Thayer Consultancy Background Brief:

ABN # 65 648 097 123

Carlyle A. Thayer
Vietnam and U.S. Oil and Gas
Cooperation
September 9, 2020

Dr. Le Hong Hiep authored “The Strategic Significance of Vietnam-US Oil and Gas
Cooperation” published in The Diplomat on September 7, 2020.
Q1. Do you agree with the writer’s opinion about the gas and energy industry
cooperation between the U.S. and Vietnam?
ANSWER: Vietnam’s massive trade surplus with the United States will be a pressing
bilateral issue as long as Donald Trump is president of the U.S. Increased involvement
by U.S. companies to assist Vietnam’s shift from coal to liquefied natural gas (LNG) by
constructing gas-fired power plants utilising imported U.S. LNG would reduce the
trade deficit.
Dr. Hiep argues that LNG deals between Vietnam the United States would “kill two
birds with one stone,” that is, reduce the trade deficit and secure U.S. government
backing for American companies subject to Chinese harassment. This proposition is
debateable.
It is in Vietnam’s interest to have several foreign oil and gas companies involved in
developing its hydrocarbon sector and gas-fired power plants rather than become too
reliant on one partner.
While the U.S. government may work closely with American oil and gas companies,
they are separate and independent entities. American companies factor risks into
their commercial calculations and U.S. government backing could help mitigate these
risks. But the U.S. government cannot compel an American company to stay the
course in Vietnam in the face of Chinese pressures, especially if these companies have
interests in mainland China.
It is unclear what form “U.S. backing” would take other than political and diplomatic
support. Certainly a second term Trump Administration would put pressure on
Vietnam to provide protection to American offshore investments.
Dr. Hiep argues that “other foreign partners have proven unable to resist Chinese
intimidation” and cites Repsol of Spain as an example. However, the evidence suggests
that it was the Vietnamese government not foreign companies (Repsol and Russia’s
Rosneft) that took the decision to terminate operations in the face of Chinese
intimidation.
Q2. What is the most important advantage Vietnam will gain through cooperation
with the U.S. in the South China Sea?
 2

ANSWER: There can be no question that increased American investment in Vietnam’s

energy sector is a win-win proposition for both countries. It is in the U.S. national
interest to protect American investment in Southeast Asia in general and Vietnam in
particular. It is also in Vietnam’s interest to develop its energy sector and to have U.S.
support and backing against Chinese intimidation. But this convergence of interests
has not yet created sufficient trust between Vietnam and the United States to lead to
stepped up practical defence and military cooperation.
Oil and gas are one part of a larger picture. There are a number of irritants in the
bilateral relationship besides the trade deficit that must be resolved before trust can
be built. These irritants include tariffs on Vietnamese catfish, Vietnam’s status as a
non-market economy, Vietnam’s removal of technical barriers to trade, opening
Vietnam’s market to increased imports and services, Vietnamese labour reforms, etc.

Suggested citation: Carlyle A. Thayer, “Vietnam and U.S. Oil and Gas Cooperation,”
Thayer Consultancy Background Brief, September 9, 2020. All background briefs are
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Thayer Consultancy provides political analysis of current regional security issues and
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