May was a busy month in the world of U.S. defense exports. Perhaps most controversial was President Obama’s decision to terminate the arms embargo against Vietnam. The embargo, in place since 1975, was partially lifted in 2014 to provide Vietnam with greater maritime surveillance and improved security systems. Since then, the United States has contributed $46 million to strengthening Vietnam’s maritime security.

Separately, the U.S. State Department announced that it would begin reviewing applications for licenses to export defense articles and defense services to Cote d’Ivoire, Liberia and Sri Lanka on a case-by-case basis. Those announcements followed three U.N. Security Council Resolutions terminating the U.N. arms embargoes against those nations.

President Obama justified the decision to lift the arms embargo against Vietnam as an effort to comply with the Trans-Pacific Partnership (TPP), a trade agreement that the United States has been negotiating with Vietnam and other Pacific Rim nations. (Note that the United States has yet to implement the TPP). Concerns remain, however, about Vietnam’s ongoing human rights violations. Both Amnesty International and Human Rights Watch have criticized Vietnam’s continued labor rights abuses and detainment of hundreds of political dissenters. Critics argue that lifting the embargo has stripped the United States of its leverage to encourage Vietnamese human rights reform. Supporters of the President’s decision argue that lifting the embargo will allow the United States to partner with Vietnam to improve its human rights record.

The United States’ decision to lift the Vietnam arms embargo was seemingly also a response to increased Chinese maritime belligerence. (The U.N. arms embargoes against Cote d’Ivoire, Liberia and Sri Lanka, in contrast, were lifted as each of those countries stabilized following internal unrest and civil war.) With China currently controlling 80 percent of the South China Sea – one of the world’s busiest shipping lanes – there are reports that the United States is seeking to partner with Japan and Vietnam to counter Chinese dominance in the region. Although publicly welcoming U.S. cooperation with Vietnam, China has warned that such cooperation should not be used to the detriment of other countries in the region, i.e., China itself.

Unfortunately, businesses seeking to capitalize on a ripe Vietnamese arms market may be disappointed. At least in the short-term, Vietnam seems unlikely to redecorate its military closet with products from the United States. Despite the country’s substantial budget for military equipment, most U.S.-made products are too expensive and too sophisticated to replace the Russian materials that currently constitute Vietnam’s arsenal. More likely, Vietnam will look to the United States only to improve its outdated surveillance and coastal defense systems. Some observers reckon that Lockheed Martin’s P-3 Orion surveillance plane, vessels and radar systems will make it onto Vietnam’s shopping list. Boeing and GE are also among potential future collaborators. For the most part, though, it is unlikely that the lifting of the arms embargo will translate into immediate returns for the U.S. defense industry. Instead, it is U.S. foreign policy that is most impacted – at least for now.

We would like to thank Lidiya Kurin, a Bass, Berry & Sims law clerk based in our Washington, D.C. office, for her assistance in drafting this alert.