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Cablegate: Vietnam and China Working to Boost Relations

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 HANOI 002164

SIPDIS

SENSITIVE

STATE PASS USTR ELENA BRYAN

E.O. 12958: N/A
TAGS: PREL ETRD PBTS CH VM CVR WTO
SUBJECT: VIETNAM AND CHINA WORKING TO BOOST RELATIONS

1. (SBU) Summary: While U.S.-Vietnam relations have been
improving and expanding, fueled by the June visit of the
Prime Minister to Washington, Sino-Vietnamese relations have
not been standing still. In keeping with its long-standing
"balancing" strategy, Vietnam sent State President Tran Duc
Luong to China for a State Visit in mid-July. The purpose
of the visit was to make progress on some nuts-and-bolts
issues that currently clog Sino-Vietnamese relations, in
particular the lack of Chinese investment in Vietnam, the
Vietnamese trade deficit with China, the slow speed of
border demarcation, fishing rights and joint naval patrols
in the Gulf of Tonkin, and exploration and exploitation of
natural resources in the South China Sea. The official line
is that the Luong visit was a spectacular success and a
typical example of two friendly Socialist partners deepening
an already close bilateral relationship. The unofficial
line is that, despite the Vietnamese coup of securing major
Chinese concessions in concluding bilateral negotiations
regarding Vietnam's entry into the World Trade Organization
(WTO), the visit was "ruined" by single-minded Chinese
harping on the UNSC expansion issue, which President Luong
was not prepared to address. Both sides are looking forward
to the visit of China's President and Communist Party
General Secretary Hu Jintao in November as the real
bilateral high-level event of the year. End Summary.

PRESIDENT LUONG'S JULY VISIT: NOT BAD ON THE SURFACE, BUT.
--------------------------------------------- -------------

2. (SBU) Following Prime Minister Phan Van Khai's historic
June visit to the United States, the Vietnamese were eager
for President Tran Duc Luong's visit to China be a success
that would restore "balance" to the relationship among
Vietnam, China and the United States, according to our
Vietnamese think tank interlocutors. The GVN hoped for a
visit that would be long on ceremony and which would address
the future of Sino-Vietnamese relations, including a
possible addition to or rewording of the "sixteen character
framework" that defines current bilateral relations. (The
sixteen characters can be translated as: "good neighbors,
comprehensive cooperation, long-term stability, looking
forward to the future.") The Vietnamese were by all
accounts disappointed, except for state-owned propaganda
outlets. Luong had productive meetings on practical issues
such as border demarcation, increasing Chinese investment in
Vietnam and concluding Vietnam's bilateral WTO negotiations
with China, but his high-level discussions with Chinese
leaders were completely dominated by the UNSC reform issue.
Shortly after returning from the visit, Vice Foreign
Minister Vu Dzung told the Ambassador that "all the Chinese
wanted to talk about was the G-4 proposal. It ruined the
visit."

3. (SBU) Later, MFA officials tried to spin the visit as a
great success. "Recently, visits like this tend to focus
more on groundwork and concrete measures to improve trade
and sign specific projects rather than just formal policy
discussions," one China desk officer told Poloff. The visit
made "great progress" on commercial issues, with "over USD
two billion in contracts signed." An officer at the Chinese
Embassy in Hanoi had an alternative interpretation, telling
Poloff that "USD two billion in promises does not mean USD
two billion in contracts." Shaking his head, he continued,
"those were mostly contracts signed by raw materials
importing companies that do that much business with Vietnam
anyway. The agreements were ceremonial, no big thing."

WTO AGREEMENT AND TRADE WITH CHINA
----------------------------------

4. (SBU) President Luong did score one major coup on his
trip: concluding bilateral negotiations on Vietnam's WTO
entry. China made significant, and unexpected, concessions
in the last round that allowed Luong to announce that the
two sides had concluded negotiations, a major priority for
the GVN. Most were caught unawares by the rapid conclusion
of China-Vietnam WTO talks. "Even we were surprised by
that," the official at the Chinese Embassy in Hanoi said.
According to an unvetted source in Hanoi, the Chinese were
reportedly unhappy that their negotiators had to cave for
the sake of a political deal. In official discussions, the
MFA was quick to suggest that the deal would reduce
Vietnam's trade deficit with China (the deficit was about
USD 2.3 billion in 2004, according to Dr. Do Tien Sam of the
China Studies Center, a Hanoi think tank), but speaking
privately, some of the MFA's China trade experts disagreed.
The WTO agreement "would hardly have any real impact on the
bilateral trade balance, even though the two sides want it
to be so and agreed to create favorable conditions for
Vietnamese goods to enter China's markets," one MFA expert
admitted. "In theory, this is a good step. In practice,
reducing the trade deficit is not at all easy," he
continued.

NUTS AND BOLTS: BORDER ISSUES
-----------------------------

5. (SBU) The MFA, the China Studies Center and the Chinese
Embassy in Hanoi all agree that, in addition to the trade
deficit, "border and territory" issues are serious bilateral
irritants. "The speed of demarcation of the border is a
problem," Dr. Sam told Poloff. Chinese Embassy officials
confirmed to Poloff that President Luong signed an agreement
with the Chinese Government to accelerate the border
demarcation process, with a view to completing it by 2008.
The officials were cautiously optimistic about achieving
this goal. They also noted that President Luong had signed
an "important" promise with the Chinese Government to begin
the demarcation of the region south of the mouth of the
Tonkin Gulf.

NEXT STEP: HU JINTAO'S VISIT IN NOVEMBER
----------------------------------------

6. (SBU) The China Desk at MFA and the Chinese Embassy agree
that the November visit of Chinese President and Communist
Party General Secretary Hu Jintao will be a much more
important event than President Luong's trip in July. "This
will be President Hu's first trip to Vietnam since he
consolidated power," the MFA official said. Hu's visit will
also be "hands-on" and will cover "specific economic
measures," rather than just confirming bilateral guidelines
and frameworks, the MFA expert continued. These "specific
measures" will be "unprecedented breakthroughs" if all goes
well, Chinese Embassy contacts said. In particular, China
is placing importance on an agreement to conduct joint naval
patrols along the Tonkin Gulf demarcation line, and to sign
an agreement paving the way for joint oil and gas
exploration and exploitation in the South China Sea.

7. (SBU) China has never conducted joint naval patrols with
any other country, the Chinese political officer said.
Vietnam, however, has experience with Thailand in this area,
so Beijing has looked to Hanoi for guidance on how to
proceed. "That does not happen often," the Chinese Embassy
officer said. "Vietnam gets to play the big brother for
once." Vietnam is currently drafting the draft protocols
for joint patrols, he added.

8. (SBU) Signing an agreement on joint petroleum exploration
and development would be a very important step, our PRC
Embassy contact continued. However, the Chinese are
prepared for disappointment on that issue. "The Vietnamese
did not want to cooperate with the China-Philippines joint
exploration project, but they felt like they had no choice,"
he explained. "This time, maybe they have more choice."
Our other China contacts had no comment on the issue of
joint development of petroleum resources in the South China
Sea, except to confirm that Vietnam had been reluctant to
join the China-Philippines deal.

9. (SBU) Comment: China and Vietnam are working hard to
address the major remaining issues between them, with
differing amounts of success. The land border demarcation
may actually be completed before the 2008 deadline, which
would eliminate a source of low-level stress caused by
farmers and local officials clashing in poorly-marked border
areas, a common occurrence now. Joint patrols of the Tonkin
Gulf could soothe another long-time friction point by
reducing the number of violent incidents between Vietnamese
and Chinese fishermen. The issues of the Vietnamese trade
deficit and the difference of opinion over the ownership and
use of the resources in the South China Sea, however, are
not going to be solved in the short term.

MARINE

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