Vietnam loses nerve over another oil project

The guided missile destroyer, USS Mustin, came with 12 miles of the Chinese base at Mischief Reef in the latest US “freedom of navigation” mission in the South China Sea.

Vietnam is reported to have halted another major oil project because of Chinese pressure, despite Hanoi’s recent efforts to bolster its strategic position in the South China Sea.

The Spanish firm, Repsol, was ordered to suspend imminent plans to move a drilling rig into an area off Vietnam’s southeastern coast, according to reports by the BBC and Reuters news agency.

Drilling at the The “Red Emperor” project had been due to start in the next few days as part of a joint venture between Repsol and PetroVietnam, in a bid to revive Vietnam’s flagging oil and gas industry.

The site, some 400 km off the southern port of Vung Tau, is close to the scene of a similar climb-down last year, when Vietnam ordered Repsol to stop drilling for gas in block 136/03.

Reports at the time suggested that China had directly threatened military action against Vietnamese outposts in the South China Sea. The report has not been convincingly rebutted by either sides.

Extremely cautious

Vietnam’s loss of nerve this time comes despite recent flag waving by the US navy in the region and Hanoi’s success in strengthening ties other strategic players, including India, Australia and Japan.

Vietnam this month played host to a US aircraft carrier battle group, for the first time since the Vietnam War, in a clear signal of defiance aimed at Beijing.

US naval vessels have also continued what they call “freedom of navigation” missions near recently constructed Chinese bases in the disputed Paracel and Spratly chains.

However, Vietnam’s top leaders remain extremely cautious in their dealings with China, taking care not to provoke Beijing’s anger over disputed claims to oil and gas reserves.

The sites fall within or close to China’s vaguely defined “9-dash line”, which has no legal validity but forms the basis of China’s claim to much of the South China Sea.

Vietnam’s state controlled media has made no mention of what would be seen by many as a humiliating climb down, and there has been no official confirmation from the government.

Western media reports suggest the politburo has yet to make a final decision on whether to abandon the “Red Emperor” project entirely.

The BBC reported that Repsol stood to make significant losses over the project which was already well advanced.