Much is at stake now that the United States and Vietnam have embarked on a new diplomatic framework. For nearly a decade, Washington has worked to strengthen ties with Hanoi. Amid increased tensions between the United States and China, President Joe Biden traveled to Vietnam on September 10, upgrading bilateral relations to a Comprehensive Strategic Partnership. While much of the focus of U.S.-Vietnamese discussions has centered around defense ties—critical aspects of their economic cooperation have been overlooked. The current partnership fails to strengthen essential elements of Vietnam’s energy sector, primarily its ability to secure long-term LNG contracts amidst global price volatility that will be vital to supporting its industrial manufacturing base. As the Biden administration makes arrangements to launch a new strategic partnership, bridging the gap between Vietnam’s economic development and energy needs is central to building a resilient economic alliance between Washington and Hanoi.

For Vietnam to be a reliable strategic partner—continued economic growth is paramount. In order to sustain its current economic growth rate, primarily through its manufacturing sector that hosts companies like Samsung and Foxconn, access to steady, reliable, and affordable energy is essential. Vietnam is one of Asia’s most promising industrial and manufacturing powerhouses, but ongoing political and economic circumstances in its energy sector threaten to derail progress. Vietnam has significantly invested in LNG as a low-carbon baseload fuel to transition away from coal and meet net-zero targets. As early as 2012, it built two LNG import terminals—Hai Linh and Thi Vai. However, political uncertainty and supply chain delays led the Vietnamese government to postpone opening both projects and dramatically slowed future LNG infrastructure development.

One of Vietnam’s main challenges is its inability to secure long-term LNG contracts, which exposes it to global price fluctuations and forces it to purchase gas on the spot market. Vietnam is a price-sensitive buyer, meaning wild swings in global gas prices can quickly force it out of the market. When the Thi Vai broke ground in 2019, the Platts JKM LNG price benchmark price hovered around $5 per MMB. At the height of Russia’s invasion of Ukraine in winter 2022, prices skyrocketed to $70.50 per MMB—a price that would have seemed unthinkable years earlier.

Without stability in Vietnam’s energy sector, Washington and Hanoi’s economic partnership will weaken. For better or worse, gas is essential to Vietnam’s long-term economic growth. If Vietnam fails to adequately incorporate LNG into its economy, its dependence on coal will grow, leading to failed climate targets and increased power shortages. Expensive gas infrastructure could also risk underutilization, jeopardizing future investments and hindering the development of other green technologies. 

The Biden administration has already taken steps to promote economic resiliency in Vietnam’s energy sector through the Just Energy Transition Partnership (JETP). JETP will finance nearly $15.5 billion in capital to accelerate Vietnam’s energy transition, primarily contributing to the expansion of renewable energy. Despite Vietnam’s promise as a clean energy leader, it will take time to integrate widespread distributive energy into its power and industrial processes, making LNG critical to providing a baseload fuel to support economic growth. 

For these reasons, long-term LNG contracts are an essential building block to an elevated U.S.-Vietnamese strategic partnership. Vietnam has already built expensive gas infrastructure, and contracts will mitigate many of the financial risks brought on by spot market buying. Contracts also ensure a steady energy supply to Vietnam’s growing population while supporting the backbone of industrialization. 

As the Biden administration implements a new strategic partnership, the White House should press to fortify Vietnam’s energy sector by advocating for long-term LNG contracts. Although the U.S. government cannot control commercially independent markets to ship LNG to Asia, Washington still has avenues to assist. JETP could provide a preexisting framework for the White House to allocate capital to subsidize the high costs of buying LNG on spot markets. It could also direct investment toward LNG storage facilities to buy gas at low prices and save supply for when prices inevitably spike. 

Despite the high global demand for American gas, current constraints on exporting capacity create a bottleneck between suppliers and international consumers. The White House can also use this new strategic partnership to leverage its convening power to bridge the gap between American LNG suppliers and Vietnamese buyers. Last week’s talks present a compelling argument for accelerating permitting reform in the United States to ease restrictions and create an avenue for deeper partnership and trade. 

Vietnam’s energy sector is at a critical inflection point. A new partnership between the United States and Vietnam presents an opportunity for greater economic and strategic cooperation. Still, Washington must work three-dimensionally to bridge the gap between Vietnam’s economic development and energy needs. As the Biden White House moves forward with an elevated relationship with Hanoi, addressing the realities of Vietnam’s energy landscape—especially its fledgling LNG sector will ultimately make it a more resilient partner and bulwark against aggressors in the Indo-Pacific region. 

Kathryn Neville is an independent contractor who has demonstrated her leadership on global energy transition topics through published works in the Diplomat and U.S.-China Focus. She recently graduated from Johns Hopkins University School of Advanced International Studies (SAIS) with an M.A. in Economics and International Relations.

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