russia and Vietnam have developed a method to avoid possible US sanctions on arms deals

This was reported by the Associated Press, which obtained internal Vietnamese documents from an unnamed official whose faction opposes closer ties with russia due to the risks of jeopardising increasingly better relations with Washington.

Under this system, Vietnam purchased russian military equipment, including fighter jets, tanks and ships, on credit from Moscow, and then repaid the loan with its share of the profits from the joint Vietnamese-russian oil company Rusvietpetro, which operates in Siberia. At the same time, the mechanism avoids transactions through the Western-controlled SWIFT global network, which effectively helps to keep payments secret.

Information about such an agreement appeared as early as 2023, and since then it has been finalised and implemented, and agreements have been concluded to ensure sufficient funding for future military purchases, according to an internal document from 2024.

The final details of the agreement were set out in a 2024 memorandum between the Vietnam Oil and Gas Group (PVN) and the Vietnamese Ministry of Industry and Trade ahead of russian President Vladimir Putin's visit to Hanoi.

The outlined plan provides for the following:
Vietnam's profits from the Rusvietpetro joint venture in Siberia are sent to Moscow to repay the loan provided for military purchases.

Vietnam's profits exceeding the loan payments are then transferred to the russian state oil and gas company Zarubezhneft.

In Vietnam, Zarubezhneft uses its joint venture to transfer the same amount of money to PVN, effectively avoiding any international financial transfers.

‘In the context of the introduction of sanctions against russia in general and russia's exclusion from SWIFT in particular by the US and Western countries, this payment method is considered relatively confidential and expedient, as the money circulates only within Vietnam and russia, and Vietnam does not have to worry about the risks associated with the US embargo,’ wrote PVN CEO Le Ngoc Son in a document dated 11 June 2024.

Currently, Zarubezhneft is not subject to sanctions imposed on russia due to the war in Ukraine, although its CEO Sergey Kudryashov is on the US sanctions list against the russian energy sector. Zarubezhneft Chairman Yevgeny Murov, a former KGB officer, was also sanctioned by the US in 2014.

So, the mechanism outlined in the documents obtained by AP seems to be aimed at avoiding the possibility of future sanctions and the threat of secondary sanctions that could be imposed on those who facilitate the activities of organisations covered by the primary sanctions.

Two Western diplomats working in Hanoi told the AP that they had long suspected that Vietnam and russia had a secret agreement on the payment of large military contracts, although the details of the agreement in the documents obtained by the media were new to them.

Source: hromadske, Associated Press