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    Southeast Asia
     Nov 20, '13

Russia rebuilds ties with Vietnam
By Roberto Tofani

An old friend is never forgotten. After the collapse of old ideologies and Cold War patron-client relations, Russia and Vietnam are now rebuilding robust commercial, industrial and strategic ties.

Relations have "stood the test of time, having lived through the numerous tragic events of the 20th century, drastic changes in the world as well as in our countries", Russian President Vladimir Putin wrote in an article published in Vietnam's state media ahead of his November 12 state visit in Hanoi. He later quoted Vietnamese independence hero Ho Chi Minh, saying the deceased revolutionary's words still provided "spiritual instruction" for both nations' peoples.

Rhetoric aside, Putin and his Vietnamese counterpart, Truong Tan Sang, signed 17 bilateral agreements for enhanced strategic and

energy cooperation. The bilateral deals will boost Moscow's role in the Association of Southeast Asian Nations' (ASEAN) buoyant and integrating economies. They will also insert Russian influence into escalating territorial disputes in the South China Sea that pit Vietnam against China.

In his diplomatic article, Putin did not mention the South China Sea, but rather focused on the collaborative upshots of boosting bilateral economic relations, including through joint energy development. Amid rising criticism of the exploitative nature of China's investments in the region, Putin made a point of noting that new oil and gas cooperation would be "two-way and reciprocal".

Rosneft, an integrated oil company majority-owned by the Russian government, and state-run PetroVietnam signed agreements to ramp up joint exploration and production operations on the continental shelves of both countries. The deal allows PetroVietnam the rare concession for a foreign company to explore for hydrocarbons in the Pechora Sea in Russia's northwest Arctic region.

Gazprom and PetroVietnam, which first formed a joint venture - Gazpromviet - in 2006, will also expand their cooperative activities under the agreements, including joint development of oil and gas fields in Russia's Orenburg region. Gazprom, the world's largest gas supplier, agreed through the new agreements to invest in PetroVietnam's US$3 billion Dung Quat refinery, which aims to double its output to 10 million tons of oil per year by 2015.

Russia is also angling to play a leading role in the development of Vietnam's nuclear power industry. Moscow agreed to make a $8 billion loan to Hanoi for its company Rosatom to build Vietnam's first nuclear power plant, Ninh Thuan-1. The project will be launched in 2023 and plans are afoot to jointly build a Nuclear Science and Technology Center, according to Putin's article.

The new military deals are likely to be of greater concern to Beijing. Although Putin confirmed that Russia would supply Vietnam with more weapons, specific details of the deals were not made public. That's likely because the procurements will aim to improve Vietnam's naval capabilities vis-a-vis China in the South China Sea.

In 2009, Vietnam agreed to purchase six Russian-made diesel submarines under a $2 billion package deal. The first vessel was reportedly delivered on November 7 and a second should be handed over by the end of this year. Those purchases and this month's undisclosed deals mark a rising trend, according to analysts.

"Vietnam has recently become one of the world-leading purchasers of Russian arms," said Dmitry Gorenburg, a senior analyst at Harvard University's Davis Center for Russian and Eurasian Studies. At the same time, Russia is taking steps to launch Vietnam licensed production of advanced military equipment with the assistance of Russian arms companies, according to Putin's article.

Regional ambitions
While the arms deals will inevitably stir the South China Sea's troubled waters, Russia's strategic perspective is likely runs deeper. Moscow is known to be seeking a foreign military base and Vietnam's deep water facilities at Cam Ranh Bay would be an ideal harbor for Russia to reassert its political and military strategy in the region. The base is near key shipping lanes and would provide a strategic perch for surveillance of the contested Spratly and Paracel island chains.

Used in different historical periods by France, Japan and the United States, Cam Ranh was under the Soviet Union's flag from 1979 to 2002. Russia withdrew its forces after the Vietnamese government demanded $300 million in annual rent. The base has sense been a source of geopolitical competition, with the US, Japan and Russia all making a high level official visits in the last two years.

During a visit to Hanoi in March, Russian defense minister General Sergei Shoigu promised to support Vietnam's navy with personnel training and technology transfer once Russia delivered the diesel submarines, which notably will be docked at Cam Ranh.

The Vietnamese government maintains it will not allow any one foreign country to establish military bases at Cam Ranh and that's its commercial and repair facilities will be open to all comers. But Moscow may have stolen a march with its submarine deal with Hanoi. According to a report in the Russian daily Pravda, Russia will by 2015 provide new repair and logistics facilities to support the submarines based at Cam Ranh.

Some political analysts have likened Russia's broad renewed interest in Southeast Asia and in particular revamped relations with Vietnam to the US's so-called 'pivot' policy towards the Indo-Pacific. The US has said it will shift 60% of its total naval assets to the region by 2020 in a policy many view as an attempt to contain China's rising influence.

Russia's ambitions for the region, although with a strong strategic component, are less confrontational and more commercially driven. In 2012, Russia established comprehensive strategic partnerships with both China and Vietnam and currently sells arms to both. For instance, negotiations for the sale of Russian Su-35 fighter jets to China are ongoing, with an agreement likely to be reached sometime in 2014.

Russia has firmly declared its neutrality in the South China Sea disputes and is more likely to be positioning itself through its energy ties to Vietnam to participate in any joint development of oil and gas deposits discovered in contested areas. China has proposed joint development cooperation with Vietnam in recent months.

Russia's priority is participation in economic opportunities arising from ASEAN's integration rather than confronting or counter-balancing China's comparatively strong position. Russia's bilateral trade with Vietnam increased by 20% last year, to $3.6 billion. That's still a trifling amount to China-Vietnam growing trade flows, which hit $23.1 billion in the first half of this year.

While Russia's economic overtures are warmly welcomed, Vietnam's wider economy is more strongly linked to its northern neighbor.

Some strategic analysts foresee a scenario where Moscow acts as mediator between Hanoi and Beijing in their territorial disputes in the South China Sea. Russian officials have so far been reluctant to step into that breach, likely due to concerns it might be forced to favor one party's claims over the other during potential negotiations. While certain of Moscow's dealings with Hanoi will raise interest in Beijing, Russia's strategic imprint is still too small to impact the region's balance of power.

Roberto Tofani is a freelance journalist and analyst covering Southeast Asia. He is also the co-founder of PlanetNext (www.planetnext.net), an association of journalists committed to the concept of "information for change".

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