HANOI • India said yesterday that it is giving Vietnam US$500 million (S$680 million) in credit for defence cooperation, the latest security deal between the two nations seeking to counter Beijing's muscle-flexing in the South China Sea.
The deal was among a dozen cooperation agreements that Mr Narendra Modi signed in Hanoi alongside Vietnamese Prime Minister Nguyen Xuan Phuc, in the first visit to the country by an Indian prime minister in 15 years.
India and Vietnam share borders and large trade volumes with China, and have repeatedly locked horns with Beijing over territorial disputes in the Himalayas and the South China Sea, respectively.
"(We) discussed matters concerning the East Sea (South China Sea)," Mr Phuc told reporters.
"All sides must peacefully solve East Sea disputes based on international laws," he added, referring to the contested waterway where the Philippines, Brunei, Taiwan and Malaysia also have claims.
Both countries are also beefing up their defences and, in India's case, its defence industry, heavily promoting its supersonic BrahMos missile. India is keen to sell the missile to Vietnam and four other countries, according to a government note.
It was unclear whether the latest loan included the US$100 million that India had previously made available to Vietnam for four yet-to-be-built patrol vessels in a deal agreed in late 2014.
In an address to the media, Mr Modi said the credit was for "facilitating mutual defence cooperation" and that the relationship between the two countries would "contribute to stability, securities and prosperity in this region".
Mr Modi, who was en route to the Group of 20 Summit in China, made no mention of the patrol vessels or the BrahMos missiles, and did not elaborate on what Vietnam would use the US$500 million credit for.
The offer comes after a surge of almost 700 per cent in Vietnam's defence procurements as of last year, according to the Stockholm International Peace Research Institute think-tank, which tracks the arms trade over five-year periods.
Vietnam is in the midst of a quiet military build-up that analysts say is designed as a deterrent, to secure its 200 nautical mile exclusive economic zone as China grows more assertive in staking its claims in the South China Sea.
Experts say that Vietnam is in the market for fighter jets and more advanced missile systems, in addition to six kilo-class submarines it has bought from Russia, the last of which it will receive late this year.
The 12 agreements signed yesterday cover areas such as health, cyber security, ship-building, United Nations peace-keeping operations and naval information sharing.
Both leaders said ties would be upgraded to the level of a "comprehensive strategic relationship" and that bilateral trade would be almost doubled to US$15 billion by 2020.
AGENCE FRANCE-PRESSE, REUTERS