Russian President Dmitry Medvedev witnessed the signing, part of an effort to boost ties with his country's former Soviet-era communist ally.

"This is a very important project," he told reporters, but stressed the two countries were also keen to ramp up cooperation in non-energy sectors including banking and high-tech.

"We are looking into the future and the future is connected with high-tech," he told Vietnamese and Russian business people after talks with Vietnam's President Nguyen Minh Triet.

Russia is locked in a global race with competitors like the United States, Japan and France to clinch lucrative worldwide contracts as demand for nuclear energy increases.

An official with Russian state nuclear conglomerate Rosatom has told AFP the construction cost of a two-reactor plant is estimated at more than four billion euros, although Rosatom chief Sergei Kiriyenko, also in Hanoi, declined to confirm the figure.

"The fact that we are the first to start gives us a good competitive advantage," Kiriyenko said, adding Russia will be keen to win more deals later.

Vietnam wants to build eight nuclear facilities in the next two decades. Initial government plans call for four reactors, with a total capacity of 4,000 megawatts and at least one of them operational in 10 years' time.

Japan's Prime Minister Naoto Kan, also on a visit to Hanoi, announced with his Vietnamese counterpart that the two countries will join forces to build two other nuclear reactors in Vietnam.

Kiriyenko said a 2020 timeframe for the Russian plant was "absolutely realistic".

Fast-growing Vietnam faces energy shortages, and foreign businesses have expressed concern about a lack of energy and other infrastructure.

Moscow is willing to provide a loan to help finance the Russian plant's construction, Medvedev's top foreign policy aide Sergei Prikhodko said.

Earlier Sunday, during talks with Vietnamese officials, Medvedev said Vietnam was "actively developing" on various fronts, including the economy and defence.

"On all these directions Russia will assist Vietnam, which is our close friend," he said after paying his respects at the mausoleum of Vietnam's revolutionary hero Ho Chi Minh.

Ties with Vietnam date back to the Soviet era when the communist Soviet Union became the country's main benefactor after the Vietnam War ended in 1975.

Medvedev said their shared history was a firm foundation to build upon.

"This seals our partnership. The documents here are of secondary importance," he said.

Following the Soviet collapse in 1991 Vietnam was left without its ideological, economic and military benefactor, and links have long been just a shadow of those during the Cold War.

According to the Kremlin, Russia is only the 25th-largest investor in Vietnam.

Vietnamese President Triet said his country received invaluable assistance from the Soviet Union during the war against the United States.

"Everything that we have today is partly thanks to the Soviet Union's help," he said, expressing hope that investment cooperation would intensify.

The two sides signed a raft of other agreements, including deals on construction of a hydro power station and cooperation in the oil and military sectors.

Vietnam and Russia had also been expected to express political support for plans by BP's Russian joint venture, TNK-BP, to acquire the Vietnamese assets of British Petroleum.

But Russian Energy Minister Sergei Shmatko said that memorandum had not yet been finalised.

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