Vietnam's place in the Chinese Belt and Road Initiative: Bringing out for Russia

Parfenov Danil Valer'evich Postgraduate student; Faculty of Humanities and Social Sciences (FGSN); P. Lumumba Peoples' Friendship University of Russia 141150, Russia, Moscow region, Losino-Petrovsky, Oktyabrskaya str., 4, sq. 23 zergish@mail.ru

Selin Ivan Borisovich Lecturer; Department of Oriental Languages; All-Russian Academy of Foreign Trade Postgraduate; Department of Oriental Languages and Linguoculturology; National Research Nizhny Novgorod State University named after N.I. Lobachevsky 125363, Russia, Moscow, 5 Shturvalnaya str. selin.vanya2011@yandex.ru

The topic of Russian-Vietnamese relations has always been relevant, but in the context of the beginning of its own and drastic geopolitical changes, both mechanisms and areas of cooperation have become more relevant in the Russian scientific community, as well as in political circles. One of the key areas of cooperation between Russia and Vietnam has been and remains economic cooperation, which, in the context of a Comprehensive Strategic Partnership, does not meet the potential of the two countries at all, as scientists from both sides regularly write about. A summary analysis of opinions is presented in an article by V.M. Mazyrin in honor of the 30th anniversary of the treaty on the Foundations of friendship and cooperation ^[1].

Bilateral relations in the modern world never develop in a vacuum and are subject to constant direct or indirect interventions from outside. In this article, the authors examine the impact of the Chinese Belt and Road initiative on Russia, how and if the New Silk Road can be used to strengthen relations with Vietnam.

The chosen topic seems to be relatively new to the authors, since geopolitical upheavals have changed the balance of power, priorities and worldview of many countries; in addition, attempts are rarely made to link global processes with each other and consider the picture of interdependence as a whole.

It seems reasonable to start the analysis in 2013, when Chinese President Xi Jinping launched the Silk Road Economic Belt and Maritime Silk Road initiatives aimed at reviving ancient trade routes between China, Eurasia, the Middle East and Europe. The Belt and Road Initiative is a key component of China's foreign policy, designed to promote the realization of the "Chinese dream" through the realization of two "goals of the century": building a Xiaokan society (a society of average prosperity by 2021 and a "developed socialist state" by 2049 ^[2].

The main routes of the Silk Road and the Maritime Silk Road connect China with Europe, the Mediterranean, Southeast Asia and the Indian Ocean, and the Belt and Road Initiative aims to develop infrastructure, trade, attract investment, create free zones and promote win-win development ^[2].

In 2014, Chinese President Xi Jinping announced a $40 billion contribution to the Silk Road Fund to finance projects related to the Belt and Road Initiative. As part of the development of the project, the Asian Infrastructure Investment Bank was established with a capital of $100 billion, which will also finance infrastructure development ^[3].

The Belt and Road initiative involves financing from Chinese banks and foundations, while it is planned to attract private capital and use public-private partnerships. The initiative aims to promote interconnectedness and integration with an emphasis on joint development, shared prosperity, cooperation and win-win results. China's goal is to increase openness to the outside world and promote peace and prosperity. The initiative provides for the development of existing economic corridors and priority cooperation in five areas: political coordination, infrastructure development, expansion of free trade, financial integration and humanitarian cooperation ^[4].

The Belt and Road Initiative is a key component of China's economic and foreign policy, presented in the 13th Five-year Plan. It is aimed at coordinating the actions of state and non-state actors in China and developing economic cooperation with other countries. Since there is no clear understanding of what the initiative includes, it is unclear which projects are being implemented exclusively for the Belt and Road. The geographical scope of the initiative is also vague, indicating routes rather than specific projects. If successful, 65 countries, 70% of the world's population and 75% of the world's explored energy resources will be involved in the project ^[3]. The Belt and Road Forum in May 2017 brought together more than 100 states and 30 heads of state and announced 270 concrete results, including $113 billion in additional funding and $900 billion in ongoing projects. Chinese President Xi Jinping spoke about free trade, innovative development and the fight against protectionism ^[5].

Achieving China's economic, foreign policy, and geopolitical goals by stimulating domestic development, increasing exports, and introducing innovations is the main focus of the Belt and Road Project. China is striving for a balanced economic model that simultaneously combines domestic consumption with services and exports. Excess production capacity in sectors such as infrastructure, heavy industry, and construction materials production is hindering economic growth.

China is seeking to offload overproductive, energy-intensive, labor-intensive, and polluting industries by investing in infrastructure projects abroad using Chinese labor, equipment, and raw materials. This strategy is aimed at creating a new growth base, promoting high-tech production and increasing competitiveness. China will export industries with low competitiveness, especially in overproductive sectors, and will focus on developing innovative industries.

China's Belt and Road Initiative is a new stage of the "going out" strategy aimed at integrating China into the global economy by increasing investment abroad and opening up access to foreign markets for China. Since 2015, China has become a major investor, with capital exports exceeding imports. Chinese foreign direct investment is expected to be more market-oriented, decentralized, and diversified. With 3.2 trillion US dollars in foreign exchange reserves, China strives for higher-yielding investments and promotes the internationalization of the yuan for financing and transactions ^[3].

Vietnam, being a key partner of China and a major player in the Belt and Road project, remains concerned about the trade imbalance with China, as well as Chinese investments that primarily meet Beijing's interests. Vietnam is also concerned about China's influence in neighboring Laos and Cambodia, which overlaps with its own economic interests. China's Belt and Road initiative and Vietnam's "Two Economic Corridors, One Belt" concept are in the spotlight, and concern is that China's "Digital Silk Road" could undermine Vietnam's economic sovereignty.

Vietnam-China relations have been complicated by conflicts and rivalries, but they improved in 2010 with the conclusion of a trade agreement and a strategic partnership agreement. Vietnam, unlike Ukraine, did not become a satellite of the United States, but on the contrary went to a comprehensive deepening of relations. Vietnam is seen as an alternative to China for foreign companies that locate their production facilities there.

Vietnam is benefiting from the US-China trade war: in the first five months of 2019, foreign direct investment in Vietnam increased by 70%, while exports to the US increased by more than $1 billion. Production has moved to Vietnam from China due to rising wages and environmental regulations. Trade agreements, including a free trade agreement with the EU, also contributed to Vietnam's success.

Vietnam attracts foreign companies through industrial parks, tax incentives, and creating conditions for infrastructure development, which attracts major brands such as Samsung and HP^[5]. The Asian Development Bank estimates that Vietnam will surpass China due to rapid infrastructure development: Vietnam spends 5.7% of GDP on infrastructure, compared with 3% in neighboring Indonesia and the Philippines and 2% in Malaysia and Thailand.

Vietnam has managed to contain the spread of the coronavirus through effective quarantine measures, registering zero deaths, and thus achieving one of the best economic recovery in the world. The country's brand as a manufacturing alternative to China has strengthened despite the restrictions. Vietnam has attractive characteristics such as low cost of market entry, stable domestic political situation and liberal trade policy. However, the small population and limited skilled labor force may limit its ability to accommodate a significant portion of companies wishing to relocate production from China.

Vietnam is successfully developing industries such as textiles, footwear, and electronics, but faces challenges in electronics manufacturing due to labor requirements. Compared to China, Vietnam lags behind in infrastructure development: roads and ports are overloaded, and railways are limited. Vietnam's gross exports lag behind China's, and their growth is mainly driven by foreign companies. Although Vietnam is not the "next China", it is expanding its presence in the supply chain through infrastructure investments and trade liberalization, improving its economic situation and raising living standards ^[7].

Vietnam's manufacturing sector grew by 9.14% by 2019 due to the relocation of foreign enterprises from China, triggered by trade wars and lower labor costs. However, Vietnam still faces economic fraud when companies label "Made in Vietnam" imports as local products, resulting in budget losses. Companies such as Pagoda-Build and ALT Systems Group operate in Vietnam, citing lower costs and the absence of strict production restrictions. However, it is difficult for Vietnam to compare with China in terms of production scale and quality of personnel training: companies adapt to the market and face cultural and historical differences.

Vietnam has deployed missile systems on the Spratly Islands, which is perceived as a step against China, which claims this territory. Despite this, China and Vietnam have close diplomatic ties, with Beijing considering Hanoi a natural ally due to the similarity of the regimes. There are close inter-party ties between the two Communist parties, and China's support strengthens Vietnam's legitimacy.

China is Vietnam's largest trading partner, accounting for 34% of imports and 13% of exports, with engineering and textiles being the predominant sectors ^[8].

Sino-Vietnamese relations are experiencing difficulties due to the trade imbalance between the two countries and unresolved territorial disputes in the South China Sea. Vietnam is seeking to strengthen ties with the United States, Japan, ASEAN, and the EU to counterbalance China's influence. Mutual distrust and paranoia are dictated by territorial disputes, and anti-Chinese sentiments still prevail in Vietnam. The Communist Party of Vietnam is trying to overcome internal anti-Chinese sentiments, and Chinese nationalists, in turn, demand the dominance of the PRC in Southeast Asia and consider Vietnam ungrateful for its ability to pursue an independent policy. Tensions are also growing in the virtual environment: Chinese hackers are attacking Vietnamese airports and airlines, which further increases tensions between the two countries ^[9].

Sino-Vietnamese relations are complex, with cultural, ideological, and political similarities, but also strong contradictions. The negative experience of Sino-Vietnamese relations hinders the establishment of trust between the two countries, which pushes Vietnam to pursue a multi-vector policy. Despite the shared cultural context, disagreements between China and Vietnam may persist or even worsen, potentially being used to divert attention from domestic issues.

China and Vietnam have adopted a national model of market economy, which is being developed by the Communist parties of the two countries. The leaders of China and the Socialist Republic of Vietnam realized the lack of resources for accelerated growth and turned to the United States. In 1979, Deng Xiaoping visited Washington with the idea of creating a "World Anti-hegemonic Front" against the Soviet Union and the countries of the communist camp. This led to a short but bloody border war between China and Vietnam in February and March 1979.

China's transition to "socialism with Chinese characteristics" and Xi Jinping's plan for the "Great Rebirth of the Chinese Nation" disappointed the West, which had previously hoped for the spread of liberal values. The United States and Western bloc countries responded with military and trade sanctions, likening the situation to the Cold War. Vietnam, a former Soviet ally, by contrast, adopted a similar economic strategy and achieved prosperity while maintaining the Communist Party's firm grip on power.

Vietnam adheres to a passive and neutral foreign policy, avoiding military-political blocs and bilateral alliances. This is due to his past experience of cooperation with China, the United States and Russia, which have had an ambiguous mark in the history of Vietnam.

Vietnam is unlikely to join military blocs like AUKUS due to its historical context. Instead, he can focus on maintaining independence in a region where the United States is trying to form alliances. Vietnam's future in the South China Sea will depend on its decisions. He should strengthen ties with Russia, which is able to protect his interests ^[9].

At the Eastern Economic Forum in 2013 and 2024, President Putin noted the development of the Far East as a national priority and progress in the implementation of the "Turn to the East" strategy. The strategy focuses on the transport and logistics complex of the region and cooperation with the countries of the Asia-Pacific region. Russia sees great potential in partnership with Vietnam, the foundation of which was laid back in Soviet times, especially in energy, industry and agriculture, and the port of Vladivostok plays a key role.

Russian-Vietnamese relations are strong and friendly, with common Soviet-era traditions and progress in trade. Vietnam has been invited to join the BRICS as a partner, with the aim of ratification by the end of the year and increasing bilateral trade to $6.25 billion in 2024. Vietnam is the third new Asian tiger to receive the status of a BRICS partner, an ASEAN member with communist leadership and land/sea borders with several countries ^[11].

Vietnam benefits from the "China plus One" concept, which is attractive to investors due to similar performance at lower costs. It is a major exporter of agricultural products, the world's largest producer of cashew nuts, black pepper, as well as an exporter of rice and coffee.

Vietnam has free trade agreements with 13 countries, including the Eurasian Economic Union. The country has a population of about 96 million dollars, a GDP of 433 billion US dollars, and a per capita GDP of 4,300 US dollars. Vietnam's GDP growth is expected to reach 6.8% in 2024. Bilateral trade between Vietnam and Russia includes exports of coal, iron, and fertilizers, as well as imports of coffee and seafood.

The Southeast Asian countries attract profitable Chinese loans. Chinese projects often contribute to economic growth, but countries are not always able to meet their debt obligations. For example, Sri Lanka leased the Hambantota deepwater port to China for a period of 99 years from December 2017 due to the inability to repay the loan. While the participating countries bordering China are willing to cooperate and benefit from the partnership, the African countries are refraining, fearing the fate of Sri Lanka. Western experts see the expansion of China's influence in such cooperation. Russia, in turn, prefers investments, but China is already hesitating, fearing sanctions pressure ^[12],[13].

Russia's entry into the Belt and Road Initiative was postponed due to concerns that it would benefit only China. The situation changed after Putin proposed the creation of a Large Eurasian Partnership in 2017. However, the second factor, which is that Russia does not have a vision for its participation in the Belt and Road project, remains relevant.

The pandemic has complicated cooperation within the framework of the Belt and Road Initiative, and the discussion of trade volumes in the context of the imposed sanctions against Russia is not encouraging. China has taken a neutral position, calling for an early end to the conflict, and Russia has a new incentive to develop its own strategy regarding its participation in the One Belt One Road project, thus shifting its focus to the East.

The financial audit conducted in China since 2015 has shown that the balance sheets of many banks are in poor condition, which has led to a reduction in funding for long-term projects. As a result, investments have become more cautious. China is rearranging its behavior, making the Belt and Road issue less relevant.

Vietnam strives to remain neutral in conflicts and avoid involvement in them. Developing relations with Russia does not necessarily mean joining a military campaign. Despite the fact that Vietnam is currently experiencing difficulties in strengthening economic cooperation with Russia, the countries still have space to develop relations through military-technical and humanitarian cooperation, joint research, cultural events, as well as through participation in international organizations.

Maintaining friendly relations with Vietnam strengthens Russia's position in the Asia-Pacific region, and Vietnam is a promising market for Russian goods and investments. This could create alternative channels for trade and investment in the face of sanctions, and Russia could offer Vietnam energy resources and technology.

Russian-Vietnamese relations have a deep history and strategic importance for both countries, and Vietnam has the potential to become a key partner of Russia in the international arena. Mutual respect, partnership and cooperation are extremely important for the successful development of relations, while Russia needs to take into account Vietnam's interests and avoid political traps and attempts at manipulation from the outside.

By supporting Russia, Vietnam opposes secondary sanctions, also trying to avoid them, as they can harm local citizens and stability. Vietnam is deeply dependent on the markets and technologies of countries unfriendly to Russia, as well as transport and logistics companies, which harms economic cooperation with Russia.

Anti-Russian sanctions have a greater impact on Vietnam's imports, as the goods imported by Vietnam are mostly produced by TNCs from countries that support sanctions. Sanctioned technologies and services create restrictions for Russian companies in Vietnam, increasing the cost of projects and displacing them. Financial transactions with sanctioned Russian banks are also limited. Sea transportation between Russia and Vietnam, operated mainly by Japanese and Korean companies, has deteriorated due to sanctions. Vietnam's cautious policy is aimed at avoiding secondary sanctions ^[14].

Vietnam unwittingly joined the economic sanctions aimed at isolating Russia, but Russia is still interesting to Vietnam as a player balancing forces in the region. Long-term cooperation laid a solid foundation for the subsequent deepening of political ties, but the "comprehensive strategic partnership" did not lead to an increase in economic ties due to changing geopolitics ^[15].

Vietnam is seeking regional integration to modernize its economy, which slows down cooperation with Russia. Effective partnership requires adaptation to sanctions restrictions. To maintain the level of trade in 2021, a transition to settlements in national currencies is needed, as well as the alternative settlement system itself, as well as our own insurance systems.

Among the promising sectors for mutual cooperation, such areas as energy, agro-industrial complex, military-industrial complex, light industry, tourism, pharmaceuticals and medicine, digital economy, education prevail. The expansion of formats and spheres, the creation of new institutions will contribute to the intensification of bilateral relations.

Thus, to summarize, it is necessary to return to the Belt and Road, China's economic initiative, which is demonstrated as a global project “in the interests of all", but also harbors pitfalls affecting the interests of security, independence and financial freedom. Of course, Chinese investments, infrastructure projects, and the economic power of the Asian giant are attractive to Vietnam, as well as to other countries in the region. Even without sanctions, it was difficult for Russia to compete for its share of the Vietnamese market, which led to the loss of infrastructure projects - for example, the construction of the subway in Vietnam was given to Chinese performers.

But there are also positive aspects for Russia. Given that Vietnam is reluctant to participate in multilateral organizations led and promoted by Russia, Russia could consider a strategy for its participation in the Belt and Road, especially since trade anyway passes through the trade routes included in the initiative.

But still, one should not lose sight of the fact that even in the best years, Russia has not been able to achieve significant improvements in economic relations. The authors are inclined to believe that, given all the factors outlined, economic relations will not be a priority in the near future, including due to the economic attractiveness of relations with China.

Perhaps Russia should choose the path of developing its own image with an emphasis on humanitarian and political cooperation in the region, taking only indirect economic participation through the Belt and Road. Thus, to make the prospects of cooperation with Russia attractive to Vietnam, as it was during the Soviet Union, and based on Vietnamese interests, to promote and develop, among other things, economic relations, where it will no longer be so important whether they advance within or outside the framework of the Belt and Road.

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