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Vietnam and Russia expand joint South China Sea gas projects – TOMOYA ONISHI | Nikkei

30 November 2018

A Rosneft Vietnam worker stands on the Lan Tay gas platform in the South China Sea.   © Reuters

HANOI — Vietnam and Russia are working more closely together on gas development projects in the South China Sea as they seek to reduce their dependence on trade with China.

Locked in a bitter territorial dispute with China over islands in the area, Vietnam is trying to insulate itself from economic pressure by its giant neighbor. Russia, whose economy has been pummeled by Western sanctions, is also trying to avoid becoming too dependent on economic ties with China.

But cooperation between Vietnam and Russia to develop resources in the South China Sea could trigger a fierce backlash from Beijing.

Earlier in November, Russian Prime Minister Dmitry Medvedev traveled to Hanoi for talks with his Vietnamese counterpart, Nguyen Xuan Phuc. The two reaffirmed their countries’ commitment to joint natural gas development projects in the South China Sea and other forms of economic cooperation. They also agreed to double bilateral trade to $10 billion by 2020.

At the meeting, local media reports said Phuc took a thinly veiled swipe at China’s naval expansion in the South China Sea, saying countries should try to settle issues peacefully, while respecting international law. Medvedev was reported as supporting Phuc’s call.

Vietnam’s state-owned oil company PetroVietnam and Russian state-controlled natural gas producer Gazprom have agreed to jointly develop gas in fields on the continental shelf in the South China Sea. But the project has been on hold due to strong protests from China, which claims most of the vast body of water and has been building military facilities in the area.

Russian Prime Minister Dmitry Medvedev, second from right, and his Vietnamese counterpart, Nguyen Xuan Phuc, second from left, greet schoolchildren before talks in Hanoi on Nov. 19.   © AP

Russia is pursuing closer relations with Vietnam to establish a foothold in Southeast Asia. “We hope that these ties will strengthen,” Medvedev said of the cooperation between the two oil companies. “To achieve that, we will create favorable conditions for implementing joint and new projects involving Gazprom, Zarubezhneft [another Russian state-controlled oil company], PetroVietnam and other companies.”

Any projects involving the two countries are bound to irritate Beijing, which is vigorously pressing its sovereignty claims in the South China Sea.

Russia is not a major trading partner for Vietnam, accounting for less than 1% of its total trade. But Vietnam has become increasingly uneasy about its heavy reliance on China, which is its largest trading partner. This is driving Vietnam’s move to strengthen ties with Russia and other countries.

The Eurasian Economic Union, a Russian-led political and economic grouping of former Soviet republics, signed a free trade agreement with Vietnam in 2016. The union is also looking for greater economic cooperation with the Association of Southeast Asian Nations through its trade deal with Vietnam.

“Our two countries [Vietnam and Russia] will continue implementing the agreement for a free trade zone between Vietnam and the Eurasian Economic Union to maximize favorable conditions and preferences under that agreement,” Phuc said. “We will seek to achieve a breakthrough in bilateral trade and investment by increasing bilateral trade turnover to $10 billion by 2020.”

The South China Sea is rich in natural resources, such as oil and gas, and has become an arena of competition for China, Vietnam, the Philippines and others. In ASEAN, Vietnam has been the most vocal critic of China’s military muscle flexing the region.

The Russian economy has been battered by Western economic sanctions following Russia’s annexation of the Crimea and its support for separatist rebels in eastern Ukraine in 2014. Moscow has tried to cushion the impact of the sanctions by strengthening ties with China, but it is wary of relying too much on its larger neighbor for its economic well-being.

During the Soviet era, Moscow had solid relations with Vietnam and other communist countries in Southeast Asia, wielding much influence. Russia is now pursuing closer ties with Vietnam and other fast-growing economies in the region to keep its options open.

In 2017, Russian President Vladimir Putin made clear Russia’s ambitions to become a more active player in Southeast Asia. “We believe this is in our practical interest and represents an opportunity to strengthen our position in the region’s rapidly growing markets,” he said.

This article is originally published on Nikkei 

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