A recent diplomatic visit by Russian Prime Minister Dmitry Medvedev to Vietnam and Thailand may signal an increase in Russian capital flowing into Vietnamese and Thai markets, suggests a report by The Diplomat.
In the wake of the Crimea Incident, amid increasing economic isolation from Western markets, Russia finalised a SU$400 billion energy deal with China. Politically, this represents a shift away from Russian Eurocentrism and a policy overhaul that could see significantly more capital being invested in the Asian markets.
Later in 2015, a free trade agreement (FTA) between the Russian-led Eurasian Economic Union (EEU) and Vietnam is schedule to be signed. Russia is hoping that this will pave the way for a similar deal with others in the ASEAN economic community in the future. Medvedev stated that Vietnam and Russia had “…agreed on most contents of the agreement.”
Between 2015 and 2020, Medvedev and Nguyen Tan Dung, prime minister of Vietnam, have predicted that Russia-Vietnam trade could quadruple to $10 billion. Two-way trade between Russia and Vietnam amounted to $3.7 billion in 2014, a reduction from $4 billion in 2013.
Among many other deals made during the course of a high-level discussion, was the Gazprom Neft agreeing to acquire 49 per cent of Vietnam’s Dung Quat refinery.
Nguyen explained “Our turnover has decreased slightly in the recent years, so, in order to improve the situation, we decided to instruct our ministries, businesses and agencies on both sides to take measures in signing an agreement on a free trade zone between Vietnam and the Eurasian Economic Union in the first half of 2015. We have seen some reduction in trade in the past year, which, as we have stated, will be temporary, and we are sure about it.”
Establishing a FTA between Vietnam and the EEU has benefits of increasing the size of the markets accessible to Vietnamese goods, as well as increasing the business opportunities for Vietnam. For Russia, it establishes access to the growth engine of Southeast Asia and surmounts the diplomatic and economic isolation it faces in Europe.
Given the size of the Eurasian Economic Community, Vietnamese businesses would be able to access a market with 213.9 million people and an economy with a GDP estimated at to be worth $2.4 trillion.