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Much at stake for US as tensions rise in troubled China Seas

Masataka Morita / AP

A boat from Hong Kong, center, is surrounded by Japanese Coast Guard vessels after Chinese activists landed on Uotsuri Island, one of the Senkaku or Diaoyu Islands, on Aug. 15.

Vast oil reserves, trillion-dollar trade routes, fervent nationalist sentiments, competing territorial claims and bitter histories – the waters off the east coast of China are a sea of money and a sea of trouble.

Tensions have been rising for several years and recently hit new heights with activists landing on disputed islands, angry diplomatic exchanges and even a threat to deploy troops, prompting fears of an armed conflict that could potentially involve the United States, China, Japan and other nations.

The South China Sea has a myriad of competing claims of ownership: China staked out most of it in 1947 but its neighbors have never accepted it. The Spratly Islands alone are claimed by a total of five countries: China, Taiwan, Malaysia, Philippines and Vietnam.

All are eyeing oil and gas reserves thought to be so rich that the area has become dubbed "The Second Persian Gulf." Also, an estimated $5 trillion worth of trade is shipped through its waters.

In a speech last month in CambodiaSecretary of State Hillary Rodham Clinton told members of the Asean group of nations – which includes the Philippines, Vietnam and Malaysia – that "maritime security" was one of a number of issues in the region of "central importance" to the U.S., and spoke of "transnational threats" as one area of U.S. government focus.

But perhaps the most dangerous potential flashpoint is farther north in the East China Sea. China and Japan both claim ownership of the uninhabited Senkaku Islands – known as Diaoyu in Chinese – with strong nationalist feelings on both sides.

Japanese nationalists land on island claimed by China

Just last week, the U.S. confirmed last week that the islands were covered by Article 5 of its security treaty with Japan, which spells out that an armed attack against either state would prompt each to "act to meet the common danger."

'Intimidate its neighbors'
Bonnie Glaser, a senior fellow at the Center for International & Strategic Studies and a consultant to the U.S. government on East Asia, said if China decides to seize the Senkakus – currently administered by Japan – it would likely provoke a military confrontation.

An article in Foreign Policy magazine on Monday even speculated on who would win the "Sino-Japanese Naval War of 2012," concluding it would end in a stalemate that would see Tokyo emerge with a political victory and potentially reverse China's progress toward world-power status "in an afternoon."

But Glaser told NBCNews.com that she doubted war would break out, partly because China is aware that if they did seize the islands, "the U.S. would be there" for its ally Japan.

"I think there could be the possibility of some miscalculation – maybe there could be some exchange of fire, but an all-out war? No. I don't think that's on the cards," she said.

Glaser said the situation was seen as a "test case of how China will act as it emerges as a great power."

"The U.S. has an interest in trying to ensure that China does not intimidate its neighbors, that it does not use military force or other means to compel its neighbors to accept outcomes that are against their interest," she said.

"Clearly if nations like the Philippines lose confidence in the U.S. ability to serve as the principal regional guarantor, they may embark on a potentially destabilizing arms build-up or accede to the demands of China. Neither would be in the interests of the U.S.," she said.

"We do not want to set up a situation where the Chinese believe the Asia-Pacific is their backyard," she added.

'Unavoidable moment of truth'
Senator James Webb, chairman of the Senate Foreign Relations East Asian and Pacific Affairs Subcommittee, wrote in The Wall Street Journal on Monday that China had recently created a new national prefecture covering disputed islands in the South China Sea, and had announced it would deploy troops to guard them.

He said that China had "for practical purposes … unilaterally decided to annex an area that extends eastward from the East Asian mainland as far as the Philippines, and nearly as far south as the Strait of Malacca."

Kyodo via AP, file

An aerial view of Uotsuri Island, one of the islands known as Senkaku in Japanese and Diaoyu in Chinese, in the East China Sea.

"The U.S., China and all of East Asia have now reached an unavoidable moment of truth. Sovereignty disputes in which parties seek peaceful resolution are one thing; flagrant, belligerent acts are quite another," he added in the article.

For China's part, memories of Japan's violent invasion in the 1930s inflame nationalist sentiments.

Shi Yinhong, a leading scholar of international relations at Renmin University of China and a foreign policy adviser to China's Cabinet, advocated the case for "new thinking" and more rational relations with Japan in 2005, but found himself under attack from Chinese nationalists for being "too soft" on the former enemy.

"Nationalism is the number one driving force complicating the problem," he lamented, saying a "mutual hatred" existed between Chinese and Japanese nationalists.

China protests US State Department remarks on South China Sea

However, he told NBCNews.com that the nationalists in China were "not strong enough to push the government to take military action without 100 percent necessity."

"I don't think the Chinese government will take any action to occupy the Diaoyu islands," Shi said. "The governments in Beijing and Tokyo have been extraordinarily careful to prevent any direct conflict between the two armed forces and this determination is as strong as before."

Crisis for Japan?
In the South China Sea, China has set up a new military garrison and a regular "armed patrol" system to enforce its territorial claims, prompting critical reaction from the United States and some Southeast Asian countries.

But despite this, Shi said that the dispute with Japan over the Diaoyus in the East China Sea was the "potentially more dangerous" one.

Last week activists from Hong Kong, the former British colony now part of China, landed on the islands and a group of Japanese politicians then swam out to raise the Japanese flag. That sparked protests in the southern Chinese city of Shenzen as well as in several other cities.

Kyodo via Reuters

Members of a Japanese nationalist group raise Japanese flags as they land on Uotsuri island, part of the disputed islands in the East China Sea, on Aug. 19.

One of the Japanese protesters, Eiji Kosaka, a local politician from Tokyo's Arakawa District, said it was "only natural" for him to protest, even though he and his fellow demonstrators were denied permission to land on the island by the Japanese authorities.

"Senkaku Islands of Ishigaki City, Okinawa, is on the verge of a crisis. Along with 10 other comrades, we felt the need to declare that this is Japanese territory," Kosaka said.

Another protester, Satoru Mizushima, said that they had carried out the protest "to shed light on the fact that the Japanese government has abandoned its duty to defend people's lives and property."

PhotoBlog: Japan arrests activists on disputed island

Japan is also involved in disputes with Russia over the Southern Kuril islands and with South Korea over the Dokdo Islands, which have been under South Korean administrative control since 1952.

During the London Olympics, a member of South Korea's men's soccer team held up a sign handed to him by a fan proclaiming "Dokdo is our territory."

PhotoBlog: South Korean coastguard clashes with armada of Chinese fishing boats

Earlier this month, South Korean President Lee Myungbak made a surprise visit to the island -- a first by a Korean president -- prompting Tokyo to take a more active role in staking Japan's claim. For the first time in over 50 years, Japan has decided to take its case to the International Court of Justice in Hague.

'What is ours is ours'
Japan is not the only U.S. ally in the region feeling the pressure as China becomes more powerful.

Henry Bensurto Jr., head of the Commission on Maritime and Ocean Affairs under the Philippines' Department of Foreign Affairs, told NBCNews.com that the Philippines had tried to resolve the dispute with China over the South China Sea "in a quiet way" for a long time.

"But as we do that nice diplomacy, we are slowly losing our own territory," he said. "It's not good to have a picture of a strong country overpowering the small country. That is not an acceptable scenario."

"I think this issue is going to be there for a long time, I don't think there's a thought that it's going to be solved overnight. We're working for the long haul," he added.

A report in July by the International Crisis Group said, "At least five significant skirmishes were reported within the first five months of 2011, although the Philippines' lack of modern surveillance equipment made it difficult to substantiate accusations."

Vietnamese navy personnel patrol the Truong Sa or Spratly Islands in this April 13, 2010 file photo.

"In response, the Aquino government began to ratchet up diplomatic efforts, accelerate military procurement and refer to the South China Sea as the 'West Philippine Sea' in all official communications," the report said. "The president declared in July 2011 that 'what is ours is ours' in reference to Reed Bank [one of the disputed areas]."

The Socialist Republic of Vietnam might be expected to have better relations with China, but disputes over territory have raised similar tensions.

In 1988 the two countries fought over disputed islands, resulting in China occupying the Paracel Islands. According to the International Crisis Group report, this "led many Vietnamese to believe that China would not hesitate to use force again to settle sovereignty disputes."

"Nationalist sentiments in Vietnam run particularly high in its disputes with China and put pressure on the government to stand up to Beijing," the report said. "The bitter nature of the disputes has led observers to surmise that Vietnam would not back down from a military confrontation with China, despite China's overwhelming military capabilities, if only to raise the cost for Beijing."

Nguyen Lan Thang / Reuters, file

Protesters hold banners while chanting slogans on a street in Hanoi on July 22, during a protest against China's moves to strengthen its claim on disputed islands in the South China Sea.

To many, the situation appears deadlocked, with China arguing there should be one-to-one talks with Vietnam and other neighbor states, while they push for negotiations involving all parties.

"It's kind of a pessimistic situation but what can we hope for…?" Nhuyen Thi Lan Anh, deputy director of the Center for South China Sea Studies at the Diplomatic Academy of Vietnam, told NBCNews.com.

"At least we need rules of the game. If no one knows the rules of the game, we can get out of control, and in the end of course peace and stability will be hampered."

NBC News' Eric Baculinao in Beijing, Arata Yamamoto in Tokyo, Ploy Bunluesilp and Ian Johnston contributed to this report.

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