ARKANSAS, Sept 3 (Future Headlines)- The United States’ upcoming elevation of diplomatic relations with Vietnam to the top level marks a significant development in Southeast Asian geopolitics. As President Joe Biden prepares to visit Hanoi, the move carries implications that extend beyond diplomacy into the realms of trade, defense, and regional stability.

The decision by the United States to elevate its diplomatic relations with Vietnam has been a carefully considered move aimed at strengthening ties between the two nations. Historically, the United States and Vietnam have had a complex relationship stemming from the Vietnam War, which concluded in 1975. In recent years, however, both countries have worked to normalize relations and increase cooperation, with a particular focus on trade and regional stability.

Fearful of potential backlash from China, Vietnam initially expressed caution about upgrading diplomatic relations with the United States. Vietnam’s geographic proximity to China, its largest neighbor and a significant economic partner, has always made Hanoi sensitive to potential repercussions. However, the Biden administration embarked on a concerted effort to persuade Vietnam to embrace the diplomatic upgrade, including high-ranking visits to Vietnam by U.S. officials. This diplomatic push has led Washington to anticipate being elevated to the top tier of Vietnam’s diplomatic ranking, aligning the United States with China and Russia, its partners in the region. While both sides have expressed optimism about this two-step upgrade, no official statements have been released as of yet.

• China’s reaction and Vietnam’s calculations

The potential double upgrade in diplomatic relations with the United States is likely to be met with unease in Beijing. China has consistently viewed Southeast Asia as part of its sphere of influence and has exerted significant economic and political pressure on countries in the region. Vietnam, despite its long history of diplomatic and territorial disputes with China, has maintained a cautious balancing act in its relations with both Washington and Beijing.

The timing of Vietnam’s decision to elevate relations with the United States appears to be a calculated move. Vietnam’s communist leadership may have determined that its relationship with China is “likely to get worse in the future,” as noted by Le Hong Hiep, a senior fellow at Singapore’s Iseas–Yusof Ishak Institute. Heightening tensions in the South China Sea, where China’s territorial claims overlap with those of several Southeast Asian nations, including Vietnam, may have influenced this decision.

• Immediate gains and challenges

While the diplomatic upgrade is a significant step, its short-term benefits for Vietnam are not entirely clear. A boost in U.S. military supplies to Vietnam has been discussed but is unlikely to yield immediate results, as such negotiations tend to be lengthy and complex. Vietnam has also been in discussions with other countries to upgrade and expand its predominantly Russian-made defense arsenal. High-level defense meetings with Russian officials have been a notable part of these efforts.

Another facet of U.S. inducements to Vietnam is support for its ambition to become a hub for the semiconductor industry. However, public funds allocated under the CHIPS Act (Creating Helpful Incentives for Production of Semiconductors for America in America) are currently limited, and expanding this support may be necessary to fully realize Vietnam’s potential in this sector. Cooperation in the energy sector, particularly in liquefied natural gas (LNG) and offshore wind, holds promise. Vietnam has been preparing to become a significant player in LNG, but administrative and funding delays have hampered progress.

• Economic opportunities and implications

The diplomatic upgrade is also expected to boost U.S. firms’ plans in Vietnam, extending beyond defense and energy. Notably, planemaker Boeing and energy firm AES may make announcements during President Biden’s visit. Given that the United States is already Vietnam’s largest export market, the elevation of diplomatic ties could lead to streamlined customs procedures and increased trade, providing a significant economic boost. As both nations seek to deepen their cooperation, President Biden’s upcoming visit to Vietnam may provide further clarity on the extent of this diplomatic upgrade and its accompanying economic opportunities.

Reporting by Sarah White