[Vnbiz] Russia's new Vietnamese courtship

[Phan, Tai]

Russia's new Vietnamese courtship
By Federico Bordonaro 
Asia Times - Sept 30, 2006
Russian-Vietnamese trade, energy and security ties are on the upswing, underscoring Moscow's latest bid to re-energize its strategic relationship with Hanoi and re-establish itself as a major Southeast Asian player at a time the United States, the European Union and China are likewise competing for regional influence. 

Vietnamese Vice President Truong My Hoa said after meeting with Russian Prime Minister Mikhail Fradkov in Moscow on September 20 that "all-around cooperation between Vietnam and Russia should be further developed" and that "Vietnam wants 



Russia to invest not only in its oil-and-gas industry, but also in atomic-energy and hydroelectric-power projects". Fradkov diplomatically praised Vietnam's economic "renewal process" and indicated Russia's keen interest in responding to Hanoi's calls for closer ties. 

Former Cold War allies, and later post-Cold War antagonists, nowadays there is plenty of economic and strategic incentive for the two sides to forge stronger bilateral ties. Hanoi and Moscow frequently refer to their bilateral relationship as a "strategic partnership". President Vladimir Putin used the term back in February 2001, when bilateral relations first got back on track, and mutual ties have since significantly strengthened. 

It's a partnership of mutual convenience. Vietnam desperately needs to enhance its energy security and upgrade its dilapidated armed forces, while Moscow is seeking to expand its influence in Asia's energy sector, mainly through its giant energy concern Gazprom, and increase big-ticket military-related exports. 

Significantly, Russia's new strategic push into not only Vietnam but Southeast Asia is predicated and somewhat restrained by Moscow's bigger concern of maintaining stable relations with China. Russia walks a thin line by helping Vietnam to improve its defensive capabilities, which for geographical and historic reasons are largely aimed at counterbalancing China. 

Moscow's apparent deference to Beijing's wishes helps to explain why Putin agreed in 2001 to decommission Russia's naval base at Vietnam's Cam Ranh Bay three years before its lease expired - though subsequent US overtures to establish some sort of a military presence at the deepwater port have irked China. 

That's why Russian and Vietnamese officials have concentrated their new strategic embrace more on business than war games. At the 11th session of the Vietnam-Russia Intergovernmental Committee for Economic, Trade and Scientific-Technical Cooperation, the two sides declared that bilateral trade would likely exceed US$1 billion in 2006. 

They also announced plans for the establishment of a new joint-venture bank to be established between the Bank for Investment and Development of Vietnam and Russia's Vneshtorbank, which will likely be officially opened for business when Putin visits Hanoi during this November's Asia-Pacific Economic Cooperation (APEC) summit. 

Fueling new ties
Energy security, now as in the past, remains at the forefront of the bilateral relationship. As Vietnam's economy surges, its domestic energy sources are fast diminishing. Russia sits on huge fossil-fuel resources at home, and has the technical know-how to improve Vietnam's current exploitation and management techniques, industry experts say. 

Top Gazprom and Petrovietnam executives met on September 20 to discuss a new bilateral agreement where the two sides drew up new guidelines for joint operating in oil production and processing and sketched a general scheme to develop Vietnam's nascent natural-gas industry. An official statement issued by Gazprom after the meeting announced that it plans to start new drilling in the Gulf of Tonkin by November. 

The announcement could mark an important new direction for Vietnam's energy sector - though once again heavily reliant on Russian expertise and investment. Russia's hugely profitable Gazprom, which currently provides nearly all the gas needs of the former Soviet Union and Central and Eastern Europe and is ranked as the world's third-largest corporation, is set to replace Zarubezhneft as Moscow's main energy representative to Vietnam. 

The beleaguered Zarubezhneft has for decades led the Vietsovpetro oil-and-gas joint venture, where contentious negotiations over how best to wind down the expiring venture have strained bilateral relations in recent years. Similarly, Petrovietnam has replaced Vietsovpetro and has emerged as Vietnam's new energy heavyweight. 

The two sides are expected jointly to explore plenty of new potential drilling sites: recent geological analysis highlights the underdeveloped state of many of Vietnam's land-based wells, which apparently hold much deeper reserves than the country's fast-expiring offshore wells. 

More significant, perhaps, Moscow is expected to sell and share its nuclear-power expertise with Vietnam's energy planners. Hanoi announced this year that it aims to generate 11% of its total electricity through nuclear means by 2025 and increase that level to 30% by 2040. 

Vuong Huu Tan, director of Vietnam's Nuclear Energy Institute, said in February that he expected six reactors to be "operating at a potential of 1,000 megawatts each" by 2025. Assuming, as expected, that Russia will play a key role in helping Hanoi realize its ambitious nuclear designs, Moscow will assert strong influence over Vietnam's energy direction for the foreseeable future. 

As bilateral trade and energy relations deepen, Russia will increasingly find itself between a rock and hard place on improving bilateral security relations, which Hanoi will no doubt pursue more actively than Moscow is - for now at least - willing to accommodate. Vietnam remains particularly sensitive to China's rising military might and is quietly seeking ways to counterbalance the perceived threat. 

Long-simmering territorial disputes with Beijing over the Spratly and Paracel islands, from Hanoi's perspective, remain a significant security issue, although regional security analysts doubt the contested, reportedly resource-rich islands will be a major source of conflict over the short term. 

As a holdover from the Cold War, Russia remains Vietnam's main weapons supplier. Since the dissolution of the Soviet Union, Russia has sold Vietnam 12 Svetlyak patrol vessels, 12 S-300PMU1 surface-to-air missile systems, and 4 Su-30 MKK fighter aircraft, as well as artillery. Furthermore, Russia has agreed to upgrade all weapon systems Vietnam has already purchased. 

A renewed Russo-Vietnam strategic partnership will inevitably be complicated by sticky military-technology transfer issues. As Russia attempts to re-establish its influence in Southeast Asia while at the same time maintaining close ties with China, it will often bump up against US interests, including in Vietnam. Vietnam has taken a decidedly pro-American stance in its bid to hedge China's emerging strategic hegemony over the region. 

Security experts contend that it is highly unlikely that Russia would support Vietnam in any possible crisis or conflict with China over contested territory in the South China Sea. So far, they say, Russia's supply of weapons to Vietnam is being driven more by market forces and profits than any desire to recalibrate the region's power balance. 

Still, Russia appears eager to expand its all-around strategic cooperation with Vietnam, and enhanced business ties will inevitably lead to stronger political and strategic ties. Russia is back in Southeast Asia, and judging by Moscow's aggressive moves in Vietnam, similar developments with other regional countries may also soon get under way. 

Federico Bordonaro is senior analyst with the Power and Interest News Report (www.pinr.com).