In a startling revelation that has sent ripples through diplomatic and financial circles, internal Vietnamese government documents obtained by the Associated Press (AP) have exposed a clandestine mechanism developed by Russia and Vietnam to conceal arms deal payments and sidestep U.S. and European sanctions. The arrangement, finalized and implemented in 2024 despite earlier leaks, leverages profits from joint oil and gas ventures to quietly fund defense contracts—effectively bypassing the global banking system and the SWIFT network, which is overseen by the United States and other Western powers.
The documents, meticulously authenticated by experts through metadata and classification codes, lay out a complex but cunning system that keeps transactions secret and cash flowing even as international sanctions against Russia tighten. According to AP, Vietnam has purchased Russian military equipment—including fighter jets, tanks, and ships—on credit. Instead of making repayments through conventional bank transfers, which would be flagged or blocked by sanctions, Vietnam pays back this credit from its share of profits in Rusvietpetro, a joint Vietnam-Russia oil company operating in Siberia.
Here's how the arrangement unfolds: Vietnamese profits from Rusvietpetro are first sent to Moscow to repay the military purchase loans. Any profits exceeding the loan repayments are then transferred to Zarubezhneft, a Russian state-owned oil and gas company based in Moscow. In the final step, Zarubezhneft, via its joint venture in Vietnam, transfers an equivalent amount of money to the Vietnam Oil and Gas Group (Petrovietnam or PVN)—all without involving any international financial transfers. As a result, the money circulates strictly within Russian and Vietnamese territories, making it nearly invisible to global sanctioning authorities.
Le Ngoc Son, PVN's general director, confirmed the confidential nature of the payment method in a June 11, 2024 document, writing, "In the context of the U.S. and Western countries imposing sanctions on Russia in general and removing Russia from SWIFT in particular, this payment method is considered relatively confidential and appropriate because money only circulates within the territory of Vietnam and Russia and Vietnam does not have to worry about the risks of being affected by the U.S. embargo."
This backdoor financing method is anything but typical. As Evan Laksmana, head of the Southeast Asian Security and Defense research program at the International Institute for Strategic Studies, told AP, "It's not your typical flexible financing. It's not your typical offset or counter-trade provisions. It is next-level stuff." He likened the arrangement to Russia's history of creative arms deal structures in Southeast Asia, such as its 2017 agreement to supply Indonesia with fighter jets in exchange for palm oil and coffee.
The timing of this revelation could hardly be more sensitive. The United States is actively trying to deepen its ties with Vietnam to counter China's growing assertiveness in Southeast Asia. Meanwhile, the U.S. has imposed 20% tariffs on Vietnamese goods, and President Donald Trump has threatened even stricter measures against both Russia and countries that facilitate its sanctions evasion. The Trump Organization, run by the president's sons but still benefiting Trump himself, even broke ground on a $1.5 billion luxury golf complex outside Hanoi earlier this year, after Vietnamese authorities fast-tracked its approval—a move raising additional questions about the intersection of business and diplomacy.
For its part, the U.S. State Department declined to comment specifically on the documents or the payment scheme. Instead, it reiterated a general warning: "Those engaging in certain transactions or activities with sanctioned entities and individuals may expose themselves to sanctions risk or be subject to an enforcement action." Vietnam's Ministry of Industry, PVN, and the Foreign Ministry did not respond to multiple requests for comment, and Russia's Finance Ministry also remained silent.
Why go to such lengths? The answer lies in the rapidly shifting landscape of international sanctions. Since Russia's full-scale invasion of Ukraine in 2022, its major banks have been cut off from SWIFT, and its defense companies are subject to sweeping Western sanctions. Zarubezhneft, the Russian oil and gas company central to the scheme, has so far avoided direct sanctions, though its CEO Sergei Kudryashov and board chairman Evgeniy Murov have both been targeted individually. The mechanism appears designed to insulate both countries from the risk of future or secondary sanctions, particularly those under the U.S. Countering America's Adversaries Through Sanctions Act (CAATSA), which threatens penalties for countries doing business with Russia's military-industrial complex.
Ben Hilgenstock, a senior economist at the Kyiv School of Economics and an expert on Russian sanctions, explained to AP, "If you want to insulate yourself from any kind of risk, you then basically avoid cross-border transactions and create these kind of offsetting payment schemes." The vagueness of secondary sanctions, he noted, often leads to overcompliance, as companies and countries struggle to determine where exactly the red lines lie.
Vietnam's defense relationship with Russia is both deep and enduring. In 2011, Russia extended $2 billion in credit for a deal that included two navy frigates and 64 T90S tanks. Another $8 billion was provided in 2023 for SU-30 fighter jets and two additional frigates, though none have been delivered yet. Despite the growing strategic partnership with the U.S.—which lifted its arms embargo on Vietnam in 2016—Hanoi remains dependent on Moscow for spare parts and military support, a reliance unlikely to wane anytime soon.
Vietnam's military strength is notable in the region, particularly as tensions with China over South China Sea territorial claims intensify. While China is Vietnam's largest trade partner, confrontations in disputed waters have prompted Hanoi to bolster its naval and air power. The United States, now Vietnam's largest export market, sees the country as an essential partner in its Indo-Pacific strategy to counterbalance Beijing.
The authenticity of the leaked documents has been corroborated by Ben Swanton, co-director of The 88 Project, an NGO focused on human rights in Vietnam. Swanton pointed out that Vietnam has a history of misleading Washington but rarely faces consequences. "Vietnam has learned that Washington will give it a free pass basically," he said, referencing a previous incident where the U.S. State Department upgraded Vietnam in its annual human trafficking report despite evidence of misinformation.
When the 2023 document first leaked, Vietnam's Communist Party dismissed it as a Russian fake intended to sour relations with Washington. Yet, there was no visible rift when then-President Joe Biden visited Hanoi in September 2023 to cement a "Comprehensive Strategic Partnership," the highest level of diplomatic ties between the two nations. The arrangement's existence was further confirmed during Russian President Vladimir Putin's visit to Hanoi in June 2024, where the two sides signed over ten documents to deepen their strategic partnership. Zarubezhneft received a license to develop the "Block 11-2" gas field on Vietnam's continental shelf, and an internal PVN document from April 2024 indicated that 3D mapping of the block had begun.
As the European Union unveiled its 19th round of sanctions against Russia—including a proposed total import ban on Russian liquefied natural gas (LNG)—and the U.S. and UK ramped up restrictions on Russian oil revenues and military supplies, the effectiveness and longevity of the Vietnam-Russia payment mechanism remain to be seen. Huong Le-Thu, deputy director of the International Crisis Group's Asia Program, observed, "Vietnam needs to navigate in this less conducive diplomatic environment where being too close to Russia will not be well received in European capitals," especially as the U.S. administration adopts a more transactional approach.
For now, Vietnam appears to be walking a geopolitical tightrope—deepening its strategic partnership with Russia while courting the United States and hedging against the unpredictable tides of international sanctions. The coming months may determine whether this high-wire act can be sustained or whether the tightening noose of sanctions will force a reckoning in Hanoi's foreign policy calculations.
