Vietnam's Rising Geopolitical Importance

Current tensions between Vietnam and China demonstrate the rising geopolitical importance of Vietnam and the South China Sea. Below, we are publishing an article that first appeared on Business Monitor Online on June 6, 2012. Although nearly two years have passed since the article was written, it remains relevant today – perhaps more so. Vietnam subsequently signed an agreement with Russia in November 2013 to enhance bilateral defence cooperation. This includes Russian arms sales and the training of Vietnamese army and navy personnel. The US is also seeking closer ties with Vietnam, as it 'pivots' towards the Asia-Pacific region.

BMI View: Vietnam's geopolitical significance will rise over the coming decade, as the US courts it as a potential ally to counterbalance China. Although Hanoi is wary of Beijing's rise, it will avoid a formal alliance with Washington, instead charting a careful middle course between China and the US, to maximise its strategic independence.

Vietnam's geopolitical significance will rise over the coming years, as the US courts it as a potential ally to counterbalance China. Although Vietnam and China are both nominally Communist one-party states, there is a degree of tension between them over ownership of the South China Sea, and Hanoi does not wish to see Vietnam fall under the Chinese sphere of influence. Furthermore, Vietnam was the last sovereign state to be attacked by China, when the two sides fought a border war in 1979. Thus, Vietnam has in recent years been strengthening ties with the US, as well as India and Japan, as a means of offsetting China's power. For its part, the US has generally been happy to cultivate Vietnam as a new ally.

US Defense Secretary Leon Panetta visited the Vietnamese port of Cam Ranh Bay on June 3 2012, becoming the senior-most American official to set foot there since the Vietnam War. During that conflict, Cam Ranh Bay served as a major logistics hub for the US military. After the war ended with the defeat of the US-backed South Vietnam in 1975, Cam Ranh Bay became a major naval base for the Soviet Union, but its importance waned in the late 1980s, and in 2002 Russia finally withdrew its military presence there after the Vietnamese raised rental costs. Since then, there has been occasional speculation that the US Navy might reach some sort of regular visitation agreement for Cam Ranh Bay, but nothing has come of this, and American ships have instead called at other Vietnamese ports. More broadly, US-Vietnamese relations have been steadily improving since the two sides restored diplomatic relations (severed after the defeat of South Vietnam) in 1995 and signed a bilateral trade agreement in 2000.

Vietnam's Geopolitical Importance

Vietnam's location and population confer upon it an important role in Asian geopolitics. Three factors stand out:

  • Long coastline on the South China Sea: Vietnam has a very long coastline, spanning almost all of the western stretch of the disputed South China Sea. (China regards most of the sea as its own and has become more assertive in its claims since 2010, whereas Vietnam, the Philippines and several other states claim the sea in part.) This means that Hanoi cannot help but have an interest in the affairs of the South China Sea, whose importance stems from the fact that it is a major shipping route; the significant oil and gas reserves there; and its considerable fish supplies. If Vietnam were to ally with China [which is highly unlikely. Ed], then this would significantly enhance Beijing's control of the South China Sea. As it happens, Vietnam's suspicion of China means that Beijing has a formidable competitor for control of the Sea. Even if Vietnam does not ally with the US, Hanoi's stance denies Beijing complete supremacy over the Sea, and this benefits other countries with claims on its waters, most notably the Philippines. Meanwhile, Japan, South Korea and Taiwan also do not wish to see Chinese dominance of the South China Sea, because this could theoretically interfere with their shipping.
  • Mainland South East Asia influence: Vietnam also has a high degree of political and economic influence in Laos, where it competes with China and Thailand for loyalty and business opportunities. Vietnam's influence in Cambodia is less clear cut, because although the Phnom Penh leadership is on amicable terms with Hanoi, there is widespread distrust of Vietnamese intentions among ordinary Cambodians. Nevertheless, with Vietnam generally warming to the US, Thailand having officially been designated a US 'Major Non-NATO Ally' in 2003, and Myanmar moving towards rapprochement with the West, it is evident that mainland South East Asia's three most populous countries are seeking to counterbalance Chinese influence in the Asia-Pacific region.
  • Vast economic potential and large population: Vietnam's geopolitical importance has also been boosted by its rapid economic growth, especially over the past decade, which has made the country a major emerging market and an attractive investment destination. In fact, some Japanese, South Korean and Western multinationals are said to favour Vietnam as an alternative to China, partly as a hedge against political risk in China (although there is considerable political risk in Vietnam, too), but also because Vietnam offers competitive labour costs. Vietnam's economic prospects are augmented by its large and youthful population (88mn and still rising), and the country also has the 11th-largest armed forces in the world, with 455,000 personnel. As Vietnam's economy and population grow, the country has the potential to emerge as a middle-ranked power in its own right, making it all the more attractive as a partner to countries seeking influence in South East Asia (ie, China, the US, Japan and India).

Vietnam In The Regional Context

As the second decade of the 21st century progresses, we envisage the US and China increasing their competition for influence in Asia (see October 21, 2011, 'Sino-US Power Struggle To Intensify Over The Coming Decade'). The US has publicly confirmed that it is shifting its attention towards the Asia-Pacific region after a decade of wars in Afghanistan and Iraq, and while Washington denies that it is seeking to counterbalance China, we believe that this is its de facto objective. Defense Secretary Panetta stated in early June that the US would maintain six out of its 11 aircraft carriers in the Pacific in the long term and would rebalance its global naval deployments so that 60% of its other warships would be operating in the region by 2020, compared to 50% at present. However, rather than build vast new bases in friendly countries, which might prove politically controversial, the US intends to carry out more rotational deployments. To this end, Vietnam stands out as an attractive destination to US military planners, although Singapore and the Philippines are more likely hosts for the US Navy in the near future.

The US is by no means alone in seeking to boost ties with Vietnam. India and Japan have in recent years reached out to Vietnam, politically and economically, for the same reasons as America. This has led to considerable speculation that an informal New Delhi-Tokyo-Hanoi 'strategic triangle' is emerging, backed by Washington, for the purposes of preventing Chinese domination of the Asia-Pacific region. However, a formal alliance does not appear to be forthcoming, since it could be interpreted to be anti-Chinese.

Obstacles To Deeper Vietnam-US Relations

Despite evident areas of mutual interests, the level of cooperation between the US and Vietnam is nowhere near as strong as between the US and its well-established regional allies, such as the Philippines and Thailand. Going forward, there are several obstacles to Vietnam and the US forging a more concrete partnership:

  • Vietnam does not wish to alienate China: Although Vietnam is wary of China's rising power, it does not wish to alienate Beijing by formally allying with the US, for this would be seen as a provocative and obviously anti-Chinese step. China is a major trading partner of Vietnam and a source of foreign direct investment.
  • Vietnam favours strategic independence: Having defeated the US in the early 1970s, Vietnam does not wish to become a US satellite state in Asia. Although memories of the Vietnam War are fading, there remains a degree of ideological opposition among the countries' leaders to forming an excessively close partnership with the US.
  • US and Vietnamese political differences: There is considerable wariness towards Vietnam among some US legislators, owing to Vietnam's lack of democracy, its tough stance towards dissidents, and its curtailment of religious freedoms. This will occasionally stall the improvement in Hanoi-Washington relations.

Key Domestic Risks To Vietnam's Geopolitical Position

Looking to the remainder of this decade, there are two major risks that could weaken Vietnam as a geopolitical player. The first is a 'hard landing' or financial crisis in the Vietnamese economy as a result of runaway inflationary pressure and high trade and fiscal deficits. The resulting readjustment period could conceivably force Vietnamese leaders to turn their attention inwards. The second risk is an unstable political transition to democratic rule, of the kind seen in Indonesia from 1998-2004. This, too, would force the Vietnamese government to focus on domestic rather than international issues. However, neither interruption would be expected to diminish Vietnam's long-term importance in South East Asia.

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