Hong Kong (CNN) -- When China's state-owned oil company dispatched an oil rig to a contested area of the South China Sea it flicked a match on a long-smoldering dispute with its communist neighbor Vietnam.

Analysts say Beijing must have known the move would elicit some reaction, but it clearly didn't predict having to evacuate thousands of Chinese nationals desperate to put some distance between them and violent Vietnamese protests.

"The whole episode seems to reek of miscalculation, perhaps by both sides, but it demonstrates how volatile how this region can be," said Alexander Neill, Shangri-La Dialogue Senior Fellow at the International Institute for Strategic Studies, Asia (IISS).

At issue is the positioning of an oil rig in waters claimed by both China and Vietnam. Vietnam claims the rig's presence is "illegal" while China says it has every right to drill, and has castigated the Vietnamese government for failing to ensure the safety of its nationals.

To understand the issue, it's vital to look at the exact position of the rig.

Where is the rig?

In early May, Beijing announced the HD-981 rig would be parked at sea for exploratory work until mid-August. Owned by the China National Offshore Oil Corporation (CNOOC), the rig is anchored in Lot 143, about 120 nautical miles east of Vietnam's Ly Son Island and 180 nautical miles from China's Hainan Island, according to the Center for Strategic and International Studies (CSIS).

Location of HD-981

Analysis co-authored by CSIS experts said China's Ministry of Foreign Affairs appears to be basing its right to be there on the assumption that one of the Paracel Islands, which it claims as its own, is 17 miles north, allowing it to claim its own continental shelf in the region.

China calls the contested Paracel Islands the Xisha Islands, while in Vietnam they're known as the Hoang Sa Islands.

Vietnam says the rig site is clearly on its continental shelf, and moreover is in its Exclusive Economic Zone. Hanoi has demanded that China remove the offending rig, escort vessels from the region and hold talks to settle the issue.

The Chinese rig was escorted to the region by naval vessels and fighter jets, drawing Vietnamese boats to the area and raising tensions at sea. The Vietnamese have accused Chinese vessels of ramming and blasting its boats with water cannon. The Chinese say any conflict was provoked by Vietnamese harassment.