Vietnam and Russia have secretly used a back-door payment mechanism for arms deals that funnels profits from a joint oil and gas venture in Siberia to avoid the global banking system and thus elude possible US and Western sanctions, an exclusive AP report citing Vietnamese internal documents said.
With the scheme now publicly exposed, Hanoi now faces significant risks if Washington decides to act, including through the possible imposition of punitive tariffs on Vietnamese goods. Vietnam purchased fighter jets, tanks and warships from Russia on credit, then repaid those debts with profits from the Rusvietpetro joint venture in Siberia, the AP report said.
Funds circulated strictly between Vietnam and Russia, thus avoiding the SWIFT transaction system. PetroVietnam (PVN) described this as a “confidential and appropriate” method in the context of Russia’s exclusion from global financial networks in punitive response to its invasion of Ukraine.
The US has sanctioned various countries that continue to buy Russian oil and weapons, as seen most severely in the 50% tariffs recently imposed on India. Under the Countering America’s Adversaries Through Sanctions Act (CAATSA), Washington holds sweeping authority to penalize any state engaging with Russia’s defense industry.
Vietnam’s oil-for-arms mechanism directly undermines US sanctions strategy and therefore potentially places Hanoi in Washington’s punitive line of fire. The risks for Vietnam include:
- Secondary sanctions on energy and finance: PVN and other state-owned firms could be blacklisted, losing access to US dollars and Western capital markets.
- Export disruptions: The US is Vietnam’s largest export market. Restrictions would devastate textiles, electronics and seafood industries.
- Investor flight: US and European investors could freeze or withdraw capital, undermining Vietnam’s bid to anchor high-tech supply chains.
- Defense and diplomatic fallout: Since 2016, the US has supplied defense equipment to Vietnam. Sanctions could halt this cooperation, weakening Hanoi’s leverage vis-à-vis China.
- Reputational damage: Being branded a sanctions violator risks eroding Vietnam’s credibility as a reliable partner in the Indo-Pacific.
Vietnamese leaders have long touted their “bamboo diplomacy” as resilient and flexible, often bending with geopolitical winds but not breaking.
Under Trump, where international relations are treated as transactional, sustaining backdoor deals with Russia could invite not only economic sanctions but also strategic mistrust. In such a climate, bamboo may no longer symbolize deft balance but dangerous indecision.
For years, Vietnam has pledged to enter a “new era” centered on economic growth and deeper integration into global supply chains. If this is the true priority, diplomacy must prove that “bamboo” is not merely a slogan but a strategy to safeguard access to important US and European markets.
In today’s geostrategic and geo-economic environments, half-measures and hedging may no longer suffice.
Alternatively, Hanoi could lean more heavily on the emerging China–Russia–North Korea bloc in the name of multipolarity. But history before 1986 remains a cautionary tale attended by shortages, rationing, dependence on aid and hollow slogans of “fast progress” that ended in stagnation. Once again, “comradeship” risks becoming a straitjacket.
With Vietnamese Communist Party General Secretary To Lam declaring the nation’s “march into a new era,” the costs of each path are stark:
- Prioritizing economics requires gradually reducing dependence on Russia to safeguard the US market.
- Embracing the “comrade axis” means acknowledging to both elites and citizens the likelihood of greater hardship and foregone opportunities.
If Washington enforces CAATSA or broadens sanctions against Russia’s defense partners, Vietnam could face severe economic, diplomatic and strategic consequences. The oil-for-arms scheme may have provided temporary cover, but now exposed, it risks turning Hanoi’s long-held “bamboo diplomacy” into a liability.
If bamboo isn’t resilient, it may splinter in Trump’s storm — and the cost will be not only economic, but Vietnam’s international standing itself.
Nguyen Ngoc Nhu Quynh, widely known as Mother Mushroom, is a Vietnamese blogger, human rights advocate, and former prisoner of conscience. She is the founder & executive director of WEHEAR, a 501(c)(3) public charity dedicated to empowering women, supporting exiled activists and advancing independent human rights reporting.
