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

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."

China all but expects the U.S. to side with its maritime rivals, as Washington pledges military support to the Philippines and Japan as needed. Beijing has groused about it but not cut back prized economic relations.

Like the six governments that claim the South China Sea, the United States is keen to avoid war, limiting how far it will go in protecting its non-treaty diplomatic partner Vietnam. But China and Vietnam have distrusted each other for centuries. Both are Communist and nationalistic, but they disagree on major points. And some in each country are ready for a battle.

"The Obama Administration is determined to avoid a confrontation with Beijing, which is why China, seeing that it pays no price for aggressive behavior, will continue pressing and eventually push the region and the United States into conflict," says Gordon Chang, author of the 2001 book The Coming Collapse of China.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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