Malaysia, U.S. in secret talks to let P-3s, P-8As fly out of Labuan

The U.S. and Malaysia have been secretly discussing expanded use of Malaysian territory for hosting U.S. spy planes to patrol the South China Sea, in response to increased Chinese activity in the disputed territory.

Following a series of incursions into Malaysian waters by Chinese vessels in recent months, talks between the U.S. government and the office of Malaysian Prime Minister Najib Razak have intensified, two senior U.S. defense officials said. The U.S. side has been pressing Najib's government to allow the U.S. Navy to fly both P-8 Poseidon and P-3 Orion maritime surveillance planes from Malaysian airstrips over South China Sea areas where the Chinese government has been rapidly building artificial islands.

There has been no final agreement between the two governments, but the talks themselves represent a shift of Malaysia’s long effort to straddle the fence between the U.S. and China.

On the U.S. side, negotiations are being led by officials from U.S. Pacific Command in Hawaii and David Shear, the assistant secretary of defense for Asian and Pacific security, one senior U.S. defense official said. While the Pentagon has pushed Malaysia for cooperation before, the talks were newly invigorated following incidents earlier this year when Chinese ships proudly entered the southernmost areas of the South China Sea, inside Malaysia’s exclusive economic zone.

A Pentagon spokesman declined to discuss the bilateral discussions, and the Malaysian Embassy in Washington did not respond to a request for comment.

Last autumn, Admiral Jonathan Greenert, the chief of naval operations, said that "recently the Malaysians have offered us to fly detachments of P-8s out of ... East Malaysia." The New York Times stated the plan risked “enraging” China.

The Pentagon and the Malaysian government later clarified that no final agreement had been reached.

Diplomatic sources said the focus of the discussions is now the island of Labuan, off the coast of the semi-autonomous state of Sabah on Borneo. The island is a federally administered territory under the complete control of the Malaysian government that has also been used as a financial hub thanks to its unique tax regulations. It is closer to Chinese military construction in the South China Sea than the locations currently used to launch U.S. spy missions, such as Clark Air Base in the Philippines.

The Malaysian government is very wary about disclosing any of its defense cooperation with the U.S. “U.S.-Malaysian security cooperation has been very deep and very quiet for a long time. The Malaysians are very much concerned about the Chinese actions,” said Ernest Bower, the chairman of the Southeast Asian Studies department at the Center for Strategic and International Studies.

The U.S. is also working with Malaysia to help it increase its technical capabilities for monitoring and protecting its territory in and around the South China Sea. There’s little chance the U.S. would actually build a military facility in Malaysia, but the use of Malaysian territory is key.

“There’s much more Malaysian interest in allowing U.S. access than there was before. It’s places not bases,” said Bower.

At the same time, however, Malaysia has been increasing its cooperation with China, its top trade partner. The Chinese military announced last week that the two countries will soon hold their largest-ever joint military exercises.

For Najib's government it's a careful balancing act. Patrick Cronin, the director of the Asia-Pacific Security Program at the Center for a New American Security, said that Malaysia rarely calls out China publicly for its aggressive moves in the South China Sea, but has been quietly increasing cooperation with other Southeast Asian nations that have territorial disputes with China.

“P-8 or P-3 maritime patrol fights with the United States and/or Japan would make eminent sense for Malaysia, which cannot enjoy China's changing facts on the ground in the South China Sea,” he said.

The U.S. is finishing plans for a new five-year, $425 million Southeast Asian Maritime Security Initiative, and some of that funding is likely to go to exercises and training and information sharing with Malaysia, he said.

Any cooperation between the nations, however, could be complicated by the fact that Najib is facing political and popular upheaval following a string of scandals, including the revelation by the Wall Street Journal in June that Malaysian investigators discovered $700 million from a government investment fund had ended up in his personal bank account.