Delicate Balance:

US President Joe Biden visited Vietnam on September 10, opening a new chapter in the strategic relationship between the two countries. The fifth president to visit Vietnam, Biden is eager to improve relations with Hanoi and managed to sign a comprehensive strategic partnership with the country despite the hesitation of Vietnamese leaders. In Hanoi’s eyes, the trip put Washington on a diplomatic par with China and Russia.

By partnering with Vietnam, the US aims to pressure China through its southern neighbor, especially since Hanoi and Beijing are engaged in territorial and maritime disputes in the South China Sea (SCS). However, Vietnam, which is not reluctant to partner with the US in principle, is agreeing to these relations with careful calculations and a certain amount of hedging. It is important to Vietnam not to alienate either of the two powers but to improve relations with both of them without upsetting the other side.

Vietnam and China have a long history of mistrust and hostility, with China colonizing North Vietnam from 111 BCE until 939 CE. The two countries remain at odds with each other over the Paracel and Spratly Islands in the SCS, which China gained control of during two violent conflicts in 1974 and 1988.

In recent decades, although the tensions between the two countries in the SCS have been managed, there have been numerous protests against China’s oil exploration and fishing and its construction of artificial islands to establish military bases and dominate the maritime space.

Since China is considered the biggest security threat to the US, strategic cooperation with Washington will be an opportunity for Vietnam to manage its northern neighbor and tip the balance of power that is tipped in favor of China. However, for several reasons, Vietnam does not want to completely throw in its lot with either of the two powers, preferring to strike a balance between them. The existing obstacles and levers of pressure have made Hanoi somewhat wary of continuing relations with China and the US.

China is closely monitoring and evaluating US-Vietnamese relations and the numerous visits of US officials to Vietnam. Given the shared communist ideologies in both countries, Beijing has the chance to strike a delicate balance in US-Taiwan relations and has stronger leverage to pressure Hanoi.

Despite these tensions, Vietnam has experienced significant economic growth in recent decades. In 2020, Vietnam overtook Singapore and Malaysia in the Association of Southeast Asian Nations (ASEAN) to become the group’s fourth-largest economy after Indonesia, Thailand, and the Philippines. Economic growth is extremely important for Hanoi, and, under its foreign policy, proactive and active international economic integration, accelerated socioeconomic development, and national industrialization and modernization are among the main pillars of Vietnam’s strategic plan.

For its part, China can use this factor to pressure Vietnam. In 2021, two-way trade between the two countries was estimated at USD 186 billion. China is Vietnam’s second-largest export market, while Hanoi is Beijing’s sixth-largest export market. Data from the Vietnamese Ministry of Planning and Investment’s Foreign Investment Agency shows that, between January and July 2023, Chinese investors pumped more than USD 2.33 billion into Vietnam, surpassing Japan to become Vietnam’s third-largest investor. Moreover, China has the most new projects under consideration in Vietnam, at 325.

China’s investment in Vietnam was USD 2.46 billion in 2020, USD 2.92 billion in 2021, and USD 2.5 billion in 2022. Hanoi’s rapprochement with Washington could upset these investments and pose a major risk for the Vietnamese.

Furthermore, the SCS is important for Vietnam’s political stability, economic growth, and investment. Around one-third of the world’s maritime shipping passes through the SCS every year. The United Nations Conference on Trade and Development estimated that USD 3.37 trillion worth of goods, representing 21% of all global trade, passed through the SCS in 2016. According to Euan Graham, Shangri-La Dialogue Senior Fellow for Asia-Pacific Security with the International Institute for Strategic Studies, "Vietnam occupies more than three thousand kilometers of coastline on the South China Sea and occupies the largest number of features in the Spratly Islands."

Instability in the region and the SCS could reduce the overall confidence of international markets to attract foreign direct investments in Vietnam. China could further militarize the SCS under the pretext of the US presence in the region and its alleged close relationship with Vietnam, which in itself increases the possibility of a military confrontation.

In that regard, China has fully militarized at least three islands in the SCS and has approximately 20 outposts there. In addition, with Vietnam as an effective member of ASEAN, Beijing can postpone negotiations on the Code of Conduct talks with ASEAN by arguing that the US presence in the region is a threat to Chinese security.

Although, China has the upper hand over Vietnam militarily and economically in the region, Hanoi can take countermeasures against China by adopting certain policies.

The most useful move for Vietnam would be to internationalize the issue of the SCS, as in 2016, when the Philippines took its complaint against China to the Permanent Court of Arbitration in The Hague for the first time, resulting in a decision in favor of Manila.

At the moment, according to Gregory B. Poling, Director of the Asia Maritime Transparency Initiative, "international pressure and the threat of condemnation" are serving to limit Beijing’s actions in the SCS, as "China wants to be seen as a global leader, not a regional…outlaw." At a conference in Hanoi in December 2019, Deputy Vietnamese Foreign Minister Le Hoai Trung stated that Vietnam has the option of using legal options against China. "We know that these measures include fact-finding, mediation, conciliation, negotiation, arbitration, and litigation measures."

Close cooperation with the US, weapons purchases, drills, and military and intelligence training from Washington can be used as another deterrent to China. On June 25th, the USS Ronald Reagan aircraft carrier and two guided missile cruisers began a six-day port call in Vietnam,  "marking another milestone in the advancing relations between the two former wartime enemies." The aircraft carrier was the third American ship to visit Vietnam since 2018 and 2020.

Vietnam also cooperates with the US in purchasing weapons. Reuters exclusively broke the news that the Biden administration is negotiating with Vietnam on "an agreement for the largest arms transfer in history between the ex-Cold War adversaries." The military package may include the sale of a fleet of F-16 fighter jets to Hanoi. Vietnam spends an estimated USD two billion annually in arms imports, with Russia supplying about 80 percent of the country’s arsenal. The US wants to boost its previous USD 400 million in arms sales to Vietnam with incentive programs to compete with Russia and China, thus using US arms sales to Vietnam as a policy to persuade China to negotiate with Hanoi to prevent further such purchases.

Nevertheless, Vietnam is cautious about working closely with the US. Communist Party officials in Vietnam fear that further ties will lead to US interference in internal affairs and further instability. For example, US officials have repeatedly condemned Vietnam for cracking down on dissent and imprisoning journalists.

In June, the Vietnamese government arrested the attackers of two government offices in Dak Lak Province within 12 days of the attacks. The Ministry of Public Security attributed the unrest to American provocation, demonstrating the Communist Party’s belief that the US and the West are conspiring to overthrow the socialist regime in Vietnam.

As the two major powers engaged in the SCS, the US and China are looking for opportunities to deter and isolate the other side. The US sees an opportunity in Vietnam, but Hanoi, given its proximity to China and inevitable interactions with Beijing, has decided to walk a tightrope in order to benefit from the economic and political largesse of both sides.