© Reuters. U.S. President Joe Biden attends Partnership for Global Infrastructure and Investment event on the day of the G20 summit in New Delhi, India, September 9, 2023. REUTERS/Evelyn Hockstein/Pool

By Nandita Bose, Francesco Guarascio and Trevor Hunnicutt

HANOI/NEW DELHI/WASHINGTON (Reuters) – The United States and Vietnam plan to elevate their relations as U.S. President Joe Biden visits the country from Sunday, with officials saying the focus of the talks will be semiconductors and critical minerals.

The U.S. has been pushing for the upgrade for months as it sees the Southeast Asian manufacturing dynamo as a key country in its strategy to secure global supply chains from China-related risks.

The overhaul may be shadowed, however, by a New York Times report on Saturday that Vietnam was in talks with Russia over a new arms supply deal that could trigger U.S. sanctions.

The report cites a March Vietnamese finance ministry document laying out plans for Hanoi to pay to modernise its forces through a Vietnamese-Russian oil venture in Siberia.

Reuters has seen, but not been able to authenticate, documents describing talks for a credit facility that Russia would extend to Vietnam to buy heavy weaponry, including anti-ship missiles, antisubmarine aircraft and helicopters, antiaircraft missile systems and fighter jets.

A spokesperson for Vietnam’s foreign ministry has not responded to multiple requests for comment on the documents, which show Moscow pushing for months for a loan deal that would bypass Western sanctions on Moscow, and Vietnam showing “interest”.

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Hanoi is in similar talks with multiple arms suppliers including the U.S. It is unclear how far those talks have evolved.

In recent weeks, Vietnam has engaged in several high-level defence meetings with top Russian officials.

CHIPS, RARE EARTHS

A half-century after a lengthy and brutal war, the U.S. is expected to elevate Vietnam to the same diplomatic tier as China and Russia, Biden and other U.S. officials said. Vietnamese officials have shown optimism about the expected upgrade, despite initial concerns over how giant neighbour China would react.

After a Group of 20 summit in India, Biden is to arrive at Vietnam’s Presidential Palace on Sunday afternoon for a formal welcome from Communist Party General Secretary Nguyen Phu Trong, Vietnam’s most powerful leader, then go to party headquarters, where the two will meet and give public remarks.

The visit comes as bilateral trade and investment ties are growing and a long-simmering territorial dispute between Vietnam and China heats up in the South China Sea (NYSE:).

Highlighting Vietnam’s growing importance as a “friendshoring” destination for U.S. technology companies, executives from Google (NASDAQ:), Intel (NASDAQ:), Amkor (NASDAQ:), Marvell (NASDAQ:), GlobalFoundries and Boeing (NYSE:) are expected to meet on Monday with Vietnamese tech executives and Secretary of State Antony Blinken in Hanoi.

Semiconductors are the centrepiece of an action plan to be adopted during Biden’s visit, adding concrete deliverables to the diplomatic upgrade, a U.S. official said. Many see the upgrade so far as symbolic because the Washington already effectively has close ties with Hanoi.

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Besides possible announcements by U.S. corporations, it is unclear how significant the U.S. administration’s contribution to the sector could be, having only $100 million a year for five years available under the CHIPS Act to support semiconductor supply chains globally. A large part of it could go to Vietnam, officials said.

More support to train skilled workers is also expected, as Vietnam faces a major shortage of engineers in the chips sector.

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

Two people familiar with the plans said an agreement on rare earths was expected during Biden’s visit, which ends on Monday when he flies back to America.

Details, however are scant. Past attempts by U.S. companies to partner with Vietnamese rare earth firms have not succeeded, according to a person involved in one recent plan.

Trade may also be discussed, as Vietnam’s trade surplus with the U.S. trails only those of China and Mexico.

Human rights remain a controversial issue, with U.S. officials regularly criticising Hanoi for jailing activists and limiting freedom of expression. Vietnam may show goodwill, with diplomats suggesting activists could be freed.


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