A good start for the new chapter in U.S.-Vietnamese relations.

Exclusive: Courting Vietnam, U.S. prepares to ease arms embargo

(Reuters) - Nearly 40 years after the United States helicoptered its last soldiers out of Vietnam in an ignominious retreat, Washington is moving closer to lifting an arms embargo on its former enemy, with initial sales likely to help Hanoi deal with growing naval challenges from China.

Senior U.S. officials with knowledge of the initiative said Washington wants to support Vietnam by strengthening its ability to monitor and defend its coastline, and said unarmed P-3 surveillance planes could be one of the first sales.

Such aircraft would also allow Vietnam to keep track of China's increasingly assertive activities in the South China Sea, a potential flash point because of interlocking claims from many countries to its islands and reefs.

Two senior Obama administration officials said discussions on easing the embargo are taking place in Washington and could result in a decision later this year.

"The mood is changing, and it is something we're looking at seriously," said one of the officials, speaking on condition of anonymity. "What we have found is a partner in which our interests are converging."

Interest in warmer ties with Vietnam, despite U.S. concerns about its human rights record, aligns with President Barack Obama's strategy to refocus economic, political and military attention toward Asia.

The move to lift the embargo follows a gradual resumption of links between the United States and Vietnam over two decades, which accelerated with a series of high-level diplomatic and military meetings in recent months.

Two senior executives in the U.S. weapons industry told Reuters they expected the U.S. government to lift the arms ban soon. "There is a lot of discussion about allowing weapons sales to Vietnam. It is a promising area for us," said one of the executives, who was not authorized to speak publicly.

Vietnam's Foreign Ministry had no immediate comment.

     

CAUGHT OFF GUARD

Vietnam's vulnerability to China was exposed in early May when Beijing positioned a massive oil rig in waters that Hanoi claims as part of its 200-nautical-mile exclusive economic zone.

While Vietnam has embarked on a multi-billion-dollar military modernization program, its surveillance capabilities are limited, and the unannounced deployment of the drilling platform caught Hanoi by surprise. China moved the rig back toward its coast in mid-July.

The two sides clashed at sea in 1988 when China occupied its first holdings in the Spratly Islands in the South China Sea. China took full control of another South China Sea archipelago, the Paracels, after a naval showdown with what was South Vietnam in 1974.

The Philippines, Malaysia, Brunei and Taiwan also have claims in the South China Sea. China has a separate maritime dispute with Japan over islands in the East China Sea.

U.S. Senator John McCain, a former prisoner of war in Vietnam who led the charge to normalize ties with Vietnam in the early 1990s, said he would shortly present a bipartisan proposal to lift some of the restrictions on arms sales.

McCain was one of four U.S. senators to meet the Hanoi leadership and discuss the arms embargo this summer at a time when Sino-Vietnamese ties were at their lowest ebb in decades.

In August, six days after the senators' visit, General Martin Dempsey, chairman of the U.S. Joint Chiefs of Staff, made the first trip to Vietnam by America's top soldier since 1971. Vietnam People's Navy Commander-in-Chief Admiral Nguyen Van Hien traveled to the United States last week and discussed joint naval exercises with Navy Secretary Ray Mabus.

Vietnam's foreign minister, Pham Binh Minh, will visit Washington in early October for talks with Secretary of State John Kerry, and U.S. Defense Secretary Chuck Hagel is expected to go to Vietnam before the end of the year.

Vietnam is unlikely to stray too far into the U.S. orbit. Soon after the meetings with U.S. civilian and military officials, Hanoi sent a Politburo heavyweight to Beijing to try to repair damaged ties between the communist neighbors.

"Vietnam understands China is forever at its doorstep and wants to have an independent foreign policy," said Phuong Nguyen, a research associate at the Center for Strategic and International Studies in Washington.

Daniel Russel, the U.S. Assistant Secretary of State for East Asia and the Pacific, warned against overstating the rapprochement between the United States and Vietnam.

"I don't believe that Vietnam is looking to swap out the long-term party-to-party relationship that it has enjoyed with Beijing, albeit punctuated with some pretty violent wars, for an exclusive relationship or an alliance with the United States," Russel told Reuters.

    

STRATEGIC LOCATION

Russel said Vietnam's strategic location was a good reason to work more closely with Hanoi, adding that easing the embargo would be "not a bad thing."

"We are open to - and consider it in our interests to - help countries like Vietnam develop their maritime domain awareness as well as their maritime capacities, and hopefully there will be more to come," he said.

Vietnam is already a big buyer of weapons from Russia, its Cold War-era patron.

It has two state-of-the-art Kilo-class submarines and will get a third in November under a $2.6 billion deal agreed with Moscow in 2009. Three more submarines are to be delivered in the next two years.

Vietnam has also bought modern naval frigates and corvettes, mostly from Russia.

But the P-3 surveillance planes would fill a gap for Vietnam.

There are 435 of the Lockheed Martin-made P-3s in service worldwide, operated by 21 governments, according to Lockheed’s website. The U.S. Navy is replacing its P-3 aircraft with more advanced P-8 surveillance planes built by Boeing Co.

One Lockheed executive was quoted in April 2013 by IHS Janes, a trade publication, as saying Vietnam could request six P-3s, and that there appeared to be growing support in the U.S. government for approving the request. Lockheed officials declined comment on the issue to Reuters, since such weapons sales are handled by the governments involved.

The State Department declined to say whether Vietnam had submitted a formal "letter of request"  for the aircraft. One source familiar with the issue said officials were still working through the decisions before such a request would be submitted.

U.S. government officials view sales of maritime surveillance equipment as a good start for the new chapter in U.S.-Vietnamese relations and see P-3 aircraft as a "logical choice," one source said.

(Reporting by Lesley Wroughton and Andrea Shalal; Additional reporting by Mai Nguyen and Martin Petty in Hanoi; Editing by Dean Yates, David Storey and Douglas Royalty)