THE U.S. TRADE SNUB OF VIET NAM

Recent advances notwithstanding, worldwide U.S. evangelizing for free markets and trade would be more convincing if the country practiced what it preached. To be sure, the advances are impressive. By promising the U.S.S.R. $1.5 billion in farm credit guarantees, the U.S. may have found a way to keep supporting Moscow's shift toward a market economy without acceding to its request for hundreds of billions of dollars in direct aid. And by renewing fast-track negotiating authority, Congress

June 17, 1991

3 min read

The U.S. thus has nothing to prove regarding its zeal for free markets and trade. But how does it square such zeal with its continued snubbing of a former enemy now aligning itself with precisely those goals?

WELCOMING PARTICIPATION

The former enemy is Viet Nam. With subsidized Soviet trade no longer available, the country is letting U.S. oil companies know it would welcome their participation in its promising oil exploration business. Yet, thanks to a trade embargo imposed during a war that ended a generation ago, the companies cannot respond.

Too bad. Viet Nam was among the first Communist countries to recognize the failures of central planning. With its economy in ruins, the country began moving toward a market economy in the mid-1980s, even before the Soviet subsidies disappeared. New petroleum legislation in 1987 made offshore exploration rights available to international oil companies under production sharing contracts. According to a study by East-West Center, Honolulu, 21 companies from at least 14 countries now hold interests. Most are in early stages of exploration.

Past exploration, meanwhile, is paying off. The Vietnamese-Soviet joint venture Vietsovpetro is reported to be producing 75,000 b/d from White Tiger oil field-enough to make Viet Nam a net oil exporter. A unit of Mobil Corp. discovered the field in 1975. Vietsovpetro plans to bring Dragon and Big Bear oil fields on stream within the next couple of years.

The government doesn't publish reserves data. East-West Center recently raised its reserves estimate to 1.5-3 billion bbl of crude and believes companies will find a number of 1-4 tcf natural gas fields in Viet Nam. It projects the country's oil production at 300,000500,000 b/d by 2000-2005.

To Viet Nam, then, oil represents a potentially rich companion to rice as a source of export earnings. That partly explains the ex officio overtures to U.S. oil companies. The country hints that it has reserved highly prospective acreage for U.S. operators, probably tracts in deep water or parts of those now held by Vietsovpetro. Most of the rest of the country's offshore already is under contract, which makes the special attention to U.S. companies somewhat curious. Viet Nam no doubt sees interest by U.S. companies as a way to pressure Washington not only to lift the trade embargo but also to relax clamps on international finance.

A START IN THE SENATE

The U.S. should go along. Last week the Senate foreign relations committee approved a recommendation by Frank Murkowski (R-Alas.) that the trade ban end. That's a start.

The trade embargo has outlived its usefulness as a lever in lingering disputes between the U.S. and Viet Nam. It keeps U.S. oil companies and service firms out of the competition for attractive business in an emergent economy. And it hinders movement of a Communist country toward free markets and trade, movement that the U.S. so eagerly urges for the rest of the world. The war in Indochina is long over. It's time to do business.