Beijing recently announced the establishment of an "air defense identification zone," a new measure that could deepen the territorial dispute with Tokyo over an island chain in the East China Sea.

Chinese fighter jets may now intercept Japanese aircraft flying over the disputed territory. Japan has reacted angrily. A senior Japanese foreign ministry official lodged a protest with the Chinese Embassy in Tokyo saying that Japan could "never accept the zone set up by China."

Similar air defense zones, set up by Japan, South Korea and Taiwan on the East China Sea, also exist. These zones overlap in several places. Liu Jiangyong, professor of international relations at Tsinghua University, says that China is only catching up other countries in this area: "I am of the opinion that China has set up the air defense zone too late," the Chinese expert told DW.

Small islands, big consequences

The islands, which are called Senkaku in Japan and Diaoyu in China, have a total area of about seven square kilometers. The dispute is primarily about who has sovereignty over the islands. However, it's also about rich fishing grounds, mineral resources and access to key international sea lanes passing through the archipelago.

The conflict is also fueled by rising nationalism on both sides. A study by the German Institute for International and Security Affairs (SWP) states: "Mutual resentment limits the ability of both Chinese and the Japanese governments to make compromises to resolve the dispute over the island chain."

Since there is no institutionalized system for dealing with maritime incidents, there is a big risk of the conflict escalating. And this would have global consequences. Because of its security deal with Japan, the United States would have to intervene. US Secretary of Defense Chuck Hagel confirmed this: "We remain steadfast in our commitments to our allies and partners."

It's difficult to measure the impact an escalation of the conflict might have on the world economy, as three of the world's largest economies - the United States, China and Japan - are involved in it. But "also German and European economic interests would be affected," according to a report published by the SWP. The report states that trade with East Asia accounted for more than a quarter of total EU trade in 2012. The EU would therefore have good reasons for defending it's interests in the East China Sea.

Europe as a mediator?

But the EU has followed a restrained approach. According to the SWP report, "the EU has restricted itself to calling on both sides to settle the dispute peacefully." However, the SWP experts believe the EU could do more, as it is not directly involved in the conflict, unlike the United States and East Asian countries.

The institute, which also advises Germany's parliament and federal government suggests: "For these reasons, it is important for the EU to act preemptively. This requires that the Union intensifies its political ties with East Asia." A strategy for East Asia must be drafted in the interest of the EU, the document adds.

Arbitration could first take place on a low level, starting with, for instance, scientists, former political decision-makers, members of civil society or between government officials and non-official representatives.

The SWP report ends with the following sentence: "This way, the EU could make a name for itself as an independent player in the region - between the USA and China."

Skepticism about EU's role

Edward Schwark, Asia expert at the London-based Royal United Services Institute (RUSI) agrees that there's a lot at stake for the EU. But Schwark is skeptical about a potential European involvement.

"There are already too many players involved in the dispute in the East China Sea. I don't see what the EU will be able to contribute. Furthermore, it will be difficult to justify such a move vis-a-vis the states in the region, particularly China."

Schwark explains that Beijing has always insisted on bilateral negotiations and pronounced itself against international solutions. The expert therefore believes that "the EU would cause more problems than it would solve." Instead, he argues, the EU should speak out in favor of freedom of navigation and against unilateral attacks on the sovereignty of any nation.