In separate visits this week, Senators Bob Corker (R-TN), John McCain (R-AZ), and Sheldon Whitehouse (D-RI) suggested that existing arms export restrictions on Vietnam may soon come to an end. Sen. Corker said that the Senate was considering lifting its ban on weapons sales, while Sen. McCain said it was time for the United States to ease restrictions given the progress Vietnam has made on human rights. Sen. McCain further suggested that the ban’s easing could begin as early as next month.
The U.S. ban on weapons sales to Vietnam has been in place since 1984. U.S.-Vietnamese relations have steadily improved in the last decade, and lifting the 30-year arms ban could be a reasonable next step. By contrast, Vietnam’s relationship with Russia recently entered a rough patch when Russia aborted an oil and gas co-development scheme in the South China Sea. In response, the Vietnamese government initiated plans to phase out Russian assault rifles in favor of the Israeli ACE-31 and ACE-32. Russia is Vietnam’s largest arms supplier, with current contracts for Sukhoi-30 fighter jets, Kilo-class submarines, and Gepard-class frigates. Avascent Analytics estimates that Russian firms have at least 70% of the market share available to foreign contractors in Vietnam in the 2013-2015 period. Should cooperation between Russia and China continue to grow, Vietnamese arms procurement practices could see a greater change.
Escalating tensions between China and its neighbors in the South China Sea are leading to changes in the regional security environment. Japan has made revisions to its pacifist constitution and signed an agreement with Australia to collaborate on submarine development. Relations between Vietnam and China reached a new low in May of this year when a Chinese oil rig appeared in contested waters and a Vietnamese fishing boat sank after being rammed by a Chinese vessel. These and other incidents are fostering a regional arms race and encouraging militaries to import foreign arms in order to meet capability requirements.
Avascent Analytics views Vietnam to be a growing market for defense spending, as it estimates Vietnamese procurement spending to be US $1.4 billion this year and almost US$20 billion between 2015-2025. While Vietnam is unlikely to abandon its contracts for Russian fighters and submarines, Analytics believes that lifting the U.S. arms ban and continuing changes in the security environment could provide opportunities for foreign contractors in Vietnam. Such opportunities may include maritime surveillance aircraft, maritime helicopters, and air-defense systems. In the longer-term, future sales opportunities could appear for jet trainers, infantry fighting vehicles, advanced fighter jets, and advanced radar and C4I capabilities.