U.S. Moving to Restore Normal Vietnam Ties : Diplomacy: MIA announcement is viewed as a prelude to full relations. Trade embargo may be lifted.

The Bush Administration is preparing to move toward normal U.S. relations with Vietnam before Inauguration Day in January, according to Washington-based diplomats and Indochina specialists.

“After the election, it will come,” one Western diplomat said. “I think the full normalization is not very far off--one month, two months, a few months.”

The announcement Tuesday of the discovery of new photographs that may provide information about U.S. servicemen missing in Southeast Asia “is a prelude to saying, ‘Now we can move ahead,’ ” said an Asian diplomat who follows Indochina policy.

Some new steps toward normal relations could come very soon--perhaps as early as Friday, when retired Gen. John W. Vessey Jr. is scheduled to brief President Bush on his trip to Hanoi last weekend. A White House official suggested Wednesday that Bush will make some sort of public statement after the meeting.

One of the earliest policy changes, a senior Administration official said, will be to clear the way for U.S. companies to sign contracts to do business in Vietnam as soon as the 17-year-old trade embargo is lifted.

The trade embargo has been in effect since 1975, when North Vietnamese troops conquered what was then South Vietnam and forced Americans to flee the country. At the moment, U.S. firms cannot trade, invest, enter into contracts or even spend much money making business contacts in Vietnam.

In one small step already taken toward relations, the Administration has offered Vietnam a token grant of $25,000 for the victims of recent severe flooding. Speaking to reporters in Phoenix, Sen. John McCain (R-Ariz.), a former POW who accompanied Vessey to Hanoi, said the general told the Vietnamese that “the United States is making available immediately a new disaster-assistance grant to help alleviate the suffering of residents of Quang Binh province.”

Asked whether the Administration may take other, broader steps toward normal relations, such as a lifting of the U.S. trade embargo and the opening of diplomatic liaison offices in Washington and Hanoi, the senior Administration official replied, “Not this week.”

Analysts said that several factors--commercial, military, diplomatic and political--are propelling the U.S. and Vietnamese governments to move as fast as they can toward normalization over the next few months.

Japan, France and other Western European governments have made it clear that they would like to lend money to Vietnam and to open the way for Hanoi to begin borrowing money from the World Bank and the International Monetary Fund. Japanese and European companies are hoping to win contracts to develop Vietnam’s industries and infrastructure, but Vietnam’s economic development has been stymied by its inability to get international loans.

“If the United States goes on stalling, the Japanese and French are going to move ahead,” one Washington-based diplomat said this week.

U.S. companies also are pressing hard to lift the trade embargo, fearing that foreign competitors may win lucrative contracts in Vietnam. Virginia Foote, director of the United States-Vietnam Trade Council, said she is optimistic the Administration will soon ease at least some of the curbs on U.S. firms in Vietnam. “My guess is they’ll do it within the next two weeks,” she said.

Some diplomats believe that new strategic and military calculations also are driving the United States and Vietnam closer. Officials in both Hanoi and Washington have voiced concern about China’s growing military power and about its vast territorial claims in the South China Sea.

“China wants to assert itself because it feels that right now, after the American withdrawal from the bases at Subic Bay (in the Philippines), there is something of a vacuum in Southeast Asia,” one Asian diplomat said. “And the main things standing in the way (of China) are Vietnam and Indonesia.”

For the last year, Indochina specialists have argued that the best possible time for the United States to begin normal ties with Vietnam would be soon after the November elections--at a time when the President can more easily withstand political pressures and criticism.

Now, these considerations of post-election timing have taken on new importance, analysts said, because if Arkansas Gov. Bill Clinton wins the election, he and his Administration would find it particularly sensitive to take steps seen as helpful to Vietnam.

Clinton’s decision to avoid serving in the U.S. armed forces during the Vietnam War and his participation in anti-war demonstrations have been prominent issues in the current campaign. “If this issue waits for a Clinton Administration, we might have to wait until the 20th anniversary (of the U.S. withdrawal from Vietnam in 1975), or even longer,” said Indochina specialist and author Elizabeth Becker.

All the predictions about normalization are based on the assumption that Vietnam will now do whatever it can to help account for missing U.S. servicemen. And several analysts cautioned that even if everything goes smoothly, Washington and Hanoi will not achieve full normal ties and the establishment of diplomatic relations until some time next year.

In April, 1991, the Bush Administration set down a detailed series of steps, called a “road map,” that it says will be followed in working toward normal relations with Vietnam. The United States already has taken a few small steps by allowing group travel to Vietnam and by permitting the restoration of telephone links between the United States and Vietnam.

Under this road map, the next steps would include permitting U.S. firms to sign contracts in Vietnam and to open representative offices there. Then, assuming Vietnam has cooperated in accounting for missing U.S. servicemen, the United States would lift the trade embargo, allow the opening of diplomatic offices in Washington and Hanoi and open the way for some World Bank, IMF and other international lending to Hanoi.

The last step would be full ambassadorial relations between Washington and Hanoi. But under the road map, this would come only after elections take place in Cambodia and a national assembly is seated there. The Cambodian elections, under the supervision of the United Nations, will not take place until next spring.

After Vietnam invaded Cambodia in 1979, Japan and Western European countries halted or cut back on their aid programs to Vietnam, saying that Hanoi should withdraw its troops from Cambodia. Since 1989, Vietnam has pulled its troops out of Cambodia and cooperated with U.N. efforts to bring about a peace settlement there.

A senior Japanese diplomat in Washington indicated Wednesday that Tokyo is preparing to restore the economic aid to Vietnam that it cut after the invasion of Cambodia.

“Sooner or later, we should fulfill our commitment to Vietnam, made several years ago, to resume our economic aid program if Vietnam withdrew its troops from Cambodia,” the Japanese diplomat said.

The U.S. trade embargo has important implications for companies and governments around the world. At the moment, Vietnam is unable to borrow money from the World Bank or the IMF because it is in arrears on its past loans and the United States has blocked Japanese and French-led efforts to help Vietnam pay these past debts. Vietnam finds it extremely difficult to attract foreign investment because of this inability to borrow new money.

Special correspondent Laura Laughlin in Phoenix contributed to this story.