The Economic Impact of Russian President Putin’s Visit to Vietnam

The significance of valuing relationships with world leaders to protect national sovereignty was underscored by General Secretary Nguyen Phu Trong during his address at the 29^th Diplomatic Conference in 2016. This, in conjunction with the diplomatic approach of President Ho Chi Minh—one of the founders of modern Vietnamese diplomacy, characterized by firmness yet adaptability like bamboo—constitutes two of the primary pillars of Vietnam’s current foreign policy.

Vietnam’s diplomatic landscape has seen significant developments in recent years. The relationship between the United States and Vietnam was elevated to the same strategic partnership level as that of China and Russia during President Biden’s visit to Vietnam in September 2023. This was followed by a visit to Vietnam by President Xi Jinping in December 2023. General Secretary Trọng subsequently extended two invitations to President Putin for a state visit: one at the end of last year and another at the beginning of this year. In response, President Putin arrived in Hanoi on the morning of June 20^th.

Amidst its expanding global influence, Vietnam has been deepening its diplomatic ties with major world powers. Vietnam currently has comprehensive strategic partnerships, which represent the highest level of diplomatic relations, with South Korea, Japan, Australia, Russia, China, and India.

Against the backdrop of these strategic partnerships, President Putin’s visit stands to reshape Vietnam’s economic and diplomatic landscape in profound ways. The economic outlook of Vietnam could be significantly altered in terms of traditional diplomatic relations and national interest relations as a result of President Putin’s visit. Moreover, the United States currently is Vietnam’s largest export market, making it one of the most critical economic partners for the country. Vietnam is an export-oriented economy, with exports accounting for nearly 80% of GDP. Additionally, ‘Vietnam always remembers the support and assistance of the Soviet people in the past and the Russian people today in the nation’s past struggles and current development efforts,’ according to Nhan Dan (The People) newspaper, the most prestigious state-run newspaper in Vietnam, on October 17, 2023.

In the context of modern economic development, Vietnam’s energy exchange with Russia plays a pivotal role in the advancement of oil and gas resources in the South China Sea. This collaboration began with the establishment of Vietsovpetro in the 1980s, a joint venture between Russian and Vietnamese state oil companies.

The partnership includes the development of significant oil and gas fields such as the White Tiger (Bạch Hổ) and Dragon (Rồng) fields, located in Vietnam’s exclusive economic zone. Despite the considerable number of developed oil and gas wells in this region, Russia’s support continues to be vital.

This cooperation not only secures Vietnam’s energy resources but also strengthens the strategic partnership between the two nations, offering opportunities for further investment and expanded development in the future. Despite the passage of time, these oil fields continue to provide substantial benefits to Russia

Nevertheless, the energy sector in Vietnam has been affected by geopolitical conflicts. As a result of China’s disruptive measures, various energy projects in Vietnam’s maritime sector, including collaborations with Repsol from Spain, Marubeni from the UAE, and Rosneft from Russia, have terminated their relationships with Vietnam. In response to these challenges, state-owned Russian energy companies have continued to uphold their collaboration with Vietnam, demonstrating their commitment to maintaining a strong and resilient partnership despite the pressures from China

In light of these developments, the limited gas supply relative to Vietnam’s increasing demand has made the import of LNG from northern Russia particularly essential. As Vietnam struggles with gas shortages impacting the operation of its gas-fired power plants and fertilizer production facilities, securing a reliable supply of LNG becomes a critical step. This partnership with Russia is poised to address these challenges and support Vietnam’s energy infrastructure as the country continues to advance its economic development.

Although the relationship with Russia remains strong, the plan to support the development of renewable energy, introduced during President Biden’s visit to Vietnam last year, appears to be a strategic effort by the U.S. to engage more deeply with Vietnam amid current challenges. This initiative aims to reduce Vietnam’s dependence on Russian energy sources by diversifying its energy portfolio.

Through this visit, Vietnam and Russia signed 11 individual memoranda of understanding/contracts/agreements and issued a comprehensive joint statement.

Among the 11 MOUs and contracts signed, one letter indicated a Russian state-owned company’s interest in investing in energy development in the South China Sea—a key concern for Vietnam. Most of the remaining agreements focused on broader development in education and science.

Most of the joint statement focused on broad areas of cooperation, including education, science, and exchanges between people and governments, all without third-party interference. It highlighted collaboration on issues such as chemical weapons prevention, counterterrorism, nuclear non-proliferation, space exploration, cybersecurity, climate change, and human rights. The two sides committed to joint efforts across various fields.

In fact, the main interest of both countries is that from Vietnam’s perspective, they jointly support business expansion based on the legal provisions of both countries and international law, including the 1982 Law of the Sea, regarding energy resource development and energy supply. From Russia’s perspective, it is stipulated in the UN Charter.

Both countries, with a focus on Vietnam’s viewpoint, prioritize the collaborative promotion of business growth within the legal frameworks of both nations and international law. This includes adhering to the 1982 United Nations Convention on the Law of the Sea, specifically in relation to energy resource development and supply. According to Russia, this has been clearly stated in the United Nations Charter.