid atolls have anything to offer tourists or hoteliers. But the stakes are far larger than they appear – connected in some cases to reportedly vast quantities of untapped oil and gas, and in all to strategic control of the surrounding waterways. And everywhere, these disputes are feeding into a dangerously febrile nationalistic mood throughout the region.

Senkaku is a case in point. The islands reverted to Japan in 1972 in the treaty signed with the US which also returned Okinawa to Japan. Gas reserves had been identified nearby in 1968, but it was not until a visit to Japan by Deng Xiaoping in 1978 that China staked a claim to the archipelago, which is much closer both to Taiwan and the south China coast than to the Japanese mainland.

The issue has steadily risen in importance since then, with firebrands on both sides using it to urge their governments to stand up to claimed humiliations by the other side. The issue came to a head in August when Chinese demonstrators landed on one of the islands, Uotsurijima. They were arrested by Japanese authorities stationed on the island and deported. A few days later Japanese nationalists hoisted the national flag on the same island, sparking protests in China, in one of which the Japanese flag was torn from the bonnet of the ambassador's car.

Yesterday's agreement by the Japanese government to purchase three of the islands, including Uotsurijima, provoked an immediate and furious Chinese reaction. A Chinese Foreign Ministry spokesman said: "In disregard of China's solemn representations and firm opposition, Japan single-mindedly pushes forward the island purchase process, which severely harmed China's territorial sovereignty and hurt the feelings of the Chinese people. We cannot help but ask where is Japan trying to lead China-Japan relations?"

The spat left Ms Clinton high and dry at the end of a bruising visit to Beijing which was dominated by similar tensions over other little spots in the ocean.

After a marathon negotiating session, Ms Clinton tried to put the best face on her visit at a news conference yesterday. "Our two countries are trying to do something that has never been done in history," she said, "which is to write a new answer to the question of what happens when an established power and a rising power meet." She did not go so far as to say they had succeeded.

Prime Minister Wen Jiabao spoke more plainly. "Generally speaking, our relationship has been moving forward," he said, "but recently I am more or less worried. I feel that our two countries should maintain political mutual respect and strategic mutual trust. The United States should respect China's sovereignty and territorial integrity."

As any Tibetan could point out, the People's Republic has shown a repeated tendency to claim as its own since time immemorial territories whose histories are far more complex than that. On Monday, for example, a Chinese Foreign Ministry spokesman said that the Senkaku islands had been "inherent" parts of China since "ancient times."

The islands which are under dispute in the South China Sea include the Scarborough Shoal (named after an East India Company ship of that name which sank here with all hands in 1784), claimed by China, Taiwan and the Philippines, and the Spratly Islands, variously disputed by these countries but also by Vietnam, Brunei and Malaysia. Yet as the regional giant, China has no hesitation about insisting on the pre-eminence of its own rights. And to increase the likelihood of its claims winning the day, it also insists on negotiating each individual case bilaterally. It has refused to allow ASEAN, the Association of South-East Asian Nations, to play a part.

The reason is clear – and if it wasn't, Wen Jiabao's blunt rebuff to Ms Clinton yesterday made it clearer: although none of these issues involves territory claimed by the US, China is in no doubt that it is America that stands behind China's adversaries, using them as proxies.

It was last November that President Obama spelled out the new foreign policy doctrine which is keeping the Chinese leadership awake at nights. Addressing Australia's Parliament, he said he had "made a deliberate and strategic decision" that the US "will play a larger and long-term role in shaping this [Asian-Pacific] region and its future...I have directed my national security team to make our presence and mission in the Asia Pacific [region] a top priority." He went on, "we will allocate the resources necessary to maintain our strong military presence in this region. We will preserve our unique ability to project power and deter threats to peace."

President Obama backed up his rhetoric with the announcement that at least 2,500 US Marines would be stationed in Darwin, in Australia's Northern Territory. The US is also said to be planning to fly long-range surveillance drones from Australia's remote Cocos Islands, and to be dusting off bases in Thailand abandoned after the Vietnam war.

Underlying this so-called 'pivot' in American priorities is the belief, first spelled out in an internal Pentagon report in 2005, that China is "building strategic relationships along the sea lanes from the Middle East to the South China Sea in ways that suggest defensive and offensive positioning to protect China's energy interests but also to serve broad security objectives." These "strategic relationships", described by the US as a "string of pearls", includes the disputed islands in the South China Sea as well as new ports being developed by China in Bangladesh, Burma, Sri Lanka, and Pakistan.

A still rampant China is in this way seen to be expanding helter-skelter into its surrounding oceans. The determination to secure its vast and rapidly growing energy needs is the clearest motivation. Meanwhile the US, with a military that still dwarfs those of all its friends and enemies combined, refuses – for the time being – to allow the logic of economic decline to dictate either its rhetoric or its strategies.

In the midst of stresses such as these, and with governments on both sides that are rapidly approaching the end of their mandates, it is not surprising that the latest attempt by the US and China to thrash out a bilateral agreement was so fraught. Their failure to do something "that has never been done in history" will leave the new administrations in both Washington and Beijing with problems that are rapidly growing toxic.