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Cablegate: Vietnam Reaching Out to Venezuela and Cuba On Energy

VZCZCXRO0022
RR RUEHHM
DE RUEHHI #2642/01 2890926
ZNR UUUUU ZZH
R 160926Z OCT 06
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 3718
INFO RUEHHM/AMCONSUL HO CHI MINH 1997
RUEHCV/AMEMBASSY CARACAS 0010
RUEHUB/USINT HAVANA 0006
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC

UNCLAS SECTION 01 OF 02 HANOI 002642

SIPDIS

STATE FOR EAP/MLS AND EB/TPP/BTA/ANA
STATE PASS USTR DAVID BISBEE
COMMERCE FOR 4431/MAC/AP/OPB/VLC/HPPHO
TREASURY FOR OASIA

SENSITIVE BUT UNCLASSIFIED
SIPDIS

E.O. 12958: N/A
TAGS: ECON ENRG OVIP EINV VE VM
SUBJECT: VIETNAM REACHING OUT TO VENEZUELA AND CUBA ON ENERGY

SENSITIVE - DO NOT POST ON INTERNET

1. (SBU) Summary and Comment: Recent news reports have indicated
that Vietnam has signed a series of energy deals with Venezuela and
Cuba. According to a GVN official, such Memoranda of Understanding
(MOUs) are in line with the GVN's policy to seek more oil resources
and partners outside of Vietnam in order to meet the country's
increasing energy needs. Vietnam has only signed MOUs to explore
the contracts, and commercial considerations would be the primary
factors in the GVN's decisions. The timing of the Venezuela deals
coincide with Venezuela's attempt to gain a seat on the UN Security
Council (UNSC). Despite Venezuela's efforts to curry Vietnam's
favor for its UNSC bid, MFA officials have assured us on several
occasions that Vietnam has a vote-trading arrangement with
Guatemala. End Summary and Comment.

2. (SBU) Econoff met with Deputy Director Nguyen Xuan Dinh of the
Ministry of Interior's Department of Energy and Petroleum on October
13 to inquire about recent news reports that Vietnam had signed a
series of energy deals with Venezuela and Cuba. According to media
reports, on October 6 Venezuela President Hugo Chavez announced
plans to build a USD 2.1 billion refinery in Vietnam using funds
earned from Venezuela's recent sale of its Lyondell-Citgo refinery
in Texas. The reports said Vietnam's state-owned oil and gas firm
PetroVietnam would also cooperate with Venezuela's state oil company
PDVSA to certify and quantify the reserves in Venezuela's Orinoco
belt. Other news reports stated that while in Cuba, Vietnamese
officials entered a partnership with Cubapetroleo for oil
exploration in the Gulf of Mexico.

3. (SBU) When asked for details of these deals, Dinh explained that
these were "only" MOUs to explore contracts and that commercial
considerations would be the primary factors in the GVN's ultimate
decisions. He added that these MOUs are in line with GVN policy to
seek more oil resources and partners for exploration outside of
Vietnam in order to meet the country's increasing energy needs. The
GVN currently has seven contracts abroad, including in Malaysia,
Algeria, Indonesia, Mongolia and Russia, and is exploring new
contracts with Kazakhstan, Cuba and Venezuela. "This is normal
cooperation between countries," he said, adding that the GVN is also
trying to expand deep water production in its own territories. Dinh
adamantly asserted that political considerations played no role in
the agreements.

4. (SBU) In regard to Chavez' statement on plans to build a refinery
in Vietnam, Dinh said that officials from Venezuela's PDVSA will
come to Vietnam in December to discuss terms and conditions. Dinh
was at pains to emphasize that Vietnam has an "open door policy for
every country and company" in regard to investment, and that PDVSA
would be treated no differently than any other potential investor in
Vietnam. Vietnam is now adjusting the scope of work for new
refineries and PDVSA would be free to accept or reject the terms.
"It depends on PDVSA's offer," he said. "But we are also waiting
for American firms to bid on contracts in Vietnam. We don't care
about the name of the company or country. It is the economic
substance that matters."

5. (SBU) As for the Cuba MOU on exploration and production, Dinh
said the GVN would be examining available geological data and
bidding criteria. "It depends on the potential of the block that
Cuba offers to PetroVietnam," he said.

6. (SBU) Comment: The timing of the Venezuela deal coincides with
Venezuela's attempt to gain a non-permanent seat on the UN Security
Council. Despite Venezuela's efforts to curry Vietnam's favor for
its UNSC bid, MFA officials have assured us on several occasions
that Vietnam has a vote-trading arrangement with Guatemala. The
MOUs also shed light on the way Vietnam's "friends towards all"
foreign policy relates to its economy. Vietnam's energy needs are
growing, and the country is searching for energy partners. It may
be that because of their government's particular circumstances and
ambitions, the state oil firms of Venezuela and Cuba are willing to
come to the table with terms that are, for Vietnam, more favorable
than those offered by their European and U.S. counterparts. End
Comment.

7. (SBU) Background: With daily output of 350,000 barrels per day,
Vietnam is the third largest crude oil producer in Southeast Asia
after Indonesia and Malaysia. Crude oil currently accounts for 22
percent of Vietnam's exports. The Ministry of Trade recently

HANOI 00002642 002 OF 002


drafted an export plan, however, which sees crude oil exports
falling to 15.6 million tons in 2010 from 18.7 million tons in 2006
because Vietnam will increasingly use its crude oil resources once
it establishes refining capacity. Vietnam's first oil refinery, in
central Quang Ngai Province, is expected to come on line in early
2009.

MARINE

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