“We have calculated the reaction from China but we have not done anything wrong. We will just drill within our exclusive economic zone,” he said.

Pham Quang Minh, the former dean of the University for Social Science and Humanities in Hanoi, one of the country’s top centres for international relations scholarship, said he was hopeful the deal with the Japanese firm would yield results where the ventures with Rosneft and Repsol had failed.

06:24

Explained: the history of China’s territorial disputes

Explained: the history of China’s territorial disputes

While the distance between the offshore fields and the Vietnamese coast are all less than 200 nautical miles – the typical boundary for the zones in which countries have exclusive rights to resource extraction – they are also located within the so-called nine-dash line, China’s vaguely defined, self-proclaimed maritime border that includes almost all the South China Sea.

Greg Poling, director of the Asia Maritime Transparency Initiative at the Washington-based Centre for Strategic and International Studies (CSIS), said the confrontations at sea between drillers and Chinese maritime forces were the “new normal”, and added that Vietnam would not find it easy to secure offshore ventures with foreign firms.

“It’s just hard to go to a board meeting today and say that of all the potential places to invest, the South China Sea makes sense given the near certainty that China will risk the lives of your workers,” he said, pointing out that Malaysia has also seen stand-offs with Chinese maritime forces last year over its drilling.

BUDDING PARTNERSHIP

The hope in Hanoi is that increased defence cooperation will extend to Japanese state-backed oil and gas exploration within the nine-dash line. Analysts who spoke to This Week in Asia said it was likely that Vietnam had encouraged Inpex to renege on an agreed-upon sale of its shares of Blocks 05-1B and 05-1C to the Singaporean firm Jadestone. When the resulting arbitration ended in November 2020, the blocks were entirely in Vietnamese and Japanese hands, with the firms Idemitsu and JX Nippon also holding stakes.

“The conventional wisdom is that Hanoi asked Inpex to cancel that deal because it had more faith in Japanese companies standing up to likely Chinese pressure and eventually producing in that block,” Poling said.

Carl Thayer, an emeritus professor at the University of New South Wales and specialist on Vietnamese defence issues, said Japan could dispatch its coastguard and naval forces to the South China Sea to protect its companies if China were to interfere with drilling operations. Tokyo’s “workmanlike” relationship with Beijing would also put a price tag on any potential stand-off at sea.

“China is unlikely to want to undermine this relationship, especially as a Biden administration is likely to move quickly to coordinate regional policy with Japan,” he said, adding that Japan’s treaty alliance with the US also raises the stakes.

Nick Birman-Trickett, a London-based freelance political risk consultant who specialises in the Eurasian energy sector, said an advantage of using Japanese energy firms was that Tokyo had the ability to coax them into fulfilling foreign policy objectives.

Japan to provide Vietnam with six patrol ships amid South China Sea tensions

“Japan has companies that effectively act in the interests of the state, and they see [the South China Sea] as an important area to operate because of China,” he said, adding that Rosneft, despite being a state-owned Russian enterprise, was apparently pursuing its own corporate interests in the South China Sea.

Birman-Trickett said although Vietnam was likely behind the cancellation of the Rosneft deal, the Russian firm was probably also keen to get out of the contract over concerns it would threaten much more vital projects with the Chinese government.

“Ultimately their priority is keeping the Chinese happy, if they have to choose,” he said.

Phillip Y. Lipscy, chair of Japanese Politics and Global Affairs at the University of Toronto, said Japan’s long-standing energy security concerns meant there was “generally very close consultation” between the government and the fossil fuel sector.

“The Japanese government cannot dispatch firms to risky areas at will, but it can certainly structure financial incentives in a manner that compensates for potential geopolitical risks,” he said.

Jane Nakano, a senior fellow in the Energy Security and Climate Change Programme at CSIS, said the South China Sea dispute could be a case where the Japanese government decided to apply pressure to the sector.

“If the geopolitical stake is high for the Japanese government, a private firm may find it unfeasible to turn down a request from the Japanese government flat out, but how far one goes in fulfilling the request is far from given,” she said, adding she was unaware of the specifics of the joint venture with PetroVietnam.

Poling said the risk appetite for the Japanese firms remained to be seen.

“Whether Idemitsu and company actually have the stomach for the kind of harassment they’ll get from the China Coast Guard, including the potential for collisions that China will intentionally create, is an open question,” he said.

A THREATENING YEAR?

Minh, the international relations professor in Hanoi, said China might use provocations at sea to “test” both US President-elect Joseph Biden as well as the new administration in Hanoi, which will be selected in late January at the Vietnamese Communist Party’s quinquennial National Congress.

“They have so far done this several times, so there’s no reason that they will not carry out or continue such kind of cases,” he said.

Thayer, meanwhile, said differences among Vietnamese Politburo members could emerge “over how to respond to China at the operational and tactical level”, and that Chinese retaliation against Vietnam could be expected if drilling went ahead.

“If PetroVietnam and its Japanese partners decided to proceed with field development in Block 05-1, it is likely that China would apply considerable pressure on Vietnam, even threatening to use force, as was the case of Repsol of Spain in 2017-18,” he said.

Zachary Abuza, a professor at the National War College in Washington who specialises in Southeast Asian security issues, said any Vietnamese action to assert maritime sovereignty would be politically popular at home amid constant public pressure to take a tough stance against its northern neighbour.

But whether Hanoi behaves assertively depended on China’s next move, which Abuza said was likely to come after the new Vietnamese leadership took office in the spring.

02:05

Vietnam lotto shows become LGBT safe haven

Vietnam lotto shows become LGBT safe haven

“I think it is very likely that immediately after the phone calls of congratulations to Vietnam’s new leaders and the paeans of socialist solidarity, that the Chinese soon begin to test them through provocative relations in the South China Sea, possibly come April or May when the waters calm down,” Abuza said.

“It doesn’t have to be big or permanent, simply sending in a seismic research vessel for a few months is all it takes for Beijing to put the new leaders in Hanoi in a box.”