External Affairs

India and Vietnam Upgrade to Comprehensive Strategic Partnership

Influenced by China's neighbourly presence, the two countries signed 12 pacts, including a $500 million defence line for credit, to deepen bilateral cooperation across multiple sectors.

India's Prime Minister Narendra Modi (L) poses for a photo with his Vietnamese counterpart Nguyen Xuan Phuc at the Government office in Hanoi, Vietnam September 3, 2016. Credit: Reuters/Kham

India’s Prime Minister Narendra Modi (L) poses for a photo with his Vietnamese counterpart Nguyen Xuan Phuc at the Government office in Hanoi, Vietnam September 3, 2016. Credit: Reuters/Kham

New Delhi: India announced its biggest defence line for credit (LoC) yet – $500 million – during Prime Minister Narendra Modi’s visit to Vietnam on Saturday, even as both countries ‘noted’ the Arbitral Tribunal order on the South China Sea and called on everyone to respect the United Nations Conference on the Law of the Sea (UNCLOS).

Modi kicked off his three-nation foreign sojourn with Hanoi, arriving late Friday night. On Saturday, Modi and Prime Minister Nguyen Xuan Phuc signed 12 agreements following a morning of discussions.

As they share a common giant neighbour in the north, India and Vietnam have both been eager to develop a stronger relationship. Bilateral efforts which began as an effort to tap into Vietnam’s economy have now expanded into defence and strategy.

Comprehensive strategic partnership

After a decade of being Strategic Partners, India and Vietnam have formally upgraded their relationship status to ‘comprehensive strategic partnership’.

“It will provide a new direction, momentum and substance to our bilateral cooperation. Our common efforts will also contribute to stability, security and prosperity in this region,” Modi told the press, addressing them after the talks concluded.

According to the Vietnamese prime minister, “The upgradation of [our] relationship to Comprehensive Strategic Partnership was an indicator of the importance Vietnam attaches to India”.

“It [Vietnam] has strategic partnerships only with two other countries, Russia and China,” Phuc added.

Stating that economic prosperity needs security, Modi said that India and Vietnam have agreed to “deepen our defence and security engagement to advance our common interests”.

“I am also happy to announce a new Defence Line of Credit for Vietnam of five hundred million dollars for facilitating deeper defence cooperation,” he said.

India had earlier offered a $100 million line of credit for patrol boats. One of the 12 pacts signed today is for utilising $100 million LoC between Indian firm Larsen and Toubro and Vietnam’s Border Guards.

“The agreement on construction of offshore patrol boats signed earlier today is one of the steps to give concrete shape to our defence engagement,” said Modi.

Another $5 million will facilitate the construction of an army software park at the Telecommunications University in Nha Trang.

India has already been providing assistance to Vietnam’s navy through training to operate the new Russian-built submarines.

Vietnam has been steadily increasing its efforts to have a credible defence sector – mostly as deterrence against China’s rise and its aggressive moves in the South China Sea.

While there was no mention of the South China Sea in the leaders’ public statement, the bilateral statement released at the conclusion of the visit devoted a substantial paragraph to the dispute – just as it had in the last such joint statement.

“Noting the Award issued on 12 July 2016 of the Arbitral Tribunal constituted under the Annex VII to the 1982 United Nations Convention on the Law of Sea (UNCLOS), both sides reiterated their support for peace, stability, security, safety and freedom of navigation and over flight, and unimpeded commerce, based on the principles of international law, as reflected notably in the UNCLOS,” read the statement.

The phrasing in the statement adopted India’s position of merely ‘noting’ the UN court’s order, a departure from Vietnam’s statement that welcomed the judgement.

It further called for “safety and freedom of navigation and over flight, and unimpeded commerce”,  for states to resolve disputes peacefully, exercise “self-restraint” and respect the code of conduct previously agreed upon.

“They also recognised that the sea lanes of communication passing through the South China Sea are critical for peace, stability, prosperity and development. Vietnam and India, as State Parties to the UNCLOS, urged all parties to show utmost respect for the UNCLOS, which establishes the international legal order of the seas and oceans,” said the joint statement.

As per sources, Nguyen Phu Trong, the Communist Party’s general secretary, told Modi during their meeting that Vietnam “appreciates India’s principled position on the South China Sea issue”.

Outer space

The countries signed another important pact during the meeting – the Inter-Governmental Framework Agreement for the Exploration of Outer Space for Peaceful Purposes.

Vietnam has already been chosen as the location for establishing an ISRO satellite tracking centre, however the project is under the aegis of the ASEAN-India initiative and not a bilateral arrangement.

Cyber security

Covering another strategic area, India and Vietnam signed an agreement on cyber security. They also agreed to conclude a pact between their national security councils and set up a dialogue on security issues at the deputy ministerial level .

Modi said that “enhancing bilateral commercial engagement is also our strategic objective”.

“For this, new trade and business opportunities will be tapped to achieve the trade target of $ 15 billion by 2020. I also sought facilitation of ongoing Indian projects and investments in Vietnam. And, have invited Vietnamese companies to take advantage of the various schemes and flagship programmes of my government,” he added.


Modi also called on President Tran Dai Quang, who asked for increased Indian investment in oil and gas sectors.

“The prime ministers agreed to further enhance cooperation in the oil and gas sector and urged both sides to actively implement the Agreement signed in 2014 between PVN and OVL on cooperation in new blocks in Vietnam. The Vietnamese side also welcomed Indian oil and gas companies to avail of opportunities in participating in mid-stream and down-stream sectors in Vietnam,” said the joint statement.

The Oil and Natural Gas Corporation (ONGC) Videsh already has a productive Block 6 and has hung onto offshore Block 128, which is partly claimed by China, after Vietnam’s requests for it do so.

The two sides also agreed to “expedite the negotiation” for a new Inter-Governmental Framework Agreement on Cooperation in the Peaceful Uses of Nuclear Energy, “which will set a strong foundation for further cooperation in civil nuclear energy”. India has been helping Vietnam’s civil nuclear sector since signing the first agreement in 1986.

Before leaving in the evening, Modi also made a visit to Quan Su Pagoda, where he talked about the centuries-old Buddhist ties between the two nations.

He then left for Hangzhou in China to attend the G20 summit and after that he will proceed to Laos for the East Asia Summit.