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Soviet Redux: Vietnam Is Joining Russia's Eurasian Trade Bloc

Ahead of a summit in Hanoi, Russian PM Dmitry Medvedev has promised to supply Vietnamese nuclear plants and encourage joint oil exploration. This affectionate tone is likely to irk the US.
Photo by Tran Van Minh/AP

In 1981, Vietnam acquired its first oil company: Vietsovpetro, a joint venture of Vietnam and the Soviet Union, which soon began extracting crude from the Bach Ho oil field, east of the Mekong Delta. The enterprise was meant to boost oil and gas exploration on Vietnam's continental shelf — but Hanoi was also viewed as a friendly base, from which Moscow could project influence across the Asia-Pacific region.


And so it is again.

On Monday, Russian Prime Minister Dmitry Medvedev landed in Hanoi for two days of high-level talks — and immediately dropped a bombshell. Vietnam, he said, will soon join the Russian-led Eurasian Economic Union (EEU).

Medvedev told Russian media that preparations for Hanoi to join the trade bloc had "entered the home straight," and that the two countries were likely to seal an agreement by July.

If the deal goes through, it will mark the first time that an outside country is granted access to the EEU. This came into effect on January 1, uniting the post-Soviet states of Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan in a common market that is viewed as Vladimir Putin's answer to the European Union — and sometimes also as a sign that the Iron Curtain is descending again across the continent.

The agreement "would give Vietnam access to a huge market, which includes not only Russia but also its partners," Medvedev told Vietnamese journalists.

According to Russian news outlets, trade between Vietnam and Russia amounted to around $4 billion last year. But Russian Deputy Prime Minister Igor Shuvalov hopes to increase that number to $10 billion by 2020.

The talks come amid mounting tensions between Vietnam and China over control of territory in the South China Sea. In May 2014, a Chinese oil rig moved into waters claimed by Vietnam, near the Paracel Islands, leading to boat-on-boat confrontations and a spate of anti-Chinese protests in Hanoi.


Recent tussles have ostensibly inspired Hanoi to form military and commercial ties with competing world powers, including both Russia and the US. In this contest, well strategically placed Hanoi has emerged as something of a geopolitical prize.

But the affectionate tone of the Vietnam-Russia summit is likely to irk officials in Washington. Just last month, the US asked Vietnam to stop letting Russia refuel its nuclear-capable strategic bombers at a former American air base in Vietnam.

According to General Vincent Brooks, commander of the US Army in the Pacific, Russian bombers are increasingly using Vietnam's Cam Ranh Bay base as a launching pad for "provocative" flights — some, around the US Pacific Ocean territory of Guam, which houses a large US air base.

Shortly after the US issued its warning, Russia said it did not "intend to listen" to Washington's "strange" admonitions, and vowed to continue using the base.

Related: Putin's answer to the EU starts January 1 — but it's already being challenged. Read more here.

On Monday, Medvedev and his Vietnamese counterpart, Prime Minister Nguyen Tan Dung, took a sunny stroll around the presidential palace in Hanoi. They then kicked off the diplomatic summit, which will reportedly focus on striking oil and gas deals.

By day's end, the delegations had signed no fewer than 17 priority project agreements. According to one deal, Russia will supply Vietnam with equipment for its nuclear power plants. Medvedev has promised to continue "our cooperation in nuclear energy" and to train Vietnamese scientists at Russia's MEPhI National Research Nuclear University.


Vietnam's prime minister, in return, pledged his commitment "to creating favorable and secure conditions for Russian oil companies to operate in Vietnam."

Also on Monday, Gazprom Neft — the oil arm of the Russian energy behemoth Gazprom — agreed to purchase 49 percent of PetroVietnam, which operates Vietnam's only oil processing facility, the Dung Quat oil refinery.

In a wide-ranging interview with Vietnamese media leading up to the talks, Medvedev said that Russia and "friendly Vietnam" should "create conditions for mutual investment."

"We have a number of Russian projects that we have invited our Vietnamese friends to join. To be clear, we invite foreign partners to take part in exploration and production in the Russian Federation only rarely."

Medvedev also extolled the historical strength of Russia-Vietnam relations — dating back to the Soviet era and through the 1980s, when Russia acted as one of Vietnam's chief allies in the aftermath of the Vietnam War.

"I'll never forget a meeting with some Vietnamese comrades who had studied in the Soviet Union or Russia… What was important is not just our friendship, but also the fact that our Vietnamese friends had gained their knowledge and experience in the Soviet Union or Russia, and we are now applying them in ways beneficial to Vietnam and our friendly relations," he continued.

Medvedev also promised that more Russian tourists would visit Hanoi: "Russians love to spend their vacations in Vietnam. Vietnam is an interesting country with an ancient culture and good holiday destinations." But the PM warned that "this should be a two-way process," and encouraged more Vietnamese people to vacation in Moscow.


Related: South China Sea deadline looms as Beijing slams US in growing global crisis. Read more here.

But America too is pushing for access to Vietnamese lands and markets, as part of its larger "pivot" to Asia. And Washington is also willing to shell out for Hanoi's affection. In December 2013, US Secretary of State John Kerry pledged $18 million in assistance, including funding for unarmed Vietnamese Coast Guard patrol boats.

Critically, in October, Washington reversed a decades-old arms embargo on Hanoi, clearing the way for the US to sell "maritime security-related defense articles" to the country.

The turnaround was seen as a retort to China's regional expansionism. But critics slammed the Obama administration for sidelining longstanding human rights concerns, which have held the embargo in place. The US State Department's own human rights report for 2013 noted that Hanoi continues to impose "severe government restrictions on citizens' political rights, particularly their right to change government."

"Vietnam's record on political prisoners is bad and getting worse," Human Rights Watch director John Sifton told the New York Times. "Vietnam has hardly earned this reward."

Related: China and Vietnam have agreed to disagree on the South China Sea. Read more here.

Putin first announced his vision of a "Eurasian Union" of former Soviet republics in 2011, ahead of his return to the Russian presidency. The proposed trade bloc was touted in Moscow as a rival to the European Union and a way for Russia to flex muscle in its regional backyard.

Russia described the EEU, which launched in January, as marking "a completely new level of cooperation" between post-Soviet states, which have a combined population of over 170 million and an estimated GDP of $2.4 trillion — as well as 20 percent of the world's gas reserves.

Follow Katie Engelhart on Twitter: @katieengelhart