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In About-Face, U.S. Supports Vietnam in Oil Dispute With China

Stocks in this article: A INTC XOM

TAIPEI (TheStreet) -- The U.S. fought Vietnam in the 1960s and 1970s and has long had a frigid relationship with its government, but now the U.S. is all but explicitly backing the Communist government as they both try to check the expansion of China.

Washington has taken a series of soft yet persuasive measures to indicate it's on the side of Vietnam, which reports injuries and a sunken boat in its quest to oppose the CNOOC (traded in Hong Kong) oil rig that China placed in disputed waters on May 2.

The unspoken alliance against Beijing's expansion in the 3.5 million square-kilometer (1.4 million square mile) South China Sea marks a U.S. policy shift favoring the Southeast Asian country, where the U.S. lost more than 58,000 people in the war before full pullout by 1973.

Although it seems antithetical to longstanding American policy, sustained closer relations with Hanoi would protect the interests of American companies such as South China Sea gas driller Exxon-Mobil (XOM) as well as those with strong onshore business in Vietnam, like Agilent Technologies (A) and Intel (INTC).

In one sign of improved U.S.-Vietnam ties, the Group of Seven industrialized nations -- of which the U.S. is a member -- issued a statement last Wednesday, June 4, calling for use of legal dispute mechanisms rather than coercion to settle South China Sea disputes.

Vietnam is exploring international legal action over the oil rig, while China has resisted agreements on maritime claims under international organizations.

Washington has also stood by as Japan, itself at odds with China over sea rights, sells patrol ships to Vietnam. And Vietnam is among 12 countries expected to join the U.S.-led Trans Pacific Partnership trading bloc. China isn't.

The U.S. may see Vietnam as part of a broader set of nations it can use to contain China's expansion, part of its three-year-old pivot to Asia that's supposed to allow U.S. engagement with Beijing without letting it rival Washington as a world superpower.

More frequent U.S. naval visits and military exercises with Vietnam are probably on the horizon, says Scott Harold, associated political scientist with the RAND Corporation in Washington.

"I wouldn't go quite so far as to call it an alliance," Harold says. That said, "the U.S. is going to build a closer and closer defense relationship with Vietnam."

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