U.S. diplomatic strategy on South China Sea appears to founder

WASHINGTON (Reuters) - In the lead-up to an international court ruling on China's claims in the South China Sea this month, United States officials talked about rallying a coalition to impose "terrible" costs to Beijing's international reputation if flouted the court's decision.

But just two weeks after the July 12 announcement by the Permanent Court of Arbitration in The Hague - which at least on paper, appeared to be a humiliating defeat for China - the U.S. strategy appears to be unraveling and the court's ruling is in danger of becoming irrelevant.

Earlier this year, U.S. officials spoke repeatedly of the need for countries in the Asia-Pacific region and elsewhere, including the European Union, to make it clear that the decision of the court should be binding.

"We need to be ready to be very loud and vocal, in harmony together ... to say that this is international law, this is incredibly important, it is binding on all parties," Amy Searight, the then-U.S. deputy assistant secretary of defense for South and Southeast Asia, said in February.

Then in April, U.S. Deputy Secretary of State Antony Blinken said China risked "terrible" damage to its reputation if it ignored The Hague's ruling.

The top lawyer from the Philippines, which brought the case against China, even said Beijing risked "outlaw" status.

The United States had backed Manila's case on the grounds that China's claims to 85 percent of the South China Sea, one of the world's busiest trade routes, were a threat to freedom of navigation and international law.

Yet after the international court rejected Beijing's position, the U.S. calls for a united front appear to have made little headway, with only six countries joining Washington in insisting that the decision should be binding.

They include the Philippines, but not several other countries with their own claims to parts of the South China Sea that might benefit if Beijing observed the decision.

China also scored a major diplomatic victory earlier this week, when the Association of Southeast Asian Nations (ASEAN) dropped any reference to the ruling from a joint statement at the end of a meeting of the 10-country group's foreign minister in Laos. This followed objections from Cambodia, Beijing's closest ASEAN ally.

On July 15, the European Union, distracted after Britain's vote to leave the bloc, issued a statement taking note of the ruling, but avoiding direct reference to Beijing or any assertion that the decision was binding.

RULING RISKS IRRELEVANCE

On Wednesday, U.S. Secretary of State John Kerry expressed satisfaction that ASEAN had issued a communique that championed the rule of law and said the omission of any reference to the arbitration case did not detract from its importance.

He also said it was "impossible" for the ruling to become irrelevant because it is legally binding.

But analysts said it now risks exactly that, not least because Washington has failed to press the issue effectively with its friends and allies.

"We should all be worried that this case is going to go down as nothing more than a footnote because its impact was only as strong as the international community was going to make it," said Greg Poling, a South China Sea expert at Washington's Center for Strategic and International Studies think-tank.

"And the international community has voted by not saying anything. The consensus seems to be 'We don’t care. We don’t want to hold China to these standards.'"

Dean Cheng, an expert on China with the Heritage Foundation think-tank, said Washington appeared reluctant to push a tougher line with Beijing - a vital economic partner as well as a strategic rival - with only a few months to go in President Barack Obama's tenure and a presidential election in November.

"What we have is China pushing very hard into the South China Sea, physically, politically, illegally and diplomatically, and the United States refraining from doing very much at all," said Cheng.

One reason for the administration's relative passivity may be its desire to prevent any major escalation of the dispute after the ruling, including further land reclamation by China or the declaration of a new air defense identification zone.

China has so far responded only with sharpened rhetoric, but analysts and officials worry that Beijing might take bolder action after it hosts the Group of 20 meeting of the world's biggest economies in September.

(Reporting by David Brunnstrom and Matt Spetalnick in Washington and Ben Blanchard in Beijing; editing by G Crosse)