Hanoi: Chinese and Vietnamese ships were locked in a tense standoff today in disputed waters where Beijing is trying to set up an oil rig, a Vietnamese commander said, as the US urged both sides to de-escalate tensions in the most serious incident in the South China Sea in years.
Vietnam`s main stock market index recorded its biggest one-day drop since 2001 on fears of a protracted stalemate or possible conflict between the neighbouring nations, which have fought two naval skirmishes in the waters since 1974 and have history of conflict going back 1,000 years.
The standoff started May 1 when China moved a deep sea oil rig into waters close to the Paracel Islands in what most analysts believe was an especially assertive move to help cement its claims of sovereignty over the area.
Vietnam, which says the islands belong to it, immediately dispatched ships.
Yesterday, Vietnam said Chinese vessels had repeatedly rammed and fired water cannons at its ships, damaging several of them, and showed video footage of the incidents.
China insists it is doing nothing wrong, and has said it will continue with its drilling activities in the area.
Ngo Ngoc Thu, deputy commander of Vietnam Coast Guard, said the situation remained tense Thursday, but there had been no contact.
"The two sides are still shadow boxing with each other," he told The Associated Press.
China has been increasingly pressing its claims in the South China Sea, which it claims almost in its entirety. This is bringing it into conflict with Vietnam and the Philippines, which also claim parts of the water, as do Malaysia, Brunei and Taiwan.
The United States position is that it doesn`t take sides in the dispute, but it too shares regional concerns about China`s growing clout. It has criticized Beijing`s latest move as "provocative."
Daniel Russel, the assistant secretary of state for East Asia and the Pacific, urged both sides to use restraint and avoid taking unilateral actions.
"The global economy and the region`s economy are too important and too fragile to brook the possibility of a crisis that could escalate into conflict," he told reporters in the Vietnamese capital, Hanoi.
"My simple message is to restate the importance of restraint, dialogue and adherence to international law."