In a world where international sanctions are meant to choke off the financial lifelines of sanctioned states, Russia and Vietnam have found a way to keep their lucrative arms relationship alive—by sidestepping the global banking system altogether. According to a trove of internal Vietnamese government documents obtained by the Associated Press, the two countries have engineered an elaborate scheme to pay for Russian military equipment using profits from joint oil and gas ventures, thus evading U.S. and European restrictions aimed at pressuring Moscow over its war in Ukraine.
The arrangement, finalized and implemented in 2024, is detailed in a memo from Petrovietnam (PVN)—Vietnam’s state oil and gas giant—to the country’s Ministry of Industry and Trade, just ahead of a high-profile visit to Hanoi by Russian President Vladimir Putin. The documents, which were provided to the AP by a Vietnamese official opposed to closer ties with Russia, reveal a sophisticated system designed to keep cash quietly flowing between the two states, even as sanctions against Russia intensify.
Here’s how it works: Vietnam has purchased Russian military hardware—including fighter jets, tanks, and ships—on credit from Moscow. Instead of transferring repayment funds through conventional international banking channels, which are heavily monitored and often blocked due to sanctions, Vietnam uses its share of profits from Rusvietpetro, a joint oil venture in Siberia, to pay back the credit. Any Vietnamese profits exceeding loan repayments are sent to Russia’s state-owned Zarubezhneft, which in turn uses its joint venture in Vietnam to transfer an equivalent sum back to PVN. This circular flow ensures that money never actually crosses international borders or enters the SWIFT network, the backbone of global financial transfers overseen by Western authorities.
"It’s not your typical flexible financing. It’s not your typical offset or counter-trade provisions. It is next-level stuff," Evan Laksmana, head of Southeast Asian Security and Defense research at the International Institute for Strategic Studies, told the Associated Press. The scheme, he said, is a creative workaround that reflects both countries’ desire to insulate themselves from the growing threat of secondary sanctions.
Secondary sanctions—punitive measures imposed not just on Russia, but on anyone who does business with sanctioned Russian entities—have become a powerful tool in the U.S. arsenal. The Countering America’s Adversaries Through Sanctions Act (CAATSA), passed during Donald Trump’s first term, gives Washington the ability to target countries that continue to trade with Russia’s military-industrial complex. Ben Hilgenstock, a senior economist at the Kyiv School of Economics who reviewed the Vietnamese documents, explained: "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 timing of this revelation is especially sensitive. The United States is actively courting Vietnam as a strategic partner to counter China’s growing assertiveness in Southeast Asia. Washington has imposed 20% tariffs on Vietnamese goods and continues to negotiate trade deals with Hanoi, all while President Donald Trump threatens even harsher sanctions against Moscow. The European Union, too, has ramped up its sanctions on Russia, seeking to squeeze President Putin into ending the war in Ukraine. In a parallel move, Trump recently doubled tariffs on India to 50%, aiming to pressure New Delhi to stop buying Russian oil and arms—a move he claims enables Moscow’s war efforts.
Despite these tensions, economic ties between the U.S. and Vietnam are deepening in other areas. Earlier this year, the Trump Organization broke ground on a $1.5 billion luxury golf complex outside Hanoi, after Vietnamese authorities fast-tracked its approval. While Trump’s sons run the family business, financial disclosures indicate that the former president continues to benefit from its global activities.
Vietnam’s strategic calculus is complicated. On one hand, China is its largest trading partner, but the two countries have a history of friction, especially over territorial disputes in the South China Sea. On the other, the United States is now Vietnam’s top export market and a growing supplier of defense goods since the U.S. lifted its arms embargo on Hanoi in 2016. Yet, decades of defense cooperation with Russia mean Vietnam remains reliant on Moscow for spare parts and new military equipment. According to the AP, Russia extended Vietnam $2 billion in credit in 2011 for two navy frigates and 64 T90S tanks, and another $8 billion in 2023 for SU-30 fighter jets and two more frigates—though none of these have yet been delivered.
The documents obtained by the AP show that the payment mechanism was not only planned but executed, with agreements in place to ensure future military purchases could be funded the same way. News of the unorthodox arrangement first leaked in 2023. At the time, Vietnam’s ruling Communist Party dismissed the reports as a Russian attempt to undermine Hanoi’s growing relationship with Washington. But the subsequent implementation of the scheme, as outlined in the 2024 memo, confirms its authenticity.
PVN’s general director, Le Ngoc Son, spelled out the rationale in a June 11, 2024, document: "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."
While the U.S. State Department declined to comment directly on the specifics of the documents or the payment plan, it reiterated in an email to AP this week: "Our sanctions remain in place. 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." Vietnamese and Russian officials did not respond to multiple requests for comment.
Experts say that the mechanism, while perhaps unnecessary for avoiding current sanctions, is a sign of the lengths to which both countries are willing to go to prepare for future restrictions. The threat of secondary sanctions is particularly potent because of its ambiguity; as Hilgenstock put it, "Everyone else is left figuring out where exactly the red line is and how to toe it, and how not to cross it. And the result is compliance, or more often overcompliance."
Meanwhile, Vietnam continues to strengthen its military capabilities, largely in response to perceived threats from China. Yet, its balancing act—maintaining close ties with both Russia and the United States—has come under increasing scrutiny. As 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." With the current U.S. administration taking a more transactional approach, the margin for diplomatic maneuvering is shrinking.
During Putin’s June 2024 visit, Russia’s Zarubezhneft received a license to develop a new gas field off Vietnam’s continental shelf, further cementing the energy partnership at the heart of this sanctions-evading scheme. High-level visits and new defense agreements signed in Moscow this May underscore that, for now, the backdoor channel remains open—and the stakes, both economic and strategic, are only growing higher.
As the U.S. and EU weigh additional sanctions and the global order shifts, the ingenuity of this payment mechanism may offer a glimpse into how other countries could seek to evade financial restrictions in the future. For Vietnam and Russia, the game of cat and mouse continues, with billions of dollars and geopolitical influence hanging in the balance.