Chinese Peril

Vietnam is the East Asian cornerstone of India’s counter China policy
By Harsh V Pant
Getting closer.

Last week, Vietnam indicated it has bought BrahMos anti-ship cruise missiles, a weapon the country has long cherished, from India.
Without going into the specifics, the Vietnamese foreign ministry said “the procurement of defence equipment by Vietnam is consistent with the policy of peace and self-defence and is the normal practice in national defence.” 

India, however, claimed that the reports about the deal were “incorrect.” 

It may be so, but there is no doubt that Hanoi is increasingly coming to be at the centre of India’s “Act East” policy.
Narendra Modi visited Vietnam last year, rather pointedly on his way to China for the G-20 summit. The visit, the first by an Indian prime minister in 15 years, made it clear that New Delhi was no longer hesitant to expand its presence in China’s periphery. 

The Modi government has made no secret of its desire to play a more assertive role in the Indo-Pacific region. 

Modi himself has argued that India can be an anchor for peace, prosperity and stability in Asia and Africa. 

A more ambitious outreach to Vietnam, therefore, should not be surprising.
Although India’s ties with Vietnam have grown considerably in the past few years, it had dilly-dallied on Hanoi’s request to buy BrahMos since 2011, believing the sale would antagonise China.
Last year, however, the Modi government asked BrahMos Aerospace, the Indo-Russian joint venture that develops the supersonic missile, to expedite the weapon’s sale to Vietnam, as also to Indonesia, South Africa, Chile, and Brazil. 

India already provides Vietnam a $100 million concessional line of credit for the procurement of defence equipment. 

And in a first of its kind sale, it sold four offshore patrol vessels to Vietnam that are likely to be used to strengthen the country’s defences in the energy rich South China Sea.
India’s outreach to Hanoi comes at a time when the US has lifted its long-standing ban on the sale of lethal military equipment to Vietnam. 

New Delhi’s abiding interest in Vietnam, too, is in the defence sector. 

It wants to build relations with countries such as Vietnam so they can act as pressure points against China. 

With this in mind, it has been helping Hanoi beef up its naval and air capabilities.
The two nations have a stake in ensuring the security of sea lanes, and share concerns about China’s access to the Indian Ocean and the South China Sea. 

Hence, India is helping Vietnam build its capacity for repair and maintenance of its defence platforms. 

At the same time, their armed forces have started cooperating in areas such as information technology and English-language training of Vietnamese army personnel.
The two countries potentially share a common friend—the US. 

New Delhi has a burgeoning relationship with Washington, with the two sides signing a logistical support agreement this week, while Vietnam has been courting America as the South China Sea becomes a flashpoint. 

As the three countries ponder how to manage China’s rise, they have been drawn closer together.

Sphere of influence
It is instructive that India entered the contested region of the South China Sea via Vietnam. 

India signed an agreement with Vietnam in October 2011 to expand and promote oil exploration in South China Sea, and stood by its decision despite China’s challenge to the legality of India’s presence.
New Delhi was told it required Beijing’s permission for the Oil and Natural Gas Corporation Videsh Limited (ONGC Videsh) to explore the Vietnamese blocks 127 and 128 in those waters. 

But Vietnam cited the 1982 United Nations Convention on the Law of the Sea to claim its sovereign right over the two blocks in question. 

Hanoi has been publicly sparring with Beijing over claims to the South China Sea for some years now, so such a response was expected.
What was new, however, was New Delhi’s aggression in taking on China. 

It immediately supported Hanoi’s claims. 

By accepting the Vietnamese invitation to explore the two blocks, the ONGC Videsh not only expressed India’s desire to deepen its friendship with Vietnam, but also ignored China’s warning to stay away. 

This display of strength stood India in good stead with Vietnam.
Now, Hanoi is gradually becoming the linchpin of India’s eastward move. 

Hanoi fought a brief war with Beijing in 1979 and has grown wary of Beijing’s increasing economic and military might. 

That’s why in some quarters in New Delhi, Vietnam is already seen as a counterweight in much the same way Pakistan has been for China. 

If China wants to expand its presence in south Asia and the Indian Ocean region, the thinking in New Delhi goes, India can do the same thing in east Asia. 

If China can have a strategic partnership with Pakistan ignoring Indian concerns, India can develop robust ties with states on China’s periphery, such as Vietnam, without giving China a veto on such relationships.
This means that New Delhi is ready to challenge Beijing in its backyard. 

For now at least, this stance is being welcomed by countries that fear the growing aggression of China. 

The more engaged India is in the region, the more stable will be the balance of power. 

While India may want to downplay the BrahMos sale at this point in its engagement with Vietnam, a final decision will have to be made soon. 

The Doklam border stand-off with China cannot be the determining variable. 

India’s decision will have to be based on its long-term foreign and security priorities.

Chinese Aggressions

Vietnam And India To Spoil China's South China Sea Ambitions
By Panos Mourdoukoutas

Vietnam and India are teaming up to tame China’s ambitions to control the South China Sea and the riches that are hidden beneath.
Early this week, Vietnam granted Indian oil firm ONGC Videsh a two-year extension to explore oil block 128, according to a Reuters report.
China considers the South China Sea its own sea, and is building artificial islands, defying international tribunal rulings – including one favoring the Philippines. 

While Philippines President Rodrigo Duterte isn't prepared to stop Beijing, Vietnam – which also claims parts of the waterway – seems to be.
Vietnam’s and India’s challenge to China comes at a time when tensions between New Delhi and Beijing have flared on several fronts. 

Like the Doklam area of Sikkim, where India has been trying to block China’s efforts to build a road, and where in reply Beijing has warned New Delhi that it is risking to suffer "greater losses" than 1962.
Then there’s the Pakistani regions claimed by India and crossed by the China Pacific Economic Corridor (CPEC). 

And the Malacca Straits, where India sent warships recently -- most of China's energy supplies and trade passes through this waterway.
Meanwhile, India’s Prime Minister Narendra Modi has been traveling around the globe to enlist old and new friends and allies to New Delhi’s cause.
So far, financial markets in the region do not seem that concerned, at least for now, focusing on the economic fundamentals rather than the geopolitics of the region. 

But things may change as the US Navy and Air Force have stepped up their presence in the region, drawing angry protests from Beijing.

Chinese Aggressions

Vietnam renews India oil deal in tense South China Sea
By Mai Nguyen, Nidhi Verma and Sanjeev Miglani | HANOI/NEW DELHI

Vietnam has extended an Indian oil concession in the South China Sea and begun drilling in another area it disputes with China in moves that could heighten tensions over who owns what in the vital maritime region.
The moves come at a delicate time in Beijing's relations with Vietnam, which claims parts of the sea, and India, which recently sent warships to monitor the Malacca Straits, through which most of China's energy supplies and trade passes.
Vietnam granted Indian oil firm ONGC Videsh a two-year extension to explore oil block 128 in a letter that arrived earlier this week, the state-run company's managing director Narendra K. Verma told Reuters.
Part of that block is in the U-shaped 'nine-dash line' which marks the vast area that China claims in the sea, a route for more than $5 trillion in trade each year in which the Philippines, Brunei and Malaysia also have claims.
A senior official of ONGC Videsh, who asked not to be named because of the sensitivity of the matter, said interest in the block was strategic rather than commercial, given that oil development there was seen as high-risk with only moderate potential.
"Vietnam also wants us to be there because of China's interventions in the South China Sea," the official said.
Vietnam's state-run PetroVietnam declined to comment on the concession, which was first granted to India in 2006 but had been due to expire in mid-June.
Conflicting territorial claims over the sea stretch back many decades but have intensified in recent years as China and its rivals have reinforced their positions on the rocks and reefs they hold.
Far to the south of block 128, drilling has begun in a block owned jointly by Vietnam's state oil firm, Spain's Repsol and Mubadala Development Co of the United Arab Emirates.
Deepsea Metro I, operated by Odfjell Drilling Ltd., has been drilling in the region since the middle of last month on behalf of Spain's Repsol SA, which also has rights to neighboring block 07/03, Odfjell said.
Odfjell declined to comment on the specific location of its vessel, but shipping data from Thomson Reuters Eikon showed it was in oil block 136/3, which also overlaps China's claims.
Odfjell's Eirik Knudsen, V‎ice President for Corporate Finance and Investor Relations, referred further queries to Repsol, which declined to comment. 

PetroVietnam made no comment.

COMPETING MARITIME CLAIMS
When asked about the activity, Chinese foreign ministry spokesman Geng Shuang said China opposes anyone "carrying out unilateral, illegal oil and gas activities in waters China has jurisdiction over".

Chinese General Fan Changlong cut short a visit to Vietnam and a friendship meeting at the China-Vietnam border was canceled around the time the drilling began.
The centuries-old mistrust between China and Vietnam is nowhere more evident than in their competing maritime claims, despite their shared communist ideology and growing trade.
Asked about the most recent drilling, Vietnamese officials said their Chinese counterparts have started raising concerns about cooperation with both Repsol and ExxonMobil Corp. of the United States, which is developing the $10 billion "Blue Whale" gas concession off central Vietnam.
They said Chinese officials also expressed concern at Vietnam's evolving security relationships with the United States and Japan, both of which have offered moral support for its South China Sea claims and help for Vietnam's coastguard.
Tensions with China were being contained, however, and had not yet reached crisis proportions, they said.
"We know they are unhappy again, but we are resisting the pressure – it is a traditional part of our relations with Beijing," one official said privately. 

"Other parts of the relationship remain strong."
Underlining the relationship between India and Vietnam, Vietnamese deputy prime minister Pham Binh Minh told a forum in New Delhi this week that India was welcome to play a bigger role in Southeast Asia -- and specifically the South China Sea.
Hanoi's growing defense and commercial ties with India are part of its strategy of seeking many partnerships with big powers while avoiding formal military alliances.
The pace has picked up since Indian Prime Minister Narendra Modi's administration took office in 2014 and sought to push back against China's expanding presence in South Asia by raising its diplomatic and military engagement in Southeast Asia.
India is providing naval patrol boats, satellite cover to monitor Vietnam's waters and training for its submarines and fighter pilots -- more military support than it is giving to any other Southeast Asian country.
On the agenda are transfers of naval vessels and missiles under a $500 million defense credit line announced last year.
Next week, the navies of India, the United States and Japan will hold their largest joint exercises in the Bay of Bengal.

Exxon-Vietnam gas deal to test Tillerson’s diplomacy

The multi-billion dollar joint energy project comes amid past Chinese threats and tough Trump administration talk on the South China Sea
By HELEN CLARK

Former ExxonMobil executive Rex Tillerson testifies during his confirmation hearing for Secretary of State before the Senate Foreign Relations Committee in Washington, DC, January 11, 2017. 

US energy giant Exxon Mobil and state-owned PetroVietnam agreed this month to develop Vietnam’s largest natural gas-fired power generation project, a US$10 billion joint venture known as ‘Blue Whale’ (Ca Voi Xanh).

The deal, signed while outgoing US Secretary of State John Kerry was on his last official visit to Vietnam, threatens to create new ripples in the contested South China Sea under the new Donald Trump administration.
The project is scheduled to come online in 2023 and will draw on a natural gas field situated 88 kilometers from Vietnam’s central Quang Nam province in the South China Sea. 

The field is estimated to hold some 150 billion cubic meters of natural gas, three times the amount of Vietnam’s current largest gas project, a joint venture with Russia’s Gazprom in the southern Con Son Basin.
Exxon Mobil will construct an 88-kilometer sea-to-shore pipeline, while PetroVietnam’s Exploration Production Corporation (PVEC) subsidiary will build gas treatment and four power plants with a total capacity of 3 gigawatts, according to reports. 

A planned expansion phase will generate enough gas for another 5,750 megawatts of power and petrochemical production, the reports said. 

PetroVietnam estimates the project will produce US$20 billion for state coffers over an undefined timeline.
The deal comes against the backdrop of Trump’s decision to scrap the Trans-Pacific Partnership agreement, a US-initiated trade pact of 12 Pacific Rim countries of which Vietnam stood the most to gain. 

The tariff-slashing deal, if it had been implemented, projected to boost Vietnam’s gross domestic product (GDP) by 11%, or US$36 billion, and exports by 28% over the decade spanning 2015-2025. Vietnam is a signatory to the China-led Regional Cooperative Economic Partnership, which does not require the same type of economic reforms that TPP would have required.
The ExxonMobil project will have a strong diplomatic defender in US Secretary of State designate Rex Tillerson, Exxon Mobil’s former chairman and chief executive officer. 

Two days before Kerry met with Vietnamese leaders, Tillerson threatened China over the South China Sea, saying in a Senate confirmation hearing that the Trump administration would send Beijing a “clear signal” and “block” China’s access to artificial islands it has built in international waters.
While within Vietnam’s exclusive economic zone (EEZ), the deepwater field is also in an area China claims on its nine-dash map, which lays wide-ranging claim to 90% of the entire South China Sea. 

In 2011, China indirectly warned Exxon Mobil soon after the company announced a big gas find at Block 118, contained in the Blue Whale project zone, saying foreign companies should refrain from exploration in the "contested" area. 

Other multinational energy companies appeared to buckle under China’s pressure by abandoning their exploration activities with Vietnam.
China has also explored in the same area and is believed to have discovered its first commercially viable store of fuel in the South China Sea. 

In mid-2014, state-run China National Offshore Oil Company (CNOOC) positioned a massive deepwater exploration rig in the contested area, setting off sea skirmishes and sparking anti-China riots in Vietnam that resulted in arson attacks on Chinese factories and the exodus of hundreds of fearful Chinese.

Tillerson and CNOOC chairman Wang Yilin met in Beijing on May 14, 2014, where the two executives discussed “further cooperation” between the two firms without giving specific details, according to a Reuters report. 

After those closed door talks, neither side announced any production plans in the area until this month’s Exxon Mobil-PetroVietnam deal. 

Exxon Mobil also has exploration rights to blocks that could be "contested" in adjoining areas.
Vietnam expert Carlyle Thayer wrote in a January 16 background briefing paper on the deal that Tillerson “would have institutional knowledge of Chinese attempts to intimidate Exxon Mobil from investing in Vietnam dating back to 2007-8” and that the businessman-cum-envoy “will not be receptive to Chinese protests at the Exxon Mobil deal with PetroVietnam.” 

Thayer wrote that Chinese officials had previously privately warned Western oil companies that their interests in China would suffer if they assisted Vietnam’s exploration ambitions.
China has not commented specifically on the multi-billion dollar Blue Whale deal, though mouthpiece media has blasted Tillerson’s Senate confirmation comments on the South China Sea. The China Daily said in a January 13 op-ed that Tillerson’s remarks were “a mish-mash of naivety, shortsightedness, worn-out prejudices and unrealistic political fantasies.” 

The Exxon Mobil-PetroVietnam venture was announced while Kerry was in Hanoi and Vietnam Communist Party General Secretary Nguyen Phu Trong was in Beijing meeting with Xi Jinping, where the two signed a joint communiqué on cooperation and peace. 

The pro forma agreement is not expected to resolve or even mitigate the South China Sea disputes.
Hanoi and Beijing maintain a wide network of cooperative ties and agreements despite their South China Sea disputes. 

Whether these agreements, including a joint steering committee to oversee relations, help to restrain bilateral ructions or are useless in the face of serious disputes, such as China’s 2014 incursion into Vietnam’s EEZ, is difficult to say due to the opaque nature of both nominally communist regimes.

This handout photo taken on June 23, 2014 shows a Chinese boat (L) ramming a Vietnamese vessel (R) in contested waters near China’s deep sea drilling rig in the South China Sea.
Bilateral ties cratered after the 2014 anti-Chinese riots and relations were not reset until November 2015, when Xi Jinping visited Hanoi. 

During Xi’s visit a dozen new bilateral agreements were signed under a comprehensive strategic cooperative partnership where China promised US$157 million worth of investments for hospitals and schools and US$500 million for infrastructure.
The sea disputes have been accentuated and complicated by recent joint exploration ventures Hanoi has entered into with foreign energy concerns. 

The deals have also added new geostrategic dimensions to the volatile region. 

For instance, India’s drive to sell Hanoi advanced missiles and other power-projecting weaponry is believed to be motivated in part to protect its ONGC Videsh Ltd energy company’s joint exploration ventures with Vietnam in the South China Sea.
China’s threat to Vietnam’s exploration activities in the area, however, is as much about political power as natural resources. 

U.S. Energy Information Agency (EIA) estimated in 2013 that the South China Sea holds 11 billion barrels of oil and 190 trillion cubic feet of natural gas, including both proven and possible reserves. China’s estimates for the sea are higher, with the state-run China National Offshore Oil Corporation (CNOOC) projecting 125 billion barrels of oil and 500 trillion cubic feet of gas. 

China consumed around 1.7 billion barrels of oil in 2015, according to industry estimates.
Like China, Vietnam sorely needs the energy to fuel its fast expanding industrializing economy. 

The Exxon Mobil deal is believed to be part of a broad Vietnamese central plan to integrate its coastal economy with natural resources in its EEZ, according to academic Thayer’s briefing paper. 

Those designs for contested maritime areas riled China in the past and will likely do so again if Tillerson backs his tough language with firm action in the South China Sea.