Hard balancing

Hard balancing can be considered as a useful tool for Vietnam in order to ensure its security in the South China Sea in the context of China’s superior military capabilities. Having become a new strategic space since the late 1980s, the South China Sea represents the tense situation among China, Vietnam, the Philippine and other South-East Asia countries. To Vietnam, with a coastline of 3,260 kilometres, this is an extremely important mission to defend the coastal and the territorial integrity within its Exclusive Economic Zone (EEZ). To China, following the navy vision of China by Admiral Liu Huaqing (1916-2011) outlined in the mid-1980s, identifying many advances in naval doctrine, the Chinese navy has changed its strategy from coast-to-coast defence to offshore-defence, but the new strategy adopting a number of transit steps is called deep-seated defence, centred on the capabilities of new weapons. Under a maritime renaissance, the South China Sea becomes the frontier of intense

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geopolitical and trade competition, and most important, the defence barrier for China’s Hainan Island – the home of Asia’s largest naval base. As the matter of fact, China is forming “a strategic triangle in the South China Sea” (see Figure 4-6): from a group of

“artificial islands” in the Spratly Islands (centred on Fiery Cross Reef), Paracel Islands (centred on Woody Island) and Scarborough Shoal with a significant naval installation and airbase building.

Figure 4-6: Chinese triangle strategy in the South China Sea Source: Nippon.com

Back to Vietnam situation, since the beginning, the Vietnamese military doctrine is to maintain the construction of a people’s war posture: the war of the people to defend homeland, maintain stability and create a favourable environment for development, and ready to defeat any enemy’s intent to invade the country at the same time. In order to modernise its

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military power, Vietnam has been buying “modern hardware from foreign countries, and developing a domestic defence industry” (Le, 2013b). Indeed, while Vietnam has been continuously investing in the production of its own weapons and equipment that are compatible with its technological capability, procuring a large amount of weapons and technological equipment from foreign countries so as to enhance the strength of Vietnamese People’s armed force (Ministry of Defence, 2009).

Indeed, Vietnam’s military modernisation began after the policy of economic reform under Doi Moi was initiated. Since the beginning of the 1990s, the military expenditures could not meet the minimum requirements of the army (Thayer, 1997). This may be due to the unstable economic development of Vietnam. However, a decade later, when economic growth reached the blooming period, Vietnam’s military modernisation has reached significant progress, especially regarding naval power. From 2006 to 2016, Vietnam’s spending on defense rose in absolute terms from $1.8 billion to $5 billion that averaged $3.4 billion per year. Vietnam's defense budget was estimated at between 1.94% to about 2.6% of GDP. By 2020, Vietnam’s defense spending will increase further $6.2 billion, predicted by Jon Grevatt, Asia Pacific Defense Industry Analyst, Jane's at IHS (Yan, 2016. May 23).

Figure 4-7 provides details of Vietnam’s military expenditures from 2006 to 2016.

Figure 4-8 shows that Vietnam’s main weapon supplier is until recently Russia with about 80% of its military purchases (Yan, 2016. May 23). Especially, its major purchases are surface and submarine fleets. Besides, it has developed coastal defence with the purchase of anti-ship batteries and missiles. In addition to the military contract with Russia, now the U.S., European countries and Israel have their shares in the Vietnamese market. Most recently, on May 25, 2017, the United States handed over a high-capacity marine patrol vessel CSB 8020 to the Vietnam Coast Guard (VCG) in Honolulu city, Hawaii. The CSB 8020 may help improve the cognitive ability of maritime affairs of the VCG. At the same time, it can

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strengthen their capacity in implementing maritime law enforcement, searching and rescuing, and humanitarian response. Specially, “this is a symbol of the comprehensive US-Vietnam partnership”, said US Coast Guard Adm. Michael J. Haycock, assistant chief of staff and military officer (Nhu Tam, 2017, May 26). Furthermore, the U.S. has sent six fast patrol vessels to Vietnam aiming to bolster its coast guard and counter Chinese ambitions in the SCS (Nhu Tam, 2017, May 26). What is more, in recent years, Vietnam has been trying to upgrade its domestic capability by attending joint production activities and intensifying R&D (Yan, 2016. May 23).

Figure 4-7: Vietnam’s military expenditure (2006-2016).

Source: Author’s own collection based on TradingEconomics,

https://tradingeconomics.com/vietnam/military-expenditure. and Military Spending in Vietnam, http://militarybudget.org/vietnam/.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

USD million

Defense Budget

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Figure 4-8: Vietnam major defence acquisition since 1995.

Source (Le, 2013b)

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Figure 4-9: Vietnam Strategic missile-defence force Source: Benoit Noget 2016

Figure 4-9 presents the data for Vietnam military acquisition, the areas of interest in the ground weapons system are the BAL-E and Bastion K-300P Bastion missiles, along with the K-300P anti-aircraft missile system. Vietnam's military modernization focused on naval equipment but did not forget to renew the armament system for the army. The main purpose is to defence the country sovereignty. This strategy uses missiles to destroy and disable all enemy military facilities in the security zone as determined by the range of missiles, but those factors and the number of launchers increase the cost. Vietnam's missile defence strategy can only handle a part of threats and is only effective by a self-supply ammunition industry.

In sum, China's new defence theory puts on the development of arm forces with the assumption of new space and frontier control and defence. The fact is that Vietnam did not make the mistake of placing the purchase of a weapon depending on the prospect of the Chinese, because Vietnam military doctrine is not to create a completely destructive arms race. If the firepower gap between China and Vietnam is clearly inclined toward China, Vietnam will still have an impact on China's aggressive stance with its defence strategy and one unique military doctrine: the people’s war posture.

93 4.3. Soft balancing

Soft balancing is one of the foreign policy-balancing options in theories of balancing power.

In spite of its long-standing existence, the concept of soft balancing remains incompletely to recognise or difficult to define. In attempting to put some order to this confusion, various scholars have defined multiple meanings of soft balancing. Kenneth Waltz, Keir A. Lieber and Gerard Alexander view soft balancing as efforts that form alliances or co-operate with other countries to counter powerful state (Lieber & Alexander, 2005; Waltz, 1979). At this point, there were many definitions of alliance and Bergsmann (2001) pointed out those definitions generally accentuate formal and informal cooperative arrangements of some consequence among at least two states. They usually relate to military and security affairs.

Walt (1987b) defines “alliances as a formal or informal relationship of security cooperation between two or more sovereign states” (Walt, 1987b, p. 1).

However, soft-balancing is also a measure that uses “non-military tools to delay, frustrate, and undermine aggressive unilateral military policies” of stronger state (Pape, 2005). Particularly, soft balancing is undertaken by international institutions, economic methods, and diplomatic arrangements (Pape, 2005).

In respond to Chinese assertiveness in the SCS, Vietnam in recent years expanded its security cooperation with other powers in the region. For example, Vietnam has been strengthening its cooperation with the US and Japan in relation to maritime security issue.

Three countries share common goals including the maintenance of freedom of navigation in the South and East China Sea (ECS) based on the laws and current international practices which have extremely important meaning for the survival and prosperity of the region and the peoples, because these waters supply enormous resources and provide safe maritime routes.

Apart from this, three countries have no intention to intervene on territorial disputes of other

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countries but they do not recognize the rights and maritime interests that China unilaterally declared over SCS and ECS.

In August 2010, the US aircraft carrier George Washington visited Vietnam, during that time, the two countries held joint military training within a week. In the next three months later (Nov, 2010), Vietnam had an invitation for the foreign navy on the use of services in the port of Cam Ranh (upgraded with Russia’s help), which attracted a lot of attentions, and seemed to lead to an increasing presence in the region of Russia, the US, Japan, Korea and India (Bland, 2011).

Furthermore, the Vietnamese and the US government have established an agreement to tie firmly the cooperation between the two sides in July 2011. Accordingly, both countries have conducted joint exercises at Da Nang city. Besides, there have been many high-level state visits of the US Navy. The Naval cooperation improved rapidly between the two countries and have also attracted a lot of attentions (Barta, 2011, July 16). The most recent visit to Vietnam in 2016 is by President Obama on the fully embargo lift towards Vietnam.

Besides these, Vietnam has been trying to deepen its ties with major powers by multilateral arrangements. Particularly, by 1995 Vietnam had successfully established diplomatic ties with all major powers, including the US. Since the early 2000s Hanoi has endeavoured to develop bilateral ties through the establishment of “strategic partnerships”.

By September 2013, Vietnam had established strategic partnerships with Russia (2001), Japan (2006), India (2007), China (2008), South Korea, Spain (2009), the United Kingdom (2010), Germany (2011), Italy, Thailand, Indonesia, Singapore, and France (2013).

In addition to military co-operations with other major powers in region, Vietnam has also soft-balanced China by many economic and diplomatic methods. Nevertheless, it is important to note that even though Vietnam’s strategy has been deploying in direct way and gain certain achievements, the country still faces several challenges:

95 4.3.1. Economic factor as an obstacle

It is important to note that even though Vietnam’s achievements in economic development under Doi moi are undeniable, the country’s interests add more tensions in terms of its disputed waters with China. This factor reflects the truth that until 2016 Vietnam’s hedging strategy has not been deployed significantly.

After the reunification of the north and the south of Vietnam, on August 9, 1975 the Vietnamese Communism of Party (VCP) Politburo issued Resolution no. 244 NQ/TW as a guideline for the promotion of oil and gas exploration in the whole country. As discussed in the Resolution, the continental shelf off the southern coast and the Tonkin Gulf are the most important areas for sovereignty and economic values (Tien Dung, 2016, November 15).

According to VCP, the southern continental shelf was the key target showing that there was a great potential of oil and gas there (Tien Dung, 2016, November 15). Be aware of this, in 1978, PetroVietnam signed its first Production Sharing Contracts with foreign partners. After the failure of the first exploration drills that were carried out in the Nam Con Son basin (the southern continental shelf), in May 1984 oil of commercial value was discovered at Bach Ho (White Tiger) field. Consequently, Vietnam had its first barrels of crude oil from the SCS in 1986 (Tran, Le, & Pham, 2016).

After that, Vietnam put more emphasis on the oil and gas industry. For example, the VCP Politburo passed Resolution no. 15-NQ/TW providing guidelines for the development of the industry in July 1988. Accordingly, in 1989 the state-owned company - PetroVietnam adopted a development strategy until 2000. It could be said that the two resolutions and the strategy showed Vietnam’s efforts in developing oil and gas industry for the coming decades that based on the reform policy Doi moi (Tran et al., 2016). According to the Strategy for socio-economic stabilization and development until 2000 adopted by the VCP’s seventh national congress in 1991, Vietnam would “actively promote cooperation with foreign

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countries to explore, exploit and process oil and gas” (Politburo of Vietnam, 1993; Tran et al., 2016). Two year later, the 1993 Petroleum Law was adopted by the National Assembly, and this was the first time a comprehensive legal framework for the development of the industry was approved. Since then, the production of oil and gas in Vietnam developed quickly. As a result, it became a crucial source of wealth for the country, promoting significantly its socio-economic development. By the early 2010, PetroVietnam had become Vietnam’s biggest conglomerate, accounting for about 20 percent of the country’s GDP and generating up to 25–30 percent of the government’s annual revenue (PetroVietnam, 2012).

In recent years, although oil and gas were considered as an indispensable part for the country’s economic growth, Vietnam’s annual oil production has declined. Clearly, during ten years (2001 – 2011), Vietnam’s oil consumption increased by 6.4 percent annually, reaching 16.5 million tons in 2011 (BP, 2012). However, the production decreased from 20.1 million tons in 2004 to 15.2 million tons in 2011 (General Statistics Office, 2008, 2012). For this reason, Vietnam became an importer of oil in 2008 (General Statistics Office, 2010) and the topic of energy security deserved attentions and concerns. In order to deal with this problem, PetroVietnam increased its investment in foreign oil fields and intensified exploration and exploitation activities within Vietnam’s continental shelf. Particularly, there are currently more than 40 international oil companies operating in the upstream, midstream and downstream sectors in Vietnam. They are Chevron, ExxonMobil (US), KNOC (Korea), Gazprom (Russia), Petronas (Malaysia), PTTEP (Thailand), Talisman (formerly Canadian, now Spanish), Total and Neon Energy (France) which are co-operating with PetroVietnam mainly in the upstream sector. These companies have mostly invested in the form of capital contribution with Petrovietnam in order to implement petroleum contracts (Tran et al., 2016).

Nevertheless, since the late 2012, China started to challenged Vietnam’s mining operations of hydrocarbon resources in the SCS (Le, 2014). For instance, due to China’s high

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energy demand for its economic development (Institute for the Analysis of Global Security, 2009), China continuously seeks hydrocarbon resources in the SCS. Accordingly, China has invited Vietnam to participate in “joint development projects” in disputed areas of the SCS.

In contrary to China’s expectation, Vietnam countered this because China’s proposal aims at Vietnam’s lawful Exclusive Economic Zone (EEZ) and continental shelf, which Vietnam does not view as disputed areas. The first plan failed, China itself drew an exaction of “nine dash line” which causing overlapping disputes in the SCS, troubling Vietnam’s oil and gas exploration efforts. The most serious incident was the cable cutting of Petro Vietnam’s seismic survey by China’s maritime surveillance vessels on May 26, 2011 (Nguyen Hung, 2011, May 27). The Binh Minh 02 was operating the seismic survey in Block 148 within Vietnam’s EEZ. Two weeks later another similar incident happened. On June 9, 2011 a Chinese fishing trawler supported by two Chinese fishery patrol vessels cut the cable of the Viking II, which was undertaking seismic surveys in Block 136/03 further south (PetroTimes, 2011, June 10). Again on December 4, 2012, the incident of cable cutting happened to the ship Binh Minh 02 (Mai Ha, 2012, December 4). The three incidents caused an angry response from Vietnam and added tensions to its bilateral relations with China. Vietnam also criticized China publicly in international newspapers as “He carries fire in one hand and water in the other” (Mai Ha, 2012, December 4).

In addition, China has used its economic tool to put pressure on a number of oil companies to force them to abandon their businesses in Vietnam. For example, China routinely put pressures on Exxon Mobil, BP, Chevron, and Petronas, to cancel oil exploration deals with Vietnam (Torode, 2011, September 23). In case of Exxon Mobil, Chinese diplomats repeatedly threatened Exxon Mobil that if it did not cancel deals with Vietnam, it might face punishment against its businesses in China (Torode, 2011, September 23). As a result, Exxon did not back down but a number of other companies did. In July 2007 four U.S.

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and eight foreign companies faced similar threats from China, and about five deals were suspended or cancelled (Torode, 2011, September 23). In response, Vietnam was more actively in engaging partners from various countries in its oil exploration and exploitation efforts. From 1988 to the end of 2014, PetroVietnam signed 102 contracts with various partners from different countries, including the United States, Russia, the UK, India, Canada, South Korea, Malaysia, and Australia (Tran et al., 2016). It is clear to note that Vietnam was seeking and will continue to find the support from these countries in protecting their legitimate interests in Vietnam, thereby countering China’s undue pressures.

Another evidence of bilateral tension comes from Vietnam’s efforts to prevent China from illegally exploring for oil and gas in its waters. For example, after the normalization of relations between Vietnam and China, the China National Offshore Oil Corporation (CNOOC) signed an agreement with Crestone Energy Corporation to conduct exploration in Vietnam’s Tu Chinh basin in May 1992 (Thayer, 1994). Vietnam drastically protested the move and a prolonged exchange of claims and counter-claims between the two countries ensued. While China claimed that the Tu Chinh area was part of the disputed Spratlys, Vietnam stated that the basin was completely in Vietnam’s EEZ and continental shelf and not in disputed area (Amer, 1997). Tensions between the two over the Crestone contract lingered on at least until September 1998 when China reported that Crestone and China were continuing their survey of the Spratlys and Tu Chinh areas (Zou, 2006).

Furthermore, the CNOOC’s offers of blocks that lie within Vietnam’s EEZ in the SCS to international bidders also affect Vietnam’s oil and gas economic development. For example, China opened nine such blocks to international bidding in June 2012. Due to Vietnam’s firm protest as well as the dubious legal basis of China’s offer, oil companies have not shown interest in the offer. After that, China decided to conduct its own exploration activities in Vietnam’s waters several times in the past. Particularly, in March 1997, China dispatched the

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Kantan-3 floating oil platform to drill in Vietnam’s Block 113 off Thua Thien Hue province.

The oil platform was also involved in a similar incident in the same area in late 2004.

Because Vietnam’s diplomatic protests and more effective measures, China finally had to withdraw the platform (Zou, 2006).

Moreover, it is important to note that China has shown its growing determination in extracting more oil and gas from the SCS regarding Haiyang Shiyou 981. In the mid of 2012, China dispatched its first deep-water drilling rig named Haiyang Shiyou 981 to the SCS. This raised worries for the Vietnamese government as there is a possibility that China may use the rig to unilaterally explore for oil and gas in the two disputed archipelagos and even its continental shelf (Nguyen & Martina, 2014). The development has provoked Vietnam to increase investments in upgrading the capabilities of the Vietnam People’s Navy (VPN) as well as the Vietnam Coast Guard (VCG) (Thayer, 2009). Because the involvement of naval ships may lead to a higher possibility of armed clash, the VCG is set to play a more important role in protecting Vietnam’s resources in its EEZ and continental shelf. In order to gain expected results, the VCG would work closely with the VPN and PetroVietnam to protect the country’s oil and gas exploration activities and decisively prevent foreign countries from installing drilling rigs in the country’s waters (Thanh Huy, 2011, July 28).

4.3.2. Construction of artificial islands

Despite Vietnam’s diplomatic efforts in dealing with China’s assertive actions in SCS (Viet Anh, 2015, 2016), China has nearly completed construction work on three man-made islands there, giving it the ability to deploy combat aircraft and other military assets to the disputed region.

The Centre for Strategic and International Studies (CSIS) analysed recent satellite photos and concluded that runways, aircraft hangers, radar sites and hardened surface-to-air missile shelters have either been finished or are nearing completion. It appears that China is

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using its island-building project to give teeth to its claim over almost the entire South China Sea and its islands and reefs (Nicol, 2017).

The Fiery Cross reef, Johnson South Reef and Hughes reef are parts of the Spratly

The Fiery Cross reef, Johnson South Reef and Hughes reef are parts of the Spratly