RUSSIAN CONCERN ABOUT CHINESE PRESSURE ON EXXONMOBIL

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