Hanoi: Vietnam and Russia have developed a covert financial mechanism to bypass U.S. and Western sanctions on defense transactions, according to internal Vietnamese government documents obtained by the Associated Press.

The documents reveal that profits from joint oil and gas ventures, particularly the Rusvietpetro project in Siberia, are being used to settle contracts for Russian military equipment, including fighter jets and tanks. By channeling payments through these energy profits instead of international banking systems such as SWIFT, both countries avoid exposure to potential sanctions under U.S. laws like the Countering America's Adversaries Through Sanctions Act.

The financial strategy involves transferring excess profits from Vietnam's state-owned Petrovietnam to the Russian state oil company Zarubezhneft. These funds are then returned to Vietnam through a local joint venture, enabling defense payments without traditional international wire transfers. This arrangement shields both nations from secondary sanctions and maintains confidentiality.

This development underscores Vietnam’s careful balancing act between its defense ties with Russia and its growing strategic relations with the United States. Despite U.S. pressure to reduce reliance on Russian arms, Vietnam continues to deepen defense cooperation with Russia, leveraging alternative financing mechanisms. The U.S. response has remained cautious, as Vietnam is considered a key partner in Southeast Asia amid rising regional tensions with China.

Experts say this case reflects a broader trend of nations seeking alternative financial channels to bypass international sanctions. Russia has increasingly turned to barter trade and similar arrangements, exchanging goods like wheat for Chinese cars and flaxseed for building materials, as conventional banking channels are restricted.

The revelation of this covert mechanism highlights the challenges of enforcing sanctions in a multipolar world and raises questions about the effectiveness of current international measures designed to curb the influence of sanctioned nations.