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 The ruling Communist Party's goal is to deter its giant northern
neighbor as tensions rise over the disputed South China Sea, and if
that fails, to be able to defend itself on all fronts, senior
officers and people close to them told Reuters.
Vietnam's strategy has moved beyond contingency planning. Key units
have been placed on "high combat readiness" - an alert posture to
fend off a sudden attack - including its elite Division 308, which
guards the mountainous north.
The two countries fought a bloody border war in 1979. The likely
flashpoint this time is in the South China Sea, where they have
rival claims in the Spratly and Paracel archipelagos.
"We don't want to have a conflict with China and we must put faith
in our policy of diplomacy," one senior Vietnamese government
official, who spoke on condition of anonymity, told Reuters. "But we
know we must be ready for the worst."
Most significantly, Hanoi is creating a naval deterrent largely from
scratch with the purchase of six advanced Kilo-class submarines from
Russia.
 In recent months, the first of those submarines have started
patrolling the South China Sea, Vietnamese and foreign military
officials said, the first confirmation the vessels have been in the
strategic waterway.
DIVISION 308
Militarily, the tensions are palpable northwest of Hanoi at the
headquarters of Division 308, Vietnam's most elite military unit,
where senior army officers talk repeatedly about "high combat
readiness".
The phrase is on billboards beneath images of missiles and portraits
of Vietnam's late revolutionary founder, Ho Chi Minh, and its
legendary military hero, General Vo Nguyen Giap.
Perched between Vietnam's craggy northern mountains and the ancient
rice paddies of the Red River Delta, 308 is Vietnam's oldest
division and still effectively guards the northern approaches to
Hanoi.
Reflecting deep-set official sensibilities towards offending
Beijing, one senior officer, Colonel Le Van Hai, said he could not
talk about China. But Vietnam was ready to repel any foreign force,
he told Reuters during a rare visit by a foreign reporter.
"Combat readiness is the top priority of the division, of the
Ministry of Defense and the country. We can deal with any sudden or
unexpected situation ... We are ready," he said.
"High combat readiness", along with references to the "new
situation", increasingly feature in lectures by senior officers
during visits to military bases and in publications of the People's
Army of Vietnam. The phrases also surface in talks with foreign
military delegations, diplomats said.
"When Vietnam refers to the 'new situation', they are using coded
language to refer to the rising likelihood of an armed confrontation
or clash with China, particularly in the South China Sea," said Carl
Thayer, a professor at Australia's Defense Force Academy in Canberra
who has studied Vietnam's military since the late 1960s.
While ramping up combat readiness, Hanoi's once-reclusive generals
are reaching out to a broad range of strategic partners. Russia and
India are the main source of advanced weapons, training and
intelligence cooperation. Hanoi is also building ties with the
United States and its Japanese, Australian and Filipino allies, as
well as Europe and Israel.
The outreach covers weapons purchases, ship visits and intelligence
sharing but will have its limits. Hanoi shuns formal military
alliances under a staunchly independent foreign policy.
Vietnam is seeking more Russian jet fighter-bombers and is in talks
with European and U.S. arms manufacturers to buy fighter and
maritime patrol planes and unarmed surveillance drones, sources have
told Reuters. It has also recently upgraded and expanded air
defenses, including obtaining early warning surveillance radars from
Israel and advanced S-300 surface-to-air missile batteries from
Russia.
Indeed, increases in Vietnam's military spending have outstripped
its South East Asian neighbors over the last decade, according to
estimates by the Stockholm International Peace Research Institute
(SIPRI).
"They are not doing this for national day parades ... they are
building real military capabilities," said Tim Huxley, a regional
security expert at the International Institute of Strategic Studies
in Singapore.
OIL RIG FLASHPOINT
While communist parties rule both Vietnam and China and share
political bonds, the two countries have a history marked by armed
conflict and long periods of lingering mistrust.
 Fresh academic research has revealed how the Sino-Vietnamese war in
1979 was more intense than is widely known, rumbling on into the
mid-1980s. The two sides then clashed at sea in 1988 when China
occupied its first holdings in the Spratly archipelago of the South
China Sea - a defeat still acutely felt in Hanoi.
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China also took full control of another South China Sea island
chain, the Paracels, after a naval showdown with then South Vietnam
in 1974. Hanoi still protests China's occupation.
More recently, China's placement of an oil rig in disputed waters
for 10 weeks in the middle of last year sparked anti-Chinese riots
across Vietnam.
The rig's placement on Vietnam's continental shelf 80 nautical miles
from its coast was a game-changer, officials in Hanoi privately
said, hardening suspicions about Chinese President Xi Jinping among
political and military leaders.
Hanoi dispatched dozens of Vietnamese civilian vessels to confront
the 70 coastguard and naval warships China sent to protect the oil
rig in mid-2014.
"It was a reminder to all of us just how dangerous the South China
Sea has become," said one retired U.S. naval officer.
For its part, China's military strategists have long been frustrated
at the two dozen military outposts that Hanoi has fortified across
the Spratlys since losing the Paracels in 1974, Chinese analysts
say. China is building three air strips on man-made islands it is
building on reefs in the Spratlys that it took from Vietnamese
forces in 1988.
A statement to Reuters from China's Defense Ministry said the two
militaries had close, friendly relations and China was willing to
work hard with Vietnam for regional peace.
"Both sides have frank exchanges of view on the South China Sea ...
both sides should look for a basic, lasting solution both sides can
accept," the statement said.
China's historic claim to most of the South China Sea, expressed on
maps as a nine-dash line, overlaps the exclusive economic zones of
Vietnam, the Philippines, Malaysia and Brunei. Taiwan also has
claims in the area.
Some $5 trillion in ship-borne trade passes through the waterway
every year, including most of the oil imported by China, Japan and
South Korea.
'PSYCHOLOGICAL UNCERTAINTY'
The importance to China of protecting its submarine base on Hainan
Island - the projected home of its future nuclear armed submarine
fleet - could be another flashpoint. Beijing also has jet fighters
and many of its best warships stationed around Hainan Island. This
South Sea Fleet is close to Vietnam's northern coast and its vital
deep water access channels to the South China Sea and beyond.
Vietnamese generals make clear to foreign visitors they know their
limitations. Two decades of double-digit increases in defense
budgets have given China a vastly larger and better equipped navy,
air force and army.
Foreign military envoys say they struggle to gauge Vietnam's actual
capabilities and how well they are integrating complex new weapons.
They are given little access beyond Hanoi's gilded staterooms.
Vietnamese military strategists talk of creating a "minimal credible
deterrent" – raising the costs of any Chinese move against Vietnam,
whether it is a naval confrontation or an attack across the 1,400-km
(875-mile) northern land border.
If conflict did break out, Hanoi could target Chinese-flagged
merchant container and oil ships in the South China Sea, said
Thayer, who said he was told this by Vietnamese strategists.
The aim would be not to defeat China's superior forces but "to
inflict sufficient damage and psychological uncertainty to cause
Lloyd's insurance rates to skyrocket and for foreign investors to
panic", Thayer said in a paper presented to a Singapore conference
last month.
Vietnam's foreign ministry did not respond to requests for comment
on this story.
(Additional reporting by Ben Blanchard in Beijing and Ho Binh Minh
and My Pham in Hanoi.; Editing by Dean Yates and Bill Tarrant.)
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