The United States and Vietnam sign a historic partnership in Biden’s visit, with a focus on China

HANOI/WASHINGTON (Reuters) – U.S. President Joe Biden on Sunday clinched deals with Vietnam on semiconductors and metals, as the strategic Southeast Asian country elevated Washington to the highest diplomatic status in Hanoi alongside China and Russia.

The United States has been pushing for the upgrade for months because it sees the manufacturing dynamo as a key country in its strategy to secure global supply chains from risks associated with China.

After half a century of a long and brutal Cold War-era conflict, Biden arrived in Hanoi to attend a ceremony organized by the ruling Communist Party that included schoolchildren waving American flags and an honor guard carrying bayonet rifles.

Biden pointed to the steps that have been taken towards improving relations.

“We can trace 50 years of progress between our two countries, from conflict to normalization, to this new high status,” he said.

The partnership with Vietnam is part of the Biden administration’s effort “to prove to our partners in the Indo-Pacific region and to the world that the United States is a Pacific country and we are not going anywhere,” Biden told reporters after the meeting in Hanoi. .

Vietnam has been experiencing frosty relations between Washington and Beijing, as the technology and textile exporting country seeks to gain a foothold in the international competition to become a low-cost manufacturing hub.

Senior Chinese officials, possibly including President Xi Jinping, are expected to visit Vietnam in the coming days or weeks, as Hanoi seeks to maintain good relations with all major powers, officials and diplomats said.

Biden also said in Hanoi that he spoke with Vice President Xi at the G20, and that they talked about stability.

The Secretary-General of the Communist Party, Nguyen Phu Trong, 79, commented on the appearance of the 80-year-old American president inside the party headquarters, saying, “You have not aged a single day, and I would like to say that you look better than before.”

Russian arms talks

Vietnam’s long-standing relationship with Russia faces tests over the war in Ukraine, including talks with Moscow over a new arms supply deal that could trigger US sanctions.

Reuters has seen documents describing talks on a credit facility that Russia will provide to Vietnam to purchase heavy weapons, including anti-ship missiles, aircraft, anti-submarine helicopters, anti-aircraft missile systems and fighter jets.

One of them, a letter sent in May by Vietnamese Prime Minister Pham Minh Chinh to the Russian government, expressed interest in the potential new deal.

A Vietnamese military officer confirmed the authenticity of the letter and talks about a new $8 billion credit facility to purchase heavy weapons.

A Vietnamese Foreign Ministry spokesman did not respond to multiple requests for comment on the documents, which show that Moscow has been seeking for months to reach a loan deal that would bypass Western sanctions imposed on Moscow.

Hanoi is holding similar talks with several arms suppliers, including the United States. In recent weeks, Vietnam has participated in several high-level defense meetings with senior Russian officials.

The US-Vietnam modernization will include a security dimension, John Feiner, the US principal deputy national security adviser, told reporters on Sunday, while on the plane with Biden heading to Vietnam from the G20 summit in India.

He said he had no arms deals to announce at this stage, but stressed that the United States and its partners could offer assistance to Vietnam to diversify its sources away from Russian military supplies, an offer he said Vietnam would accept.

That would help Vietnam reduce its military dependence on Moscow, “a relationship we think they are increasingly uncomfortable with,” Viner said.

Chips and rare earths

Biden’s visit comes as bilateral trade and investment relations grow and a long-standing territorial dispute between Vietnam and China in the South China Sea intensifies.

Vietnam Airlines (HVN.HM) is expected to sign an initial agreement to buy about 50 Boeing 737 MAX planes in a $10 billion deal, earmarked for the flight.

Highlighting Vietnam’s growing importance as a “friend exchange” destination for U.S. technology companies, executives from Google (GOOGL.O), Intel (INTC.O), Amkor (AMKR.O), Marvell (MRVL.O), and Global Foundries ( GFS.O). On Monday, Boeing and Boeing are expected to meet with Vietnamese technology executives and Secretary of State Antony Blinken in Hanoi.

However, US officials said semiconductors are the focus of the action plan adopted during Biden’s visit.

Besides potential announcements by US companies, it is unclear what else the partnership could mean. The U.S. government has $100 million annually for five years available under the CHIPS Act to support semiconductor supply chains globally. A large portion of it may go to Vietnam, officials said.

More support for training skilled workers is also part of the deal, as Vietnam faces a major shortage of engineers in the chip sector.

Another key issue is strengthening supply chains for vital minerals, especially rare earths, of which Vietnam has the world’s largest deposits after China, according to US estimates, officials said.

Two people familiar with the plans said an agreement on rare earth elements is expected to be reached during Biden’s visit, which ends on Monday when he returns to America.

But the details are few. Previous attempts by American companies to partner with Vietnamese rare earth companies have not been successful, according to a person involved in one recent plan.

Human rights remain a controversial issue, with US officials regularly criticizing Hanoi for imprisoning activists and restricting freedom of expression. Vietnam may be showing good faith, with diplomats suggesting the activists could be released.

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