US expects to upgrade Vietnam ties, risks China anger (updated)

AES

04/09/2023 03:35

(Updates Sept 3 story with request for comment to Chinese
foreign ministry in paragraph 6)
    By Francesco Guarascio
       HANOI, Sept 3 (Reuters) - The United States expects to
elevate its diplomatic relations with former foe Vietnam to the
top level as President Joe Biden travels to Hanoi in a week, in
a move that may irk China and with unclear business
implications.
    Fearful of the potential reaction from its much larger
neighbour, Vietnam had initially expressed caution about the
upgrade. That led the Biden administration to multiply efforts
to persuade the southeast Asian nation, including through
multiple visits of high-ranking members of the U.S. government
in recent months.
    The unprecedented push has led Washington to expect to be
elevated to the top tier of Vietnam's diplomatic ranking,
together with China and Russia, from two notches below now.
    Biden said it publicly in July and officials in both
countries have since informally expressed optimism about the
two-step upgrade, although no official statements have been
released from either government.
    Perhaps seeking to assuage Beijing, Vietnam is discussing
top-level visits to Hanoi after or even shortly before Biden's
arrival on Sept. 10, with officials saying China's President Xi
Jinping and Prime Minister Li Qiang could meet Vietnamese
leaders in coming days or weeks. 
    China's foreign ministry did not immediately respond to a
request for comment on Monday. 
    Risks that a double upgrade with Washington may not go down
well in Beijing remain high, but Vietnam's communist leaders may
have calculated the best timing for the move is now as relations
with China are "likely to get worse in the future," said Le
Hong Hiep, a senior fellow at Singapore's Iseas–Yusof Ishak
Institute.
    Yet it is unclear what Vietnam, which is at odds with China
over boundaries in the South China Sea, stands to gain in the
short term from the upgrade.
    A boost of U.S. military supplies to Hanoi has long been
discussed but no immediate deal is expected as these talks take
time, Hiep said.
    Meanwhile, Vietnam is talking with several other countries
to upgrade and expand its mostly Russian-made arsenal, and has
recently engaged in multiple high-level defence meetings with
top Russian officials.
    Supporting Vietnam's ambitions to become a hub for the
semiconductor industry is also part of Washington's inducements,
but public funds so far available under the CHIPS Act are very
limited. 
    The U.S. may offer more, said Vu Tu Thanh, head of the
Vietnam office of the US-ASEAN Business Council.
    Energy is another sector where cooperation could increase as
Vietnam prepares to become a player in Liquefied Natural Gas
(LNG) and offshore wind although administrative and funding
delays are dampening the mood.
    The upgrade of relations is expected to boost U.S. firms'
plans in Vietnam. Planemaker Boeing  BA.N  and energy firm AES
 AES.N  may make announcements during Biden's visit, people
familiar with the plans said. The companies had no immediate
comment.
    The U.S. is already Vietnam's largest market for its exports
and U.S. customs procedures could be eased to boost trade, Thanh
from the US-ASEAN Business Council.

 (Reporting by Francesco Guarascio @fraguarascio; additional
reporting by Trevor Hunnicutt, Khanh Vu and Martin Quin Pollard;
Editing by Lincoln Feast.)
 ((mailto:Francesco.Guarascio@thomsonreuters.com;))