Can India Break Into Vietnam's Defense Market?

Over the years India has emerged as one of Vietnam’s most reliable partners in the realm of defense. Defense ties between the two sides are presently guided by a “Common Vision on Defense Ties” for the period 2015-20, which is overseeing the creation of a wide-ranging security relationship. While progress has been made toward the vision’s objectives related to joint training and cybersecurity cooperation, substantive weapon sales from India to Vietnam remain unrealized. Of late, India has been trying to hasten the matter of weapons transfers to Vietnam via high-level exchanges that seek to address Vietnamese concerns. And it is not surprising that defense sales were reportedly high on the agenda during Indian President Ram Nath Kovind’s recently concluded visit to Vietnam.

India is keen to contribute to the deterrent potential of a country with whom it has significant geopolitical congruence, while simultaneously building up its own position as a supplier in the Asian arms market. On its part, Vietnam, though attaching great importance to defense cooperation with India, as reflected by the fact that India is one of only three countries with whom it has a “comprehensive” strategic partnership, is nevertheless likely to agree to major import deals only after closely examining their value and economic viability.

Indeed, the main issue standing in the way of sizeable arms transfers from India remains the Vietnamese reluctance to agree on a framework for a $500 million line of credit offered by India for defense purchases. Even Kovind’s visit has led to the Vietnamese only agreeing to “accelerate procedures for its approval,” as mentioned in the joint statement released during the visit. Vietnamese caution apparently stems from a desire to limit the external liability component of its public debt to a certain proportion, and Hanoi is still assessing precisely what impact an acceptance of the Indian line of credit will have in that regard. It has been suggested that Vietnam may also be interested in using this line of credit for other economic purposes, though India has made it clear that it is meant only for the defense industry.

One of the key systems that has long been on offer is the Akash surface-to-air missile (SAM), which has a range of 27 kilometers and can achieve speeds in excess of Mach 2. Versions of this system are in service with both the Indian Air force (IAF) and the Indian Army (IA), and the Akash is currently in rate production with thousands of missiles on order. As such, India feels confident about credibly offering this system to an ally like Vietnam in terms of being able to make quick deliveries and also provide life-cycle support. Moreover, unlike, say, the BrahMos cruise missile, which the Vietnamese side had once been keen to acquire, the Akash has over 90 percent indigenous content. This means that India can transfer this weapon system to Vietnam without taking into consideration the views of a third party like Russia, which co-developed the BrahMos. With the IAF deploying the Akash along India’s frontier with China and upgrades being available for the system, the Indian side also believes that it is offering Vietnam a potent capability against both Chinese combat aircraft as well as cruise missiles.

In June 2018, the lead integrator for the Akash, India’s Bharat Electronics (BEL), opened its first-ever representative office in Hanoi with the objective of marketing the company’s “weapons systems, radar systems, naval systems, military communication systems, electronic warfare (EW) systems, combat management systems and coastal surveillance systems.” But this representative office is not only meant for the Vietnamese market, and is actually a marketing and after-sales support office for all of Southeast Asia. Indeed, success in the Vietnamese market could be held up by India as an example for making headway in other ASEAN markets. Arms sales to ASEAN members financed via military aid or credit financing are a key facet of India’s diplomatic outreach in Southeast Asia and Vietnam is the “pivot” of India’s “Act East” policy, as delineated by Kovind during his visit.

BEL’s offerings in areas such as EW and intelligence, surveillance, reconnaissance (ISR) are likely to find favor with the Vietnamese military, which is working closely with India to build its capabilities in the domain of cyber-electromagnetic spectrum (cyber-EMS). Like India, Vietnam faces the prospect of cross-domain escalation in the cyber arena by China in the event of tensions boiling over and therefore acquiring information warfare muscle is a priority for Hanoi. Cooperation in this sphere is epitomized by the Army Software Park in Nha Trang, which is being built with Indian financial support to the tune of $5 million. Besides cybersecurity training and the transfer of wargaming packages, India has also been imparting English language training to Vietnamese servicemen.

Indian training assistance to Vietnam is not limited to soft skills only. There is a proposal for the IAF to begin training Vietnam People’s Air Force (VPAF) pilots on their Su-30 MK2Vs, which are similar to the Su-30 MKIs operated by the IAF. This matter was likely discussed during the visit to New Delhi by Lt. Gen. Le Huy Vinh, commander-in-chief of the VPAF, in October 2018. Such cooperation is aimed at increasing Vietnam’s ability to fight, if deterrence were to break down. Naturally, enhanced readiness and combat potential themselves contribute to deterrence. In January 2018, the IA also hosted a Vietnam’s People Army (VPA) unit in central India for the first-ever bilateral land warfare exercise between the armies of India and Vietnam.

The Indian Navy (IN) has arguably fostered the closest ties with its Vietnamese counterparts, given that it has been training Vietnamese sailors to operate the Vietnamese People’s Navy’s (VPN’s) Kilo-class submarines at Visakhapatnam since 2013. In May 2018, an IN detachment took part in the first-ever bilateral naval exercise between the navies of India and Vietnam after making a port call at Tien Sa, Da Nang. This exercise came at a time when the Chinese People’s Liberation Army Navy (PLAN) was out on maneuvers intended to send a message to Vietnam and underlined the strategic cooperation between India and Vietnam toward maintaining the “security of sea lanes.” Enhanced naval support by India is particularly important to the Vietnamese, whose track record against the Chinese at sea is much worse than their showing against the same adversary on land.

Naval diplomacy by India has also contributed to Vietnamese interest in Indian naval offerings. Currently, an order for building 10 high-speed patrol vessels for the Vietnamese Border Guards is being executed by India’s Larsen & Toubro under the aegis of a $100 million line of credit extended by New Delhi some years ago. In the joint statement released during Kovind’s visit, both sides expressed “their satisfaction at the progress of the implementation” of this particular credit line.

India is also a front runner for upgrading two Vietnamese Petya-class frigates for an order value of about $30 million, which will see the ships being refitted with new sonars, fire control systems, torpedo launchers, and anti-submarine rocket launchers. Incidentally, India has supplied spares for these ships in the past. After the initial two, the VPN’s three remaining Petyas are also likely to be upgraded by India in a similar fashion. It remains to be seen whether the Indian Defense Research and Development Organization (DRDO)-developed Varunastra heavyweight torpedo will be offered as part of this upgrade package. The Varunastra is being inducted by the IN and the Indians feel that this system is ready to be exported to the Vietnamese, who have been sounded out about the same. While the ship-launched version is on offer now, in the future India may also make a case for the fiber optic cable-guided version meant for submarines, once that completes development.

Military-to-military ties are certainly being leveraged by the Indian side to push weapon sales. For instance, it is understood that the IAF has been involved in convincing its Vietnamese counterparts about the efficacy of the Akash. General Bipin Rawat, India’s chief of army staff, who paid a four-day visit to Vietnam in November, likely emphasized India’s standpoint on deepening the military relationship. During Rawat’s meeting with the Vietnamese defense minister, General Ngo Xuan, the latter reportedly “underlined the need for the two sides to promote coordination in personnel training, defense industry, strategic research, and joining UN peacekeeping operations.”  Like in the naval realm, India has also offered to upgrade Vietnam’s main battle tank inventory with new sights, radios, and fire control systems.

Nevertheless, exposure to the Indian military’s way of doing things and aggressive Indian marketing may not suffice on their own for India to garner a major share of the Vietnamese military import market. Industrial partnerships will prove just as important. And this is precisely why Indian Defense Minister Nirmala Sitharaman, during her visit to Vietnam in June 2018, had stated that there was immense scope for Indian industry to explore the potential of “co-production of platforms, spares, and repair and overhaul services,” while delivering the keynote address at an India-Vietnam defense industry gathering in Hanoi. On that occasion, the Vietnamese deputy defense minister had invited Indian companies to set up shop in Vietnam to not just serve their home and Vietnamese markets, but also pursue exports to third countries. Obviously, direct business-to-business ties across the defense value chain will be consequential if India is to sustainably garner a share of the Vietnamese arms market.

New Delhi hopes that persistent efforts will bear fruit in the near future, despite the issues delineated earlier. Hopes are particularly high because the coming into effect of the U.S. Countering America’s Adversaries Through Sanctions Act (CAATSA) has made the Vietnamese wary of either depending too much on the Russians or switching over to the Americans as a supplier.

Most of the systems currently on offer from the Indian side are aimed at enhancing Vietnam’s “deterrence by denial” posture vis-a-vis China. Land-attack and air-launched versions of the BrahMos cruise missile could, however, aid Vietnam in also raising “deterrence by punishment” related capabilities. Interestingly, India has been working toward replacing Russian subsystems on this missile with Indian ones. A step toward this was taken recently when India began testing an indigenous radio-frequency seeker for the BrahMos. However, the Vietnamese are currently silent about the issue.

India has also resumed testing of the 150 km range Prahar battlefield support missile for its Artillery Corps after a hiatus of several years. An export version of the Prahar called the Pragati was showcased at the Seoul International Aerospace and Defense Exhibition in 2013, and it remains to be seen whether this system, which is useful for targeting enemy centers of gravity, will be offered to Vietnam. After all, there has been a long-running suggestion by some of India’s more hawkish analysts to the effect that New Delhi should consider selling Prithvi short range ballistic missiles (SRBMs) to Vietnam. In that sense, the Prahar/Pragati would be a leg up given that it is a more mobile and accurate system, albeit with a payload carrying capacity and range that is significantly less than what most variants from the Prithvi family can manage.

Indian capacity building assistance to Vietnam is seen by many in India’s strategic community as a “symmetric response” to China’s close military relationship with Pakistan. However, there is also a recognition that given Vietnam’s focus on economic development there is a limit to what Hanoi may be willing to do. Vietnam certainly has the size to field a limited conventional deterrent, but its military build up does not extend beyond what is necessary for self-preservation in an unpredictable world.

Indeed, Vietnam’s newly appointed ambassador to New Delhi, Pham Sanh Chau, seemed lukewarm to the so-called India-Japan-Australia-United States Quadrilateral initiative, possibly signalling Vietnamese unwillingness to become a frontline state in a coalition of the willing aimed at curbing China’s military revanchism. While Vietnam may be willing to deepen defense ties with an Asian power like India, or indeed Japan for that matter, Hanoi is obviously wary of provoking China beyond a point. Basically, the Vietnamese posture seems to be one of building up enough strength to deter China, short of giving the latter an overwhelming desire to initiate conflict.

For India, cooperation with Vietnam allows it to extend its eyes and ears very close to China, especially if sales of ISR equipment go through. Vietnam’s historic cultural ties with China also have the potential to help India better understand China. Proximity to Vietnam strengthens India’s hand in its overall military outreach to ASEAN. Both sides agreed to “actively support each other and step up coordination at multilateral defense and security cooperation frameworks, particularly ARF and ADMM+” during Kovind’s visit.

Watching all this closely is China, which for the past few years has been making intermittent noises about the India-Vietnam defense relationship. Earlier this year, the state-owned Global Times had voiced its concerns over news related to a potential Akash SAM sale to Vietnam and back in 2016 some Chinese think tanks had seemed particularly concerned about an Indian “Data Reception and Tracking and Telemetry Station” located in Ho Chi Minh City, although that was set up under an overall agreement with ASEAN. Indian officials believe that the Vietnamese intend to stay the course on the bilateral defense relationship regardless of the signals emanating from China. But there is no denying the fact that unless major Indian weapons sales to Vietnam take place soon, the security relationship may begin to plateau.