UNCLAS HANOI 000897

SENSITIVE
SIPDIS

STATE FOR EAP/MLS, EAP/CM

E.O. 12958: N/A
TAGS: PGOV PREL ECON CM VM

SUBJECT: RUSSIAN CONCERN ABOUT CHINESE PRESSURE ON EXXONMOBIL

REF: HANOI 0864


1. (SBU) Citing recent press reports making public China's warning
to ExxonMobil to pull out of an offshore oil exploration deal with
Vietnam (Reftel), Russian Econ/Commercial Counselor Vadim Bublikov
shared with Poloffs and Econoff Russia's "deep concern" about the
situation and how it could affect Russia's own companies.


2. (SBU) The Russians asked for a meeting with Embassy Hanoi to ask
about the U.S. position on the South China Sea dispute, and what we
have discussed with the Vietnamese thus far. In particular,
Bublikov and a member of his staff asked us to identify the
geographical location of the blocks in which American oil companies
have operations. Bublikov said that none of the Russian oil
companies active in Vietnam, including Gazprom, have been approached
by the Chinese.


3. (SBU) At the July 27 meeting, Bublikov said Russia does not take
a position on the territorial dispute in the South China Sea, but
does have an interest in expanding its commercial activities in the
area in the future. Russia worries that Chinese pressure on
ExxonMobil and other U.S. oil firms could be extended to Russian
companies doing business in Vietnam. Overall Russian investment in
Vietnam is modest, Bublikov said, but its largest and most
successful projects have been in the oil and gas sectors and date
from the Soviet era. A May 23, 2008 agreement between PetroVietnam
and Russia's Gazprom allows for the exploration and development of
natural gas deposits in four new blocks on the Vietnamese shelf in
the South China Sea. The agreement also provides for the
establishment of a new joint venture that would allow PetroVietnam
to participate in projects in Russia and third countries.


3. (SBU) Asked about Vietnamese naval and military procurements from
Russia, Bublikov said they remained at the same level they have been
in recent years - there has been no spike in purchases related to
the current dispute with China. He noted that this dispute is also
a domestic issue for Vietnam and could easily spark a strong
nationalistic reaction among the Vietnamese people.


4. (SBU) Comment: Russia has had its own history of problems with
China over doing business in the South China Sea. The ExxonMobil
case seems to have raised worries that China's aggressive approach
could be extended to its own companies or, in the short term, have a
chilling effect on Russian oil and gas companies in Vietnam at a
time Russia would like to increase its engagement in this area.

MICHALAK