Thayer Consultancy

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Background Briefing: Vietnam-Russia Relations Carlyle A. Thayer June 2, 2011

[clientnamedeleted] 1.WhatistherecenthistoryofRussiaVietnamrelations? When the Soviet Union collapsed in 1991 it pressed Vietnam for a replayment of debtstotalingUS$1.7billion.Ittooknearlyadecadetonegotiateasettlement. In 1994 the two sides codified their relationship with a Treaty on Principles of FriendlyRelations.SixyearslaterVietnamagreedtoacquititsdebtsoveratwenty three year period through a combination of hard currency payments, goods and services, and investment in joint enterprises. When Vietnam pressedRussia to pay an annual rent of US $300 million for continued access to Cam Ranh Bay, Russia withdrew. Once the debt issue was settled Moscow and Hanoi raised their relationship to a comprehensive strategic partnership in March 2001. The two countries exchanged visitsbystatepresidentsin2010andPrimeMinisterVladimirPutkinisscheduledto visitVietnamthisJuly. 2.Whatisdrivingtheresurgenceofties? Botheconomicandpoliticalmotivationsliebehindtheresurgenceinties.AsRussia recoveredfromitseconomiccrisisithassoughttoexploitthemarketopportunities in fast growing Vietnam and the transport links between Vietnam and the Russian FarEast. Political motivations playaroleforbothcountries.Russiaseconomicrecoveryhas emboldenedittoplayalargerroleinAsiaPacificaffairs.Vietnamactsasabridgein Russias dialogue relations with the Association of Southeast Asian Nations and a facilitatorofpossibleRussianmembershipintheAsiaEuropeMeetingprocess. Vietnam seeks Russian reengagement in East Asia to offset the influence of the othergreatpowers.Russiaisstillinfluentialgloballyasapermanentmemberofthe UnitedNationsSecurityCouncilandamemberoftheGroupof20. 3. What are the potential areas for cooperation and possible challenges facing bilateraltiesmovingforward? Russia and Vietnam have identified four priority areas for cooperation. The first is energy.Theyplantoexpandtheirjointventureoperationstoexploreforoilandgas onVietnamscontinentalshelfandstepupinvestmentactivitiesinRussia.Russiawill

2 invest in coal mining and hydroelectricity and construct Vietnams first nuclear powerplant. Vietnam is one of the largest markets for Russian big ticket military equipment. RussiaisexpectedtoplayamajorroleindevelopingnavalservicingfacilitiesatCam RanhBaywhichVietnamintendstoopentoallcomersonacommercialbasis. Cooperation in science and technology will focus on spaced based telecommunicationsandaviation. TwowaytradereachedUS$1.8billionin2009withVietnameseexportsaccounting forUS$415million.BothsideshopetoraisethisfiguretoUS$10billionby2020. Negotiations are underway for a free trade agreement in goods, services and investment with the Russia, Belarus and Kazakhstan Customs Union. Russian companiesarereluctanttoacceptlettersofcreditfromVietnamandmanytariffand nontariffbarrierswillhavetoberemoved.