AP Interview: Adm. Concerned About South China Sea The U.S. Navy's top commander in the Pacific says he's concerned local arguments in disputed oil rich waters near the Spratly Islands in the South China Sea could escalate into larger, more serious confrontations. Adm. Patrick Walsh said Tuesday there's potential for an incident in the South China Sea to intensify much the way tensions between China and Japan spiked after ships belonging to the Asian powers collided near the Senkaku or Diaoyu islands claimed by both nations in 2010. "Quickly the event escalated from something that was local, containable, manageable, to something that became a state-on-state sort of conflict," Walsh told The Associated Press in an interview at his headquarters a few days before he is scheduled to retire and hand over the Pacific Fleet command. Walsh said the South China Sea - which is heavily traveled by shipping companies, including tankers transporting oil from the Persian Gulf to East Asian nations - is vital to the Asia-Pacific region. No matter which perspective you adopt, it's critically important for security and stability. It is the critical node to all the economic activity. Any interruption there would create a real problem," Walsh said. Six Asian nations - Brunei, China, Malaysia, the Philippines, Taiwan, and Vietnam - claim all or part of the Spratlys, which are believed to be rich in natural resources. Pacific Fleet Commander Adm. Patrick Walsh poses for a photo in his office in Pearl Harbor, Hawaii on Tuesday, Jan. 17, 2012. In interview before he leaves office on Friday, Walsh reflected on his time as the head of the Navy in the Pacific over the past two-and-a-half years. The Philippines and Vietnam have accused Chinese vessels of repeatedly intruding into areas they claim and of trying to sabotage oil explorations in their territorial waters. China has denied the allegations, saying it has sovereignty over the vast sea. Walsh said the countries have a dilemma in that they risk losing resources if they don't patrol and enforce their exclusive economic zones, yet risk a confrontation if they do. To compound the situation, he noted countries in the area are also growing an interest in obtaining more advanced weaponry. "Now you have all the ingredients of an escalatory situation," he said. Walsh recalled the incident two years ago when a Chinese fishing vessel collided with a Japanese coast guard ship on patrol. Japan arrested the Chinese captain, after which Beijing suspended ministerial-level contacts with Tokyo, and postponed talks on the joint development of undersea natural gas fields. China later halted Japan-bound exports of rare earth metals used in high-tech manufacturing. The captain was later released and sent back to China after heavy pressure from Beijing. Walsh said a lot of the tension resulted from the threat of embargo on rare earth metals. "Just how quickly that escalated - it inflamed passions on both sides," he said. That's my concern. Walsh said the U.S. should be very clear that it supports peaceful resolutions to disputes. One way would to support this, he said, would be to sponsor regional forums where nations can discuss these issues. He lamented that China has a "checkered record" of participating in international forums like these. The approach that I'm suggesting here is one that is very inclusive. Those that opt out, who don't participate are really limiting themselves to a very narrow interpretation of what is acceptable in terms of norms and behavior," he said. Vice Adm. Cecil Haney is due to succeed Haney as the commander of the Pacific Fleet at a ceremony in Pearl Harbor on Friday. Walsh, 57, said he's moving back to his hometown of Dallas after 34 years in the Navy.