15 Years After War’s End, the U.S. Still Fights to Keep Vietnam Isolated : Diplomacy: Washington has linked normalization to help on MIAs and Cambodia. But support for ignoring the war-ravaged nation may be fading.

HO CHI MINH CITY, Vietnam —  Fifteen years after the collapse of the Saigon regime, is the United States still fighting the Vietnam War?

Officially, of course, the war ended April 30, 1975, when the last Marines climbed aboard helicopters on the roof of the U.S. Embassy and retreated to the safety of the South China Sea. Now, the only American soldiers visible here are those in photographs at the War Museum or visitors with thinning hair on tours escorted by their former Viet Cong enemies.

But the United States never normalized relations with Vietnam after the fighting ended. In fact, since Vietnam’s 1978 invasion of Cambodia, the United States has imposed stringent economic sanctions, which include a trade embargo, and has blocked financial assistance to Hanoi through the International Monetary Fund and the World Bank.

“The atmosphere is poisonous,” said Nguyen Xuan Oanh, a U.S.-educated economist who advises the Hanoi government. “We’ve been penalized for winning the war. I keep saying we should go back and concede defeat like Germany did in World War II. It’s been a very bitter pill for America to swallow.”

Pauperized by fighting wars since the 1940s, Vietnam needs at least $12 billion to get back on its feet, according to a recent European study of the economy. But the U.S. blockade has not only cut off American assistance, it has also kept nations such as Japan from providing help.

“The embargo is crippling the Vietnamese economy,” said Raymond Eaton, director of Export Development Trading Corp., an Australian-Thai concern based in Bangkok. “They have no hard currency, and as long as that goes on, Vietnam is going to be handicapped.”

Supporters of efforts to end the embargo are particularly critical of what they describe as a hardening of U.S. policy last year after Vietnam’s withdrawal of troops from Cambodia.

Since 1979, the United States had demanded Vietnamese withdrawal as a condition of normalization. Other conditions included progress on resolving cases of U.S. service personnel missing in action and on Amerasians, the offspring of Vietnamese women and American men.

Speaking at the time of the withdrawal, Richard H. Solomon, assistant secretary of state for East Asian and Pacific affairs, said the pullout “is not enough. After more than a decade of occupation, Hanoi has an obligation to do more than just walk away, leaving Cambodia in a state of civil war.”

Although the Ronald Reagan Administration had spoken of the need for Vietnam to help bring about a compromise settlement in Cambodia, the Vietnamese were appalled that they were being faced with a new condition for normalization. Not only had they withdrawn from Cambodia, officials in Hanoi insisted, but they also had gone to great lengths to resolve the MIA issue, which was borne out by comments made after a visit to Vietnam by Gen. John W. Vessey, retired chairman of the Joint Chiefs of Staff.

“There was a sense that the Americans had moved the goal posts on the Vietnamese, though you had to read the speeches to realize the policy had changed,” said John McAuliff, director of the U.S.-Indochina Reconciliation Project.

The U.S. boycott extends not only to Vietnam but also to Cambodia, which the Bush Administration continues to regard as a puppet of Hanoi.

Support for the U.S. policy of isolation is slipping, however, especially in the region. Hun Sen, the Cambodian premier, is making his fourth visit to Thailand in May. And Britain and other members of the European Community have announced that they will oppose giving Cambodia’s U.N. seat to a coalition of opposition groups because they include the Khmer Rouge, which was responsible for the deaths of more than 1 million people when it ruled Cambodia from 1975 to 1978.

Critics of American policy in Indochina argue that the United States is still fighting the Vietnam War because key policy-makers such as National Security Adviser Brent Scowcroft and Deputy Secretary of State Lawrence S. Eagleburger were close aides to former Secretary of State Henry A. Kissinger, who shaped U.S. policy toward the region in the 1960s and 1970s.

“I think it’s a very personal thing for them,” Rep. Chester G. Atkins (D-Mass.), said in a telephone interview. “For these people in the State Department, the high point of their careers was the opening of relations with China, and the low point was when the United States left Saigon (now Ho Chi Minh City) by the rooftops.”

Atkins said he believes that the United States is still “kowtowing to the Chinese on a settlement in Cambodia. I think it’s petty and mean-spirited.” The Chinese are the main supporters of the Khmer Rouge and longtime adversaries of the Vietnamese.

Richard C. Holbrooke, who was Carter’s assistant secretary of state for East Asia, said in an interview that his main regret was that Vietnam failed to respond to an offer of reconciliation, made by the United States in May, 1977, until the autumn of 1978. By then, he said, it was too late.

“The Vietnamese lost an opportunity to become a participant in the region,” he said. “It was a real turning point. We were flexible. The Vietnamese just blew it.”

In the last two years, Vietnam has adopted sweeping economic reforms in line with recommendations by IMF experts. It also has tried to arrange international loans to repay $130 million outstanding to the IMF, which technically bars it from seeking new assistance. Washington has blocked the move.

“We’re trying our best to normalize with the IMF, the World Bank and the Asian Development bank,” Nguyen Ngoc Minh, acting director of the external relations department of Vietnam’s central bank, said in a recent interview. “Because of the embargo, we’re facing a real credit squeeze.”

Meanwhile, the Asia Pacific Council of the American Chambers of Commerce, which represents U.S. business interests in 16 Asian countries, adopted a communique at a meeting this month saying it “supports immediate removal of restrictions on U.S. trade and investment with Vietnam. The current economic sanctions severely impact American competitiveness in the region.”

British and French companies are now extracting oil from offshore sites in Vietnam that were first developed by American companies. Although the Japanese government has followed the American embargo on aid, Japanese companies earned $2.5 billion last year, making it Vietnam’s second-largest trading partner after the Soviet Union.