United States President Barack Obama has lifted a decades-old arms embargo on Vietnam, looking to bolster a former bitter enemy his government now sees as a crucial partner.

Obama announced the full removal of the embargo after arriving in the communist country on Monday, saying that the move was intended as a step towards normalising relations and eliminating a "lingering vestige of the Cold War".

"At this stage both sides have developed a level of trust and cooperation," Obama said.

Obama is seeking to strike a  balance with Vietnam as China tries to strengthen claims to disputed territory in the South China Sea, one of the world's most important waterways.

Lifting the embargo will be seen as a psychological boost for Vietnam's leaders as they look to counter a resurgent China. Vietnamese President Tran Dai Quang thanked Obama for lifting the embargo.

Vietnam and China's tricky dispute in the South China Sea

 

Vietnam has not bought anything, but removing the remaining restrictions shows relations are fully normalised and opens the way to deeper security cooperation.

Massive business deals

Four decades after the fall of Saigon, now called Ho Chi Minh City, and two decades after relations were restored, Obama is eager to upgrade relations with an emerging power whose rapidly expanding middle class beckons as a promising market for US goods and an offset to China's strength.

"Very big commercial deals are being signed here numbering in the billions of dollars," Al Jazeera's Marga Ortigas, reporting from Hanoi, said. "These are the biggest deals signed by Vietnam."

One of the biggest deals was an $11.3bn purchase by VietJet airlines of 100 aircrafts from the US firm Boeing. Obama also announced several other deals.

Source: Al Jazeera and agencies