South China Sea: Fuel on the fire

Also: Islamic State, Japan, Mexico, and Peru.

Pacifying the South China Sea, section from a Qing dynasty scroll, c1810, Hong Kong Maritime Museum, Hong Kong.

In today’s dispatch:

• SOUTH CHINA SEA. Beijing confirms a 100 billion cubic metre gas discovery.

• ISLAMIC STATE. IS poses a bigger threat to Africa than to Taylor Swift.

• JAPAN. Warnings about earthquakes, and the yen.

• MEXICO. The outgoing president continues to defy expectations.

• PERU. Behind another Latin American rate cut surprise.

Geopolitical Dispatch is the daily intelligence and risk briefing of Geopolitical Strategy, an advisory firm specialising exclusively in geopolitical risk.

SOUTH CHINA SEA. Fuel on the fire

Beijing confirms a 100 billion cubic metre gas discovery.

Chinese regulators confirmed CNOOC's discovery of a gas field in the South China Sea capable of producing 10 million cubic metres per day. The US, Australia and Canada joined joint air force and naval exercises with the Philippines.

INTELLIGENCE. The field isn't huge by global standards, but its ultra-shallow nature makes it important. Smaller projects have led to close shaves in a sea with seven overlapping claims. CNOOC hasn’t disclosed its location, but its unique geology could revive interest elsewhere, as well as tensions with the Philippines. China has largely diffused tensions with rival claimants Vietnam and Malaysia. Relations with Manila are complicated by ties with Washington.

FOR BUSINESS. Beijing and Hanoi entered a diplomatic crisis in 2014 and 2016 over leases in Vietnam's exclusive economic zone, complicated by the role of Rosneft as operator. The Russian firm has since left, and ties between Vietnam and China have improved (so much so that a Chinese-funded canal from the Cambodian coast to the Mekong – once considered a red line in Hanoi – has only been welcomed). But new discoveries could change all that.

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ISLAMIC STATE. Knew you were trouble

IS poses a bigger threat to Africa than to Taylor Swift.

The UN warned Thursday that territory from Mali to Nigeria could fall to Islamic State, adding there had been a "dramatic increase" in attacks across Africa. Three Austrian teens were arrested over a plot to attack a pop concert in Vienna.

INTELLIGENCE. The alleged plot on a Taylor Swift concert has received global attention but the terror group is seeing real gains by armed jihadis, not just self-radicalised teens, throughout Africa, including