US, Vietnam upgrade ties as Biden visits in hedge against China
US President Joe Biden secured deals with Vietnam on semiconductors and minerals as the strategic South-east Asian nation elevated Washington to its highest diplomatic status alongside China and Russia.
The US has been pushing for the upgrade for months as it sees the manufacturing dynamo as a key country in its strategy to secure global supply chains from China-related risks.
A half-century after a lengthy and brutal Cold War-era conflict, Biden arrived in Hanoi to a ceremony organised by the ruling Communist Party that included school children waving American flags and honour guards carrying bayoneted rifles.
Biden noted the strides that had been taken towards improved ties. “We can trace a 50-year arc of progress between our nations, from conflict to normalisation, to this new elevated status,” he said.
Vietnam is having to navigate frosty relations between Washington and Beijing as it seeks its own foothold in the international economic competition.
Top Chinese officials, possibly including President Xi Jinping, are expected to visit Vietnam in the coming days or weeks, officials and diplomats said, as Hanoi seeks to maintain good relations with all super powers.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
It also comes as Vietnam’s longstanding relationship with Russia faces tests over the war in Ukraine, including talks with Russia over a new arms supply deal that could trigger US sanctions.
Reuters has seen documents describing talks for a credit facility that Russia would extend to Vietnam to buy heavy weaponry, including anti-ship missiles, anti-submarine aircraft and helicopters, anti-aircraft missile systems and fighter jets.
One of them, a letter sent in May by Vietnam’s Prime Minister Pham Minh Chinh to the Russian government, showed interest in the possible new deal.
A Vietnamese military officer confirmed the authenticity of the letter and the talks for a new US$8 billion credit facility to buy heavy weaponry.
A spokesperson for Vietnam’s foreign ministry did not respond to multiple requests for comment on the documents, which show Moscow pushing for months for a loan deal that would bypass Western sanctions on Moscow.
Hanoi is in similar talks with multiple arms suppliers including the United States. In recent weeks, Vietnam has engaged in several high-level defence meetings with top Russian officials.
The upgrade will include a security dimension, Jon Finer, the US principal deputy national security adviser, told reporters on Sunday (Sep 10), while on the plane with Biden to Vietnam from a Group of 20 (G20) summit in India.
He said he had no arms deals to announce at this stage but stressed that the US and its partners could offer Vietnam help to diversify away from Russian military supplies, an offer which he said Vietnam was receptive to.
That would help Vietnam reduce military reliance on Moscow, “a relationship we think they are increasingly uncomfortable with”, Finer said.
Biden’s visit comes as bilateral trade and investment ties are growing and a long-simmering territorial dispute between Vietnam and China heats up in the South China Sea.
Highlighting Vietnam’s growing importance as a “friendshoring” destination for US technology companies, executives from Google, Intel, Amkor, Marvell, GlobalFoundries and Boeing are expected to meet on Monday with Vietnamese tech executives and Secretary of State Antony Blinken in Hanoi.
Full details on the US-Vietnam deal have yet to be released.
Still, semiconductors are the centrepiece of an action plan adopted during Biden’s visit, a US official said.
Besides possible announcements by US corporations, it is unclear how significant the US administration’s contribution to the sector could be, having only US$100 million a year for five years available under the Chips Act to support semiconductor supply chains globally. A large part of it could go to Vietnam, officials said.
More support to train skilled workers is also part of the deal, as Vietnam faces a major shortage of engineers in the chips sector.
Another key issue is strengthening supply chains of critical minerals, especially rare earths, of which Vietnam has the world’s largest deposits after China, according to US estimates, officials said.
Two people familiar with the plans said an agreement on rare earths was expected during Biden’s visit, which ends on Monday when he flies back to America.
Details, however, are scant. Past attempts by US companies to partner with Vietnamese rare earth firms have not succeeded, according to a person involved in one recent plan.
Human rights remain a controversial issue, with US officials regularly criticising Hanoi for jailing activists and limiting freedom of expression. Vietnam may show goodwill, with diplomats suggesting activists could be freed. REUTERS
Share with us your feedback on BT's products and services
