China has warned US oil giant ExxonMobil to drop an exploration deal in the seas off Vietnam and said the project could threaten any future mainland contracts, a Hong Kong newspaper reported Sunday. Diplomats in Washington have contacted senior figures in the world's largest oil firm to protest the deal, which they say could be a breach of Chinese sovereignty, the Sunday Morning Post reported citing unnamed sources close to the US firm. "If it was simply a legal question it would be easy," one of the sources told the newspaper. "Vietnam would probably prevail in international mediation. But it's political, too. China's concerns make the situation much more complicated for a company like Exxon... China is a very important player in the international oil industry." The dispute involves a preliminary co-operation agreement between state oil firm PetroVietnam and ExxonMobil covering exploration in the South China Sea off Vietnam's south and central coasts, the report said.
The Chinese protests are based on Beijing's historical claim to huge swathes of the South China Sea, the report said. Last year, China criticised a joint deal between Vietnam and British energy giant BP near the disputed Spratly Islands in the South China Sea, saying the area has been an "indisputable part of Chinese territory since ancient times." The report quoted Vietnamese Foreign Ministry spokesman Le Dung saying it needed to be "clearly asserted" that Hanoi's dealings with foreign oil partners fell entirely within Vietnam's legal rights and sovereignty. China and Vietnam -- who in 1979 fought a short border war after Vietnam expelled the Beijing-backed Khmer Rouge from Cambodia -- also fought a brief naval battle in 1988 near the Spratly Islands.