It's rumored that U.S. President Barack Obama may lift the ban --
imposed in 1984
-- when he visits Hanoi this week, opening the way for Vietnam to import a variety of U.S. defense technology, especially maritime capabilities and hardware.
Scholars believe Beijing would react negatively to any situation that improved Vietnam's ability to resist Chinese ambitions in the South China Sea.
"They likely will view this possible move by the U.S. to bolster Vietnam's maritime domain awareness in the South China Sea as an effort to stand up to China's more assertive ambitions in the disputed waters," said Murray Hiebert, a senior advisor and deputy director of the Southeast Asia program for the Center for Strategic and International Studies (CSIS) in Washington D.C.
Tensions have ratcheted up in the region as China has reclaimed land in massive dredging operations, turning sandbars into islands equipped with airfields, ports and lighthouses.
Beijing has also warned U.S. warships and military aircraft to stay away from these islands.
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Orville Schell, Arthur Ross Director at the Asia Society Center for U.S.-China Relations, said that if the U.S. did lift its arms embargo on Hanoi, it would present Chinese Premier Xi Jinping with a significant symbol of just how far his aggressive policies in the South China Sea have alienated China's neighbors.
South China Sea: Is China upping the stakes?
"If he was smart Xi would go on a charm offensive and moderate China's posture," said Schell.
"However, that seems unlikely given his past unwillingness to seek compromise on matters of sovereignty."
When asked about Obama potentially lifting the ban, China has downplayed the issue.
"I wonder how you come up with such a thing," Chinese Foreign Ministry spokesman Lu Kang told journalists during a press briefing in Beijing.
"On the Chinese side, we welcome the development of normal relations between Vietnam and other countries. We also hope that this kind of relationship will contribute to peace, stability and prosperity of the region."
China and Vietnam have become the main protagonists in the row over the South China Sea, which China claims almost in its entirety through its nine-dash line.
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Those claims are disputed by Vietnam, the Philippines, Taiwan and Malaysia.
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Even without the lifting of the U.S. ban on lethal arms, Vietnam is seeking to bolster its naval forces.
It has a $3.2 billion deal in place with Russia to procure six Kilo-class diesel-electric submarines, which should be complete by the end of the year.
Hanoi has also purchased from the U.S. six Metal Shark Defiant 75 fast response boats for its Coast Guard in a deal worth $18 million and supported by U.S. aid.
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"Our analysis suggests that Vietnam's requirements include maritime-security capabilities such as maritime patrol aircraft, coastal radars, and naval craft, including coastal patrol vessels," said IHS Jane's analyst Jon Grevatt.
"All of these items could feasibly be supplied by the U.S. under existing U.S. export rules."
