Hanoi to Pay S. Vietnam’s Debts to U.S.

The government of Vietnam has agreed to pay off debts to the United States left by the defeated South Vietnamese regime, a step that could clear the way for normal trading relations between Washington and Hanoi, a senior administration official said Monday.

“We believe it is the kind of agreement that will allow us to more fully normalize relations,” the official said.

By repaying U.S. loans made to keep the embattled South Vietnamese government afloat during the Vietnam War, Hanoi in effect will share the cost of the war waged by the United States and its South Vietnamese ally.

According to U.S. officials, Hanoi will repay loans that financed roads, power stations and food aid such as massive grain shipments, all intended to bolster South Vietnam’s defense. But the agreement does not cover direct military assistance.

Officials said that the debt covered by the pact totals between $90 million and $140 million. The accord was reached last week after years of on-and-off negotiations.

Officials said that Vietnam will have 20 years to repay the loans.

Vietnam’s decision to make the payments, more than two decades after its troops overran Saigon--renamed Ho Chi Minh City--and forcefully unified the country, shows how badly the Communist regime wants to establish normal economic relations with the United States and to integrate itself into the world economy.

Legally, Hanoi assumed Saigon’s debts when it absorbed the South Vietnamese government. As long as loans from the United States were not being repaid, Hanoi was not eligible for commercial assistance through the U.S. Export-Import Bank and could not qualify for most-favored-nation trade status, which would give Vietnam the same low tariffs as most other nations.

The agreement, the most significant pact between the two former enemies since President Clinton established diplomatic relations in July 1995, clears the way for a visit to Hanoi early next month by Treasury Secretary Robert E. Rubin.

It was the latest in a series of gestures that Hanoi has made in an effort to establish the full range of normal relations with Washington after many years when there had been little more than a dialogue over the fate of U.S. troops missing in action.

According to U.S. sources, Vietnam recently agreed to an American plan to process Vietnamese citizens seeking to enter the United States as refugees, a step that would complete the unfinished business of Vietnamese who last year were forcefully returned to their homeland from camps in Hong Kong and elsewhere in Southeast Asia.

The United States supported the return of the refugees, despite its usual distaste for forced repatriation, because of pressure from host countries to close the camps. At that time, the United States promised to consider appeals for asylum once the refugees returned to Vietnam.