India and Vietnam made serious efforts to upgrade their bilateral relations earlier this month during the visit to New Delhi by Vietnamese Communist Party Secretary General Nguyen Phu Trong. Eight pacts were inked, including ones on energy cooperation and protection of information, which are strategically significant areas that will influence the trajectory of this bilateral relationship. Vietnam has offered seven oil blocks to India in South China Sea, including three on an exclusive basis where Hanoi is hoping for production-sharing agreements with India’s state-owned oil company ONGC Videsh Ltd. (OVL).

In a significant move, India has also decided to offer a $100 million credit line to Vietnam to purchase military equipment. Usually a privilege reserved for its immediate neighbors, this is the first time that New Delhi has made such an offer to a more distant nation. Delhi and Hanoi have been working toward building a robust partnership for the past few years.

It is instructive that India entered the fraught region of the South China Sea via Vietnam. New Delhi signed an agreement with Vietnam in October 2011 to expand and promote oil exploration in the South China Sea and then reconfirmed its decision to carry on despite the Chinese challenge to the legality of an Indian presence. Beijing told New Delhi that its permission was needed for India’s state-owned oil and gas firm to explore for energy there. But Vietnam quickly cited the 1982 United Nations Convention on the Law of the Sea to claim its sovereign rights over the two blocks in question. Hanoi has been publicly sparring with Beijing over the South China Sea for the last few years, so such a response was expected.

What was new, however, was New Delhi’s newfound aggression in taking on China. It immediately decided to support Hanoi’s claims. By accepting the Vietnamese invitation to explore oil and gas in Blocks 127 and 128, OVL not only expressed New Delhi’s desire to deepen its friendship with Vietnam, but also ignored China’s warning to stay away.

This display of backbone helped India to strengthen its relationship with Vietnam. If China wants to expand its presence in South Asia and the Indian Ocean region, New Delhi’s thinking goes, India can do the same thing in East Asia.

Hanoi is gradually becoming the linchpin of this eastward move by New Delhi. Hanoi fought a brief war with Beijing in 1979 and has grown wary of the Middle Kingdom’s increasing economic and military weight. That’s why in some quarters of New Delhi, Vietnam is already seen as a counterweight in the same way that Pakistan is for China.

That’s not to say good India-Vietnam relations wouldn’t exist otherwise. Vietnamese have traditionally held India in high regard because of the latter’s support for Vietnamese independence from France and its opposition to U.S. involvement in Vietnam. And New Delhi formulated a Look East policy as early as 1991 to capitalize on East Asia’s economic growth. But the rise of China has given this relationship a powerful strategic, not to mention urgent, dimension.

Both sides realize that a stronger bilateral relationship starts with economic ties. The two countries signed an agreement in 2003 in which they envisioned creating an Arc of Advantage and Prosperity in Southeast Asia. So they have been boosting trade, especially after New Delhi signed a free trade agreement (FTA) with the Association of Southeast Asian Nations in 2009 and concluded talks on an FTA on services and investment in 2012, which is expected to increase bilateral trade to $200 billion by 2022. Both sides could still do more to enhance economic cooperation.

Bilateral trade is far below its potential given that India and Vietnam are major emerging economies.

The two countries also need to think creatively about expanding investment opportunities, especially in the energy, steel and pharmaceutical sectors. This can be done by establishing stronger institutional mechanisms that review the economic relationship on a regular basis and take steps to enhance it.

New Delhi’s foremost interest in Vietnam, though, is in the defense realm. It wants to build relations with states like Vietnam that can act as pressure points against China. With this in mind, it has been helping Hanoi to beef up its naval and air capabilities. Given that Vietnam and India use similar Russian and former Soviet defense platforms, New Delhi could easily offer defense technologies to Hanoi. Talks are ongoing for India to sell the BrahMos supersonic cruise missile, an Indo-Russian joint venture. Such arms could allow Vietnam to project regional power and improve its deterrence against China.

The two nations also have stakes in ensuring sea-lane security, as well as shared concerns about Chinese access to the Indian Ocean and the South China Sea. Hence, India is helping Vietnam to build capacity for repair and maintenance of its defence platforms.

At the same time, the armed forces of the two states have started cooperating in areas like information technology and the English-language training of Vietnamese Army personnel. The two countries are also sharing their experiences in mountainous and jungle warfare.

Naval cooperation, however, remains the chief focus. Vietnam has given India the right to use its port of Nha Trang in the south; the Indian Navy has already made several port calls. It is not entirely clear what the final arrangement will look like, but the symbolism of this is not lost on China.

The two countries potentially share a common friend — the United States. New Delhi has steadily built relations with Washington in the past decade, while Vietnam has been courting America as the South China Sea becomes a flash point. As these three countries ponder how to manage China’s rise, they will be drawn closer together.

With its occasional sniping at India for its dealings with Vietnam as well as with other states in East and Southeast Asia, China has shown it will try to deter strategic competitors from collaborating against it. But if both India and Vietnam stand firm, they could force Beijing to moderate its expansionist claims on the South China Sea and adopt a more conciliatory stance on other regional matters.

Harsh V. Pant teaches in the Defense Studies Department at King’s College London. He is also an adjunct fellow with the Wadhwani Chair in U.S.-India Policy Studies at the Center for Strategic and International Studies in Washington. His current research is focused on Asian security issues.

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