Watching the Senkaku dispute, one is reminded of the passion people feel toward land, especially a piece of land that most people have never seen and almost uninhabitable. That people can feel so passionate of land speaks ill toward conflicts like the Israeli-Palestinian struggle.
What is the next step? In the Hobbesian world of international relations, possession is 90% of the game. Japan had erected markers and a lighthouse on Diaoyutai, but has no permanent presence on the islands. Therefore, the first actor to "settle" the islands will resolve the dispute in his favor.
Indeed, as NightWatch reports, Japan is considering stationing troops.
I thought China might deploy the PLA to garrison the islands much like it did in the south china sea, but this article suggests that China may not have the will to escalate.
A unilateral occupation of any island [of the 4 "habitable" ones] will trigger a military race to settle the other 3 islands. The second mover will also embargo the opposing garrisons to "freeze" the situation, pending diplomatic resolution. Both sides will try to re-supply their marines on shore. A naval confrontation is inevitable in this scenario. Due to the distance, neither side is capable of enforcing an aerial embargo for long, so aerial resupply will keep the garrisons at survival level.
[If Japan moves first, Taiwan will face political pressure to deploy as well. Such a three-way race risks driving Taiwan away from Japan, which may be one of the few current constraints holding Japan back.]
In this scenario of unilateral settlements, a military confrontation at sea will quickly reach a new local equilibrium, absent political wills for war. If domestic pressures increase, the political leadership may seek points through this escalation.
One further point on this military confrontation: To enforce the naval embargo against resupply, ramming will be the predominant tactic. As I mentioned previously, ocean-going tugboats are incredibly relevant on the maritime low-intensity battlefield. If a combatant is too fragile for ramming, its only resort will be warning shots, which is a very risky escalation on the force continuum, depending on gunnery skills and sea state. Whereas the physical force of a tugship enables safe resolution against non-cooperative vessels. While Galrahn has expounded on the necessity of including and elevating VBSS teams and naval infantry in the planning/doctrine & force structure of naval strategy, tugs and ramming represent the other leg of the low-intensity naval dyad. Indeed, a ramming touched off the current crisis, and the Japan Coast Guard cutters frequently resorted to ramming to enforce its claims over the Senkaku Islands. Both tugs & VBSS teams will depend on a mothership that is sorely lacking in the US Navy.
Given the prominence of nationalist groups in both Japan and China, a non-government actor may try to settle the islands. Japanese and Taiwanese civilian groups had attempted to resolve the sovereignty dispute through settlement. Japan Coast Guard were able to arrest and deport Taiwanese settlers in the past. Japanese settlers did not have the logistic support to stay long term. There is no fresh water on the islands nor much wildlife, making the logistic requirements unaffordable to most NGOs. The current diplomatic crisis may raise sufficient funds for such an expedition, though.
If a Taiwanese group undertakes a deployment, its primary obstacle will be Japanese eviction. The settlers will have to employ non-lethal measures to successfully resist eviction. For example, net launchers can trap RHIBs and swimmers in the surf zone, preventing Coast Guard officers from landing. Once on land, sticky foam and nets can immobilize the officers. Thus secured, the settlers can send the officers back out to sea on their RHIBs, for an intercept and recovery by their own cutters. The settlers may deploy an ADS-like device without contending with human-safety concerns, but fuel for power generation will be the primary constraint on its operation. Same goes for other direct energy systems.
[We focus on a Taiwanese group because of logistics, and because Chinese billionaires are unlikely to fund this endeavor without government clearance.]
A Japanese civilian group faces eviction risks from the Coast Guard as well. In the current environment, PRC will respond to a civilian escalation with a proxy civilian deployment [ie, a state-sponsored NGO.] To maintain the status quo, where Japn enjoys de facto sovereignty over Diaoyu with its cutter patrols, the Japanese government has an incentive to head off a low-intensity escalation by evicting Japanese settlers. In addition, a Japanese civilian escalation risks a Taiwanese response as well, which is against Japanese interests as stated above. Therefore, a Japanese NGO needs to invest in non-lethal measures to oppose landings.
An NGO can survive on the islands with reverse osmosis water purifiers and mussel/shellfish harvests. It is not impossible, but requires significant preparation and training.
At the moment, neither Japan nor PRC wishes to escalate the dispute. However, ignored domestic pressures can become rogue NGO actions. A successful NGO operation/settlement can force the governments into escalation, reaching the new local equilibrium of a naval embargo. A Solomonic resolution could divide each island into two, half to Japan and the other half China, with a Green Line going down the middle of each island. However, a settlement operation can preclude that division. We could end up with an Ying-Yang-esque division, with a Japanese Diaoyu Dao and a Chinese Taisho Jima. That would be an amusing ending to this 130 year old dispute.
PS (3OCT10): Edited title and added links and tags.