Vietnam is close to ordering four Sigma-class corvettes from Netherlands based Damen Schelde Naval Shipbuilding (DSNS). Late September Vietnamese prime minister Nguyen Tan Dung confirmed the news during a visit to the shipyard. According to a DSNS director the contract was “just a matter of financing details”. He likely meant arranging export credit insurances from the Dutch government, a necessary condition to obtain credit facilities from commercial banks. The deal is possibly worth around 600 million euro, the value of Indonesia’s similar deal a couple of years ago. Two of the four warships are possibly built at a Vietnamese yard.
Damen has in recent years expanded its activities in Vietnam, including a joint venture with the Vinachin shipyard.
Besides Indonesia and Morocco (which bought three larger frigates from the same class in 2008), the Vietnamese navy is the third export destination for this warship class. With no future order foreseen from the Dutch navy – DSNS’ vested customer – the shipyard has become fully dependent of the export market. In March this year Oman became known as another potential client. Queen Beatrix’ visit to the sultanate was said to be supportive of a deal that is still under negotiation.
Vietnam is engaged in a major expansion of its military forces. In December 2009 it agreed to buy six Kilo-class submarines from Russia for about $2 billion; also Sukhoi fighter jets are on order. In August this year it received the second of two Russian-made guided-missile frigates and the first of three Airbus Military patrol aircraft.
Decades-old disputes between Vietnam, China, Taiwan, Brunei, Malaysia and the Philippines over sovereignty in the South China Sea – including the Spratly islands – are driven by the suspected presence of oil and gas.
With China’s naval expansion – largely in response to American presence in the region – other states have joined the regional military built-up. Taiwan is discussing the deployment of advanced missiles in the South China Sea over concerns that rival claimants are building up their arms. China in turn has warned India not to continue joint energy projects with Vietnam in the South Chinese Sea.
Hillary Clinton, US secretary of state, angered Beijing in 2010 by insisting that the South China Sea was of strategic importance to the US. Currently the US is engaged in annual drills with Philippine marines, which will include a hostile beach assault exercise near the Spratly Islands. China seeks to resolve the disputes through bilateral talks with the other claimants, and has rejected a US role.
As long as these disputes over access to natural resources linger on, and military expansion is considered the answer, the arms industry has a profitable alternative to declining western budgets. Here, the Dutch government should acknowledge the potential of military confrontation, and thus refuse an export permit.
[FS, 24 Oct 2011]