India and Vietnam on Wednesday signed an accord to promote oil exploration in Vietnamese waters that could escalate long-standing tensions with China as it presses territorial claims to much of the South China sea.
The accord between the foreign arm of India's state-owned Oil and Natural Gas Corp. and PetroVietnam was signed in New Delhi after talks between Prime Minister Manmohan Singh and Vietnamese President Truong Tan Sang. It covers new investments and the exploration and supply of oil and gas.
The South China Sea that links China with Southeast Asia is becoming a flashpoint as Beijing more assertively presses its claims to large portions of it and other countries push back. Vietnam, with centuries of tensions with China, has turned to the U.S., and now seemingly India, to counterbalance growing Chinese power, while Beijing and Delhi have long viewed each other as regional rivals.
New Delhi has downplayed China's recent objections to its state oil company exploring for oil in Vietnamese waters. Vietnam's fast-growing economy, and its natural resources including oil and gas, are an attraction for India, which like China is seeking energy sources to fuel its economic boom.
Meanwhile, China and Vietnam signed an agreement Wednesday aimed at finding a long-term solution to their bitter maritime disputes driven by competing claims to parts of the South China Sea and its potentially rich oil and gas fields.
The largely symbolic agreement calls for twice yearly meetings, and for a hotline to be set up to deal with emergencies.
China views India's forays into Vietnamese waters with suspicion. China claims the disputed Paracel and Spratly islands and the waters around them and in recent years Chinese ships have driven away fishing vessels from Vietnam and the Philippines, both of which contest China's claims.
In July, an Indian warship was cautioned by China when it was about 45 nautical miles off the Vietnamese coast after visiting Vietnam. Last month, China objected to OVL, the foreign arm of India's Oil and Natural Gas Corp., exploring for oil and gas in Vietnam's territorial waters.
India played down the two incidents by saying no confrontation was involved, but it stressed its support for the freedom of navigation in international waters _ including the South China Sea.
Vietnam, one of the fastest growing economies in Asia, has in recent years attracted sizable investments from Indian companies, a trend that the two countries want to encourage.
Singh said India was committed to greater investment between the two countries.
"Several Indian companies are working in Vietnam, and we similarly welcome Vietnamese investments in India," he said.
The two countries also agreed to cooperate in ensuring the safety and security of sea lanes in the region.
Singh said the two "maritime neighbors" faced the common security challenges of terrorism, piracy and natural disasters and agreed to work closely to tackle the threats posed by them.
Sang said the two countries had set a two-way trade target of $15 billion by 2015. Trade between the two countries was $2.7 billion last year.