Vietnam says will "resolutely defend its sovereignty." China says Vietnam making "irresponsible accusations" against it; Philippines submitted arbitration case against China in March.
Vietnamese Prime Minister Nguyen Tan Dung said his government was considering various "defence options" against China, including legal action, following the deployment of a Chinese oil rig to waters in the South China Sea that Hanoi also claims.
Dung's comments, given in a written response to questions from Reuters, were the first time he has suggested Vietnam would take legal measures, and drew an angry response from China, which insisted the rig was in its sovereign waters.
"Vietnam is considering various defence options, including legal actions in accordance with international law," Dung said in an email sent late on Wednesday, while on a visit to Manila. He did not elaborate on the other options being considered.
"I wish to underscore that Vietnam will resolutely defend its sovereignty and legitimate interests because territorial sovereignty, including sovereignty of its maritime zones and islands, is sacred," he said.
China accused Vietnam of stoking regional tensions.
"Now they are distorting the facts, conflating right and wrong on the global stage, blackening China and making unreasonable accusations against China," foreign ministry spokesman Hong Lei told a regular news briefing.
"Just who is the one who is repeatedly challenging other countries' sovereignty? Who is the one who is causing tensions in the seas? Who on earth is destroying peace and stability in the South China Sea? Facts speak louder than words."
In March, the Philippines submitted a case to an arbitration tribunal in The Hague, challenging China's claims to the South China Sea. It was the first time Beijing has been subjected to international legal scrutiny over the waters.
Beijing has refused to participate in the case and warned Manila that its submission would seriously damage ties.
Anti-Chinese violence flared in Vietnam last week after a $1 billion deepwater rig owned by China's state-run CNOOC oil company was parked 240 km (150 miles) off the coast of Vietnam.
Hanoi says the rig is in its 200-nautical mile exclusive economic zone and on its continental shelf. China has said the rig was operating completely within its waters.
The spat is the worst breakdown in ties between the two Communist states since a brief border war in 1979.
"My own sense is that if the Vietnamese government start to ratchet up their tactics, the Chinese probably are not going to blink," said Christopher Johnson, a former senior China analyst at the CIA, now at the Center for Strategic and International Studies in Washington. "So you could have a very difficult situation."
The rig move was the latest in a series of confrontations between China and some of its neighbours. Washington has sharpened rhetoric towards Beijing, describing a pattern of "provocative" actions by China.
U.S. Secretary of State John Kerry discussed the situation by telephone with Vietnamese Deputy Prime Minister and Foreign Minister Pham Binh Minh on Wednesday, the two governments said. Kerry also invited Minh to visit Washington, U.S. State Department spokeswoman Jen Psaki said.
Dung, in some of his strongest comments yet on the breakdown in ties with Beijing, said that while Vietnam had sought to use dialogue to settle the situation, the response from China had been an increase in force and intimidation.
"There is a vast gap between the words and deeds of China," he said.
He followed up those remarks in a speech at the World Economic Forum on East Asia in which he warned the maritime territorial tensions could endanger global trade.
"The risk of conflict will disrupt these huge flows of goods, and have unforeseeable impact on regional and world economies," he said. "It may even reverse the trend of global economic recovery."
Both sides have traded accusations over who was to blame for a series of collisions between Vietnamese and Chinese vessels in waters near the oil rig earlier this month.
China claims about 90 percent of the South China Sea, displaying its reach on official maps with a so-called nine-dash line that stretches deep into the maritime heart of Southeast Asia. The Philippines, Vietnam, Malaysia, Brunei and Taiwan also have claims to parts of the potentially energy-rich waters.
HANOI WEIGHS OPTIONS
Vietnamese Deputy Prime Minister Vu Duc Dam told Reuters on Thursday that Hanoi had been staying well-briefed on the progress of Manila's arbitration case.
"We have followed this case very closely and would like to use all measures provided by international law to protect our legitimate interests," he said in an interview in Tokyo.
Diplomatic sources in Vietnam have previously told Reuters that China put pressure on Hanoi over joining the Philippine case.
Manila is seeking a ruling to confirm its right to exploit the waters in its exclusive economic zone as allowed under the U.N. Convention on the Law of the Sea (UNCLOS).
A ruling against China could prompt other claimants to challenge Beijing, experts say, although Manila has said it does not expect the tribunal to reach a decision before the end of 2015.
Any ruling would be unenforceable because there is no body under UNCLOS to police such decisions, legal experts say.
CHINA "BROUGHT US TOGETHER"
To try to keep up pressure on Beijing, diplomats said Vietnam might host a meeting with Philippine and Malaysian officials at the end of the month to discuss how to respond to China, underscoring the nascent coordination among the three countries. Meetings in February and March had discussed the Philippine legal case.
A senior Malaysian diplomatic source told Reuters last week that China's assertiveness had given momentum to the three-way talks and "brought us together", but he played down the discussions as little more than "chit chat" at this stage.
Malaysia had no intention of filing a legal case against China, the source added.
The growing Manila-Hanoi co-operation was a potential turning point in the tensions over the South China Sea that have intensified over the last five years said Carl Thayer of the Australian Defence Force Academy in Canberra.
"Vietnam may be siding up to the U.S. via the Philippines," he said. "A joint or two separate legal challenges would really put China on the spot, and outside international law."
By Rosemarie Francisco and Manuel Mogato