Vietnam And The South China Sea: Hypothetical Scenarios – Analysis

By Amruta Karambelkar

ONGC Videsh limited (OVL) India in October this year entered a three-year agreement with PetroVietnam to carry new investments and strengthen energy exploration. This area falls within the Vietnam’s exclusive economic zone in the South China Sea (SCS). However, China has raised objections to this deal (between OVL and PetroVietnam) on the grounds that India has violated China’s sovereignty. What is likely to be Vietnam’s response if there is provocation by China?

Against a background of growing tension and the possibility of conflict in the SCS, the scenario of war will be imagined. In such an event, will Vietnam defend OVL and stand by India?

Scenario I: Vietnam supports India

The reasons for this could be:
Regional factors

Vietnam has vehemently dismissed Chinese claims of sovereignty over the SCS. The SCS dispute has several stakeholders, both regional and international. These claimants unanimously stand against China on the issue. This regional stand provides support to Vietnam to assert itself against China. That apart, The US has declared to uphold its right to navigate in the SCS. US’s ‘Return to Asia’ is the most crucial factor as it provides an effective balance to China. Thus regional and international consensus against China’s assertion could see Vietnam take a bold stand on the issue.

Bilateral factors
India and Vietnam have infused new life into their relationship through the Strategic Partnership Agreement in 2007. Vietnam sees India as a reliable ally without a hidden agenda, in contrast to its suspicion of Chinese motives. Vietnam and India share long historical ties, both have border disputes with China, and have suffered from Chinese aggression. The bilateral relationship is seeking reinvigoration on the above commonalities. Notably, India is providing assistance to Vietnam in strengthening its naval capacity.

As per the 2006 agreement, the OVL-PetroVietnam deal (in which PetroVietnam holds 20 per cent stake) also allows joint exploration and export and production-sharing in blocks 127 and 128 in Phu Kahn basin, and blocks 06.1 in Lan Tay and Lan Do gas projects. Seeking increased foreign direct investment, Vietnam particularly considers the deal with OVL an important step in overcoming the country’s energy shortage. Significantly, many Indian companies are keen on investing in Vietnam, some are already in operation. Bilateral trade is close to USD2.75 billion, which is aimed to be quadrupled by 2015. Vietnam wants to benefit from Indian education and developments in IT. Keeping in mind the holistic benefits of increasing Indian engagement, and showcasing its image to the world as a market conducive to growth capable of ensuring secure operations, Vietnam would defend OVL in a suitable manner.

Scenario II: Vietnam sides with China

The reasons for this could be:
Relationship with China
Vietnam and China share a common history that goes back over thousand years. Irrespective of historical animosity and the current status of their relations, Vietnam would want to pursue good relations with China. Vietnam has always balanced its relationship with India and China. During the recent visit of the Vietnamese President to India in October 2011, a section of the communist party of Vietnam paid a visit to China and agreed to strengthen military cooperation. If Vietnam wishes to be practical and thinks in terms of long-term interests, it would not want to incur the wrath of a resourceful, powerful neighbour with whom it shares borders.

It is less likely that Vietnam’s relations with India will affect its ties with China. If assessed in terms of bilateral economic engagements, Indian investments are no match for the massive Chinese investments in Vietnam. Amongst 73 foreign investors in Vietnam, India ranks only 35; bilateral trade in 2011 is expected to exceed USD3 billion. China is Vietnam’s biggest importer and third largest exporter, with a bilateral trade volume that is worth USD7.9 billion. The goal is to reach US$25 billion, while India-Vietnam trade aspires to reach USD7 billion by 2015. If the Chinese withdraw their trade and engagement from Vietnam (as a punitive measure/an aftermath of the conflict), can India provide an equal alternative?

Scenario III: What is most likely?

If a country has to defend assets of another country within its territory, the cost and benefit has to be significant in size and vital in character. Although Vietnam has recently begun expanding its armed forces, it would not seek an armed confrontation with China. In case of war, it will, like any other country, defend its territory and everything that falls within, first. Specifically, protecting assets of a foreign company would not be a priority. Rather, it may seek military support from stakeholder countries. As important as the strategic partnership with India may be, maintaining cordial relations with China would also be seriously considered. If Vietnam has to defend OVL’s exploration, it will have to seriously consider ‘why, what is in for me?’

Vietnam’s behaviour may be understood from the case of Tata Steel and Formosa Plastics of Taiwan. If one was to judge Vietnam from this episode, it is evident that Chinese interests would be prioritized. The pro-China lobby is strong in the Vietnamese government. However, Vietnam will play the India card when it wants to counter China, as seems the case at present.

To conclude, Vietnam would silently support India’s interest in the SCS, and that is it. The onus to defend its own interest would be on India. For the sake of its relations with India, Vietnam may however also support India if Indian forces get involved. Vietnam would therefore be pragmatic and opportunist.

Amruta Karambelkar
Research Intern, IPCS
email: [email protected]