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 The battle-hardened country has already taken possession of three
Russian-built Kilo-attack submarines and has three more on order as
part of a $2.6 billion deal agreed in 2009. Upgrading its air force
would give Vietnam one of the most potent militaries in Southeast
Asia.
The previously unreported aircraft discussions have involved Swedish
defense contractor Saab <SAABb.ST>, European consortium Eurofighter,
the defense wing of Airbus Group <AIR.PA> and U.S. firms Lockheed
Martin Corp <LMT.N> and Boeing <BA.N>, said industry sources with
direct knowledge of the talks.
Defense contractors had made multiple visits to Vietnam in recent
months although no deals were imminent, said the sources, who
declined to be identified because of the sensitivity of the matter.
Some of the sources characterized the talks as ongoing.
One Western defense contractor said Hanoi wanted to modernize its
air force by replacing more than 100 ageing Russian MiG-21 fighters
while reducing its reliance on Moscow for weapons for its roughly
480,000-strong military.
Vietnam has ordered about a dozen more Russian Sukhoi Su-30
front-line fighters to supplement a fleet of older Su-27s and
Su-30s.
 "We had indications they want to reduce their dependence on Russia.
Their growing friendship with America and Europe will help them to
do that," said the defense contractor.
U.S. Defense Secretary Ash Carter, during a visit to Vietnam on
Sunday, pledged $18 million to help Hanoi buy U.S. patrol boats. But
any deal with Lockheed or Boeing would likely be the most
significant involving a U.S. firm since Washington started easing a
long-time embargo on the sale of lethal weapons to Vietnam in
October.
The Vietnamese Foreign Ministry said it had forwarded questions from
Reuters about the aircraft discussions to the appropriate
authorities.
Boeing said in an email it believed it had capabilities in
"intelligence, surveillance and reconnaissance platforms that may
meet Vietnam's modernization needs". It gave no specifics.
Lockheed and Saab declined to comment. Eurofighter and Airbus did
not respond to a request for comment.
CHINESE OIL RIG
While communist parties rule both Vietnam and China and annual trade
has risen to nearly $60 billion, Vietnam has long been wary of
China, especially over Beijing's claims to most of the South China
Sea.
China's placement of an oil rig in waters claimed by Vietnam for
more than two months last year infuriated Vietnam and underscored
the coastal country's need to upgrade its maritime patrol
capabilities in particular.
Vietnam's military budget is a state secret, although data collated
by the Stockholm International Peace Research Institute (SIPRI) put
defense spending at $3.4 billion in 2013, more than double the
amount a decade ago.
Experts say actual spending could be much higher given the hardware
acquired over recent years.
Among the aircraft under discussion with Vietnam were Saab's Gripen
E fourth-generation fighter jet as well as the Saab 340 or 2000
twin-engine turboprops fitted with maritime patrol and airborne
early warning systems, said a source with direct knowledge of those
talks.
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Vietnam had held talks over the Typhoon warplane made by Eurofighter
as well as the F/A-50 light fighter jointly developed by Korea
Aerospace Industries <047810.KS> and Lockheed, separate sources
said.
Lockheed had discussed its Sea Hercules, the maritime patrol version
of its C-130 transport plane.
Meanwhile, an additional source said Boeing wanted to sell its
maritime surveillance aircraft program, which involves putting
state-of-the-art P-8 Poseidon plane surveillance technology,
although not anti-submarine capabilities, on a business jet.
Vietnam had also looked at unarmed surveillance drones made by
Western and Asian contractors.
VIETNAM WAR LEGACY
Vietnam has already started moving slowly away from Russia in recent
years, buying Canadian Twin Otter amphibious planes and Airbus
Defence CASA C-212 maritime patrol aircraft for its coastguard and
Airbus C-295 transport planes.
Airbus Defence had been in talks to offer maritime patrol and
airborne early warning systems on the C-295, a source said.
In addition, Airbus Helicopters had been in preliminary talks with
the Vietnamese military.
Despite increasingly warm ties with Washington, some experts said
the legacy of the Vietnam War might make Hanoi wary about buying too
much U.S. weaponry, possibly giving Sweden an edge.
"There is no ideological bias (in Vietnam) with Sweden," said Tim
Huxley, executive director of the International Institute of
Strategic Studies in Asia.
"The Gripen E will be a cost-effective option. Saab can offer a
package that includes maritime patrol and airborne early warning
aircraft."
However, one U.S. source familiar with Vietnam's goals said Hanoi
saw Washington as a more reliable partner should tension with China
escalate.
"Vietnam is interested in building a much closer relationship with
the United States, but they also don't want to anger China," said
the source, who was not authorized to speak publicly.
"They're looking for a balanced, phased, or step-by-step approach.'
(Additional reporting by Ho Binh Minh and Martin Petty in HANOI,
Greg Torode in HONG KONG and Andrea Shalal in WASHINGTON; Editing by
Dean Yates)
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