In a world increasingly shaped by geopolitical tensions and economic sanctions, Vietnam and Russia have quietly developed a backdoor financial mechanism to keep their defense trade alive, even as Western powers tighten the screws on Moscow over its ongoing war in Ukraine. According to internal Vietnamese government documents obtained by The Associated Press, the two countries have engineered a sophisticated system to conceal payments for military goods—fighter jets, tanks, and ships—by sidestepping the global banking system and, in turn, U.S. and European Union sanctions.
The mechanism, finalized in a 2024 memo from the Vietnam Oil and Gas Group (Petrovietnam or PVN) to Vietnam’s Ministry of Industry and Trade just ahead of Russian President Vladimir Putin’s visit to Hanoi, leverages profits from joint oil and gas ventures in Siberia. Instead of making open financial transfers, Vietnam uses its share of profits from the Rusvietpetro joint venture to repay credit extended by Moscow for military purchases. Any profits exceeding those repayments are then transferred to Zarubezhneft, Russia’s state-owned oil and gas company, which subsequently uses its own joint venture in Vietnam to transfer an equivalent sum back to PVN. The result: money circulates solely within Vietnam and Russia, never crossing international financial borders or appearing on the radar of Western authorities.
"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," PVN’s general director, Le Ngoc Son, wrote in a June 11, 2024 document outlining the agreement, as reported by The Associated Press.
This elaborate workaround is not just a testament to the ingenuity of both countries, but also a sign of the times. The United States, keen to strengthen ties with Vietnam as a counterbalance to China’s growing assertiveness in Southeast Asia, has been engaged in ongoing trade negotiations with Hanoi. Yet, the White House recently imposed 20% tariffs on Vietnamese goods, and President Donald Trump has threatened even more stringent sanctions on Moscow. The European Union has also piled on with new sanctions, while Trump doubled tariffs on India to 50% in an effort to pressure New Delhi to stop buying Russian oil and military equipment, which he claims is enabling Russia’s war effort in Ukraine.
Experts say the payment mechanism is likely a precautionary measure, designed to shield both countries from the threat of future secondary sanctions—sanctions that could be imposed on companies or governments dealing with Russia’s military-industrial complex. The main threat comes from the Countering America’s Adversaries Through Sanctions Act (CAATSA), a set of measures adopted during Trump’s first term that allows the U.S. to penalize entities doing business with sanctioned Russian organizations.
"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," explained Ben Hilgenstock, a senior economist at the Kyiv School of Economics, who analyzed the Vietnamese documents for the AP. Evan Laksmana, who leads the Southeast Asian Security and Defense research program at the International Institute for Strategic Studies, described the arrangement as "next-level stuff," noting, "It’s not your typical flexible financing. It’s not your typical offset or counter-trade provisions."
The revelation of this arrangement comes at a particularly delicate moment. For Washington, Vietnam is a strategic partner in the region, seen as a bulwark against China’s ambitions in the South China Sea. At the same time, the Trump administration’s aggressive stance on trade and sanctions—especially the recent executive order doubling tariffs on India—illustrates the complex balancing act facing Vietnamese policymakers. The country must navigate its longstanding defense relationship with Russia while deepening economic and diplomatic ties with the U.S.
The documents detailing the payment scheme were leaked by a Vietnamese official who described himself as part of a faction opposed to closer ties with Russia, fearing it could jeopardize Hanoi’s growing relationship with Washington. He provided the documents to the AP on condition of anonymity, citing concerns about possible reprisals from Vietnam’s authoritarian government.
Despite the significance of the revelations, both the Vietnamese and Russian governments have remained tight-lipped. Vietnam’s Ministry of Industry, PVN, and the Foreign Ministry did not respond to multiple emails seeking comment, nor did Russia’s Finance Ministry, which conducted the negotiations on Moscow’s behalf. The U.S. State Department, for its part, declined to comment specifically on the documents or the payment plan, but reiterated in a statement to the AP that "our sanctions remain in place." The department added a pointed 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."
While the payment scheme may not be strictly necessary under current sanctions, it’s clear that both governments are exercising caution. By keeping money flows internal and off the global radar, they hope to avoid the risk of being targeted by future sanctions that could cut them off from the international financial system. The mechanism also avoids the SWIFT network, the backbone of most international financial transfers and a tool closely monitored by Western authorities for sanction enforcement.
The timing of these developments is telling. Earlier in 2025, the Trump Organization broke ground on a $1.5 billion luxury golf complex just outside Hanoi, after the Vietnamese government fast-tracked approval. While President Trump’s sons run the organization, financial disclosures from June 2025 indicate that Trump himself stands to benefit from many of its activities. This adds yet another layer of complexity to U.S.-Vietnam relations, as economic and political interests become increasingly intertwined.
News of the unorthodox payment arrangement first leaked in 2023, but instead of shutting it down, Vietnamese and Russian officials moved ahead, finalizing and implementing the system in 2024. They also made additional agreements to ensure the mechanism would continue to generate sufficient funds for future military purchases, according to internal documents reviewed by the AP.
For Vietnam, Russia remains a crucial supplier of military hardware, and for Moscow, Hanoi is a valued partner in a region where Western influence is growing. The payment mechanism is, in many ways, a reflection of the lengths to which both countries will go to maintain their strategic partnership in the face of mounting international pressure.
As the U.S. and its allies continue to ratchet up sanctions in hopes of curbing Russia’s war in Ukraine, the story of Vietnam and Russia’s secretive payment scheme offers a glimpse into the shadowy world of sanctions evasion—and the high-stakes chess game playing out on the global stage.
In the end, the arrangement stands as a stark reminder that, in geopolitics, where there’s a will, there’s often a way—even if it means rewriting the rules of international finance.