By Ho Binh Minh and Ben Blanchard
HANOI/BEIJING (Reuters)7 - China's top diplomat scolded Vietnamese officials during talks in Hanoi on Wednesday for "hyping up" a row over a Chinese oil rig drilling in disputed waters in the South China Sea, in tough comments that suggest relations will remain rocky.
State Councilor Yang Jiechi also told his hosts that the rig's activities in waters that Vietnam lays claim to were "completely legal", China's Foreign Ministry spokeswoman Hua Chunying said at a daily briefing in Beijing.
Yang, who outranks the country's foreign minister, made the remarks in a meeting with Vietnamese Deputy Prime Minister and Foreign Minister Pham Binh Minh. He later met Prime Minister Nguyen Tan Dung and Nguyen Phu Trong, general secretary of Vietnam's ruling Communist Party.
The lack of any breakthrough suggests China and Vietnam are far from resolving one of the worst breakdowns in their relations since they fought a brief war in 1979. Among the obstacles is Beijing's demand for compensation for anti-Chinese riots that erupted in Vietnam after the drilling platform was deployed on May 2.
"The most urgent thing is for Vietnam to stop its interference and harassment, stop hyping up the issue and stop whipping up disagreement to create new disputes, and properly deal with the aftermath of the recent serious incidents of violence," Hua said, describing Yang's comments.
In a later statement, China's Foreign Ministry said Yang told General Secretary Trong that both countries should try and resolve their differences no matter how hard that seemed.
"Both sides should uphold the having of bilateral communications to stabilize the situation as soon as possible," Yang said, adding that they owed this to both of their peoples.
Vietnam took a more conciliatory tone, releasing two similarly worded accounts of Yang's meetings with Dung and Minh, in which it lauded the two sides' friendship and cooperation, but gave no indication of any progress.
Dung said Vietnam was always "grateful for the support and great help from China", according to one statement, and that the two countries "need to control the situation, not let conflict happen, continue to maintain contacts and negotiations" and handle disputes promptly.
However, Dung demanded China removed the rig, which he said was a violation of international law and Vietnam's sovereignty.
Yang's visit is the highest-level direct contact between the two sides since the rig was parked 240 km (150 miles) off the coast of Vietnam. Vietnam says the platform is in its 200-nautical-mile exclusive economic zone and on its continental shelf. China has said the rig is operating completely within its waters near the Paracel Islands, which are occupied by China.
"Yang stressed that the Paracel Islands are China's inherent territory and that there exists no dispute about this," Hua said, adding that Vietnam was "continually illegally harassing Chinese drilling operations".
Nevertheless, both sides believed the talks were "frank and constructive", Hua added.
Earlier, Yang and Minh shook hands without smiling in front of reporters at a government guesthouse. Outside the building, neither country's national flag was flying, as is customary when senior foreign visitors attend meetings in Hanoi.
Sino-Vietnamese ties have been largely frozen since early May, with both sides accusing the other of inflaming the situation. Dozens of Vietnamese and Chinese coastguard and fishing vessels have repeatedly squared off around the rig, resulting in a number of rammings and collisions.
Vietnam's official newspaper Tuoi Tre (Youth) had quoted a senior Vietnamese naval official as saying Chinese ships had been less aggressive, suggesting an effort to dial down tension ahead of Yang's visit.
Communist parties rule both countries and their trade has swelled to $50 billion annually, but Vietnam has long been suspicious of its giant neighbor, especially over China's claims to almost the entire South China Sea. Ordinary Vietnamese are also quickly angered by any perceived bullying from China.
The Philippines, Malaysia, Brunei and Taiwan also have claims to parts of the potentially energy-rich waters, and China has looked on with suspicion at what it sees as U.S. moves to "provoke" tension by supporting its regional allies, notably Vietnam and the Philippines.
"The United States keeps pushing its pivot to the Asia Pacific strategy, provoking relevant countries to rely on U.S. strength and use violence to scheme at sea, which worsens the problem and increases antagonism," state media on Wednesday quoted a Chinese military think tank as saying in a report.
Deployment of the Haiyang Shiyou 981 rig triggered rioting in Vietnam in which four people were killed and factories believed to be owned by Chinese companies were looted. Many were Taiwanese-owned. Vietnam detained several hundred people after the violence. About a dozen have been tried and jailed for up to three years.
Dung told Yang the riots were "unfortunate and unintended".
He said last month that his government was considering legal action against China. That angered Beijing. China has said the rig will explore until mid-August. It has a good chance of finding enough gas to put the area into production, Chinese industry experts have said.
(Correct title of Vietnamese official in paragraph 6)
(Additional reporting by Nguyen Ha Minh; Writing by Megha Rajagopalan; Editing by Larry King)