Bangkok (AP) – Russia is the main supplier of military goods to Vietnam, offering fighter jets, tanks and ships. But Moscow’s ongoing war on Ukraine has caused international sanctions, with the US, the European Union and others more intimidating unless Russia relents.
Internal Vietnamese documents obtained by the Associated Press reveal that Hanoi and Moscow are preparing for this possibility, establishing a complex system in which Vietnam can hide payments to Russia by avoiding open transfers of cash through the global banking system.
Here are some takeaways from the AP report:
How does it work?
The system, established last year, uses Vietnam’s profits from joint oil and gas ventures with Russia to pay for defence goods purchased with credits from Moscow.
Final details of the mechanism were laid out in a 2024 memo obtained from the Vietnamese Oil and Gas Group, Vietnam’s Ministry of Industry and Trade prior to the visit of Hanoi by Russian President Vladimir Putin.
The system sends Vietnamese profits from the Siberian Rusvietpetro joint venture to Moscow, repaying extended credits for military purchases. Vietnam’s profits beyond the loan repayment will be transferred to Russia’s state-run oil and gas company Zarubezhneft. And finally, in Vietnam, Zarubezhneft uses a joint venture there to transfer the same amount of money to the PVN, effectively avoiding international financial transfers.
Why is it important?
The system was introduced during a period of uncertainty as the US was trying to strengthen its ties with Vietnam. Bullwalk Against China’s growing claims in Southeast Asiaand continues to trade negotiations after the White House imposes a 20% tariff on Hanoi, while President Donald Trump is also threatening even more severe sanctions in Moscow.
The European Union has also put in place numerous new sanctions to pressure President Putin to end the war, and Trump was recently published Executive order doubles tariffs in India to 50% puts pressure on New Delhi Stop purchasing Russian oil and military equipmenthe said, which has helped to make war with Ukraine possible.
The AP has obtained documents relating to the mechanisms from Vietnamese officials who said he is part of a faction opposed to close ties with Russia, as it risks putting the growth of its relations with Washington at risk. He provided the document on condition of anonymity to protect himself from the possibility of retaliation from the Vietnamese authoritarian government.
The US State Department declined to comment specifically on documents or payment plans designed to skirt US sanctions, and presented comments to the Vietnamese government. However, he reiterated widely that “our sanctions remain intact.”
Vietnam’s Ministry of Industry PVN and the Ministry of Foreign Affairs did not respond to multiple emails seeking comment on the payment scheme. The Russian Treasury Ministry, which conducted the Moscow negotiations, also did not respond.
Is it necessary?
Experts say this mechanism is probably not necessary to avoid current sanctions, but they show that the two countries are paying a wealth of attention by setting up systems to avoid future secondary sanctions.
The main threat of secondary sanctions comes from countering the American enemy through the sanctions law, namely the Kurtsa law. This is a measure adopted during Trump’s first term, allowing sanctions to be imposed on those engaged in commercial transactions with the country or with the Russian military industrial complex.
“If you want to isolate yourself from any kind of risk, you basically avoid cross-border transactions and create this kind of offset payment scheme,” he said. Ben Hilgenstock, a Russian sanctions expert and a senior economist at Kyiv School of Economics who analyzed the AP’s Vietnamese documents.
PVN general director Le ngoc Son wrote about his concerns on June 11, 2024, briefed the agreement, saying, “In the context of the US and Western countries, by imposing sanctions on Russia in general and removing Russia in particular, this payment method is relatively confidential, as only the territory of Vietnam and the territory of Viet and the territory of Viet and the territory of Viet and the territory of Viet are rotated, so this payment method is relatively confidential and the United States embargo is relatively confidential.”
