CLC Asia managing director Christopher Larkin was recently interviewed by the Wall Street Journal on recent developments in Thai-Cambodian relations. The original article appeared here:
Yingluck Faces Diplomatic Hurdles in Cambodia
By James O’Toole
When Yingluck Shinawatra touches down in Cambodia on Thursday as part of her first regional tour as Thailand’s prime minister, one of her first tasks will be to smooth over relations after border clashes between the two sides earlier this year killed nearly 30 troops.
Reducing tensions shouldn’t be too difficult, at least initially: Cambodian Prime Minister Hun Sen made no secret of his disdain for outgoing Premier Abhisit Vejjajiva, and he has long had warm ties with Ms. Yingluck’s brother, ousted Premier Thaksin Shinawatra, whom Cambodian spokesmen have described as Mr. Hun Sen’s “eternal friend.”
A potentially tougher assignment will be to make headway in resolving the countries’ competing offshore claims in the Gulf of Thailand, thought to be rich with oil and gas reserves.
The countries’ “overlapping claims area” is a roughly 27,000-square-kilometer block that has attracted interest from international energy firms including Total, ConocoPhillips, and BHP Billiton. One Chevron official reportedly described the block as “one of the best areas for exploration in the world,” according to a February 2008 cable from the U.S. Embassy in Phnom Penh released by WikiLeaks, and analysts have argued the area could serve as a foundation for wider natural-resource investments in Cambodia, generating giant revenues for the government.
A Chevron spokesman said the company holds working interests in the overlapping claims area but that as of 2011 they are “inactive” pending resolution of the border issues. “We are optimistic that both countries will reach agreement” eventually, the spokesman said.
Thailand and Cambodia signed a memorandum of understanding in 2001 pledging cooperation in developing the OCA, though the Abhisit administration tore up the agreement in 2009 in protest over Phnom Penh’s decision to appoint Mr. Thaksin, who remains in exile to avoid a graft conviction he says was politically motivated, as an economic adviser.
While Cambodian officials have signaled their willingness to begin talks on the issue with the new government in Bangkok, such negotiations are fraught with challenges for Ms. Yingluck. The countries have been locked since 2008 in a bitter border dispute over land adjacent to Cambodia’s Preah Vihear temple, a Unesco World Heritage site, and any issue that touches on Thailand’s territorial sovereignty is certain to arouse the passions of the country’s nationalist Yellow Shirt movement.
“Politically, Thailand, especially, has to figure out a way to de-link the settlement of the OCA issue from [Preah] Vihear,” said Chris Larkin, managing director of the market intelligence firm CLC Asia. “Whatever settlement is made on the OCA, the Thai public needs to be convinced that Thailand isn’t ceding sovereignty or land as part of the deal.”
There is also the question of revenue sharing, which divided the two sides during negotiations under the old agreement. Cambodia has called for the disputed area to be divided into blocks in a checkerboard fashion, with revenue and management split 50-50. Thailand has countered by calling for the area to be split into thirds by boundaries running north-south, with revenues from the middle third-split 50-50, those in the western third split 80-20 in favor of Thailand, and those in the east split 80-20 for Cambodia.
Analysts have put this disagreement down to the fact that the most easily recoverable reserves in the area are thought to lie closer to the west, near Thailand.
While Mr. Larkin noted that technical studies will likely be required before any precise revenue-sharing agreement can be drafted, the two sides were apparently close to a resolution while Mr. Thaksin was in power.
According to a 2007 embassy cable from Phnom Penh released by WikiLeaks, Cambodian officials had agreed on the Thai formula for revenue sharing in 2006, with a foreign ministry source telling the Americans that “an additional six months of negotiations would have settled the matter.”
With the 2006 coup that ousted Mr. Thaksin, the source added, these talks were scuttled. Whether Ms. Yingluck can resurrect them remains to be seen.
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