By Francesco Guarascio and Phuong Nguyen

HANOI (Reuters) - Vietnam plans to adopt rules that would allow Elon Musk's Starlink to provide satellite internet services in the country while maintaining full ownership of any local subsidiary, a draft of the regulations shows.

The change paves the way for Starlink to launch in Vietnam and follows protracted talks with its parent company SpaceX, a government official said.

It represents a sudden shift in stance and can be seen as "an olive branch" to SpaceX amid nervousness in Vietnam about tariff threats from U.S. President Donald Trump, according to a person familiar with the matter.

It's a "demonstration from the Vietnamese side that they can play the transactional diplomacy game if the Trump administration wants that," said the person.

All sources declined to be identified so they could speak more freely.

Attempts by SpaceX to enter Vietnam - a market of nearly 100 million people - were put on hold in late 2023 after the Communist-run country declined to lift a ban on foreign control of satellite internet providers - a precondition for Musk, who is now a key adviser to Trump.

The draft rules, set to be adopted by parliament in an extraordinary sitting on Wednesday, allow for full foreign control of operations for internet providers who have a network of low-orbit satellites, under a pilot scheme that would run until the end of 2030.

The provision is included in a 12-page resolution that seeks "to remove obstacles in scientific, technological and innovation activities". Projects submitted under the pilot scheme would require the approval of Vietnam's prime minister.

SpaceX and Vietnam's information ministry did not reply to requests for comment.

SpaceX has been expanding its network of suppliers in Vietnam. The Vietnamese government has said the company wants to invest $1.5 billion in the country.

If many Vietnamese firms and individuals were to subscribe to Starlink that could help trim the large surplus in goods and services that the country has with the United States, according to a person with knowledge of the discussions.

Its surplus last year hit a record high of $123.5 billion, the fourth biggest among U.S. partners, according to U.S. data.

Trump last Thursday directed his team to devise reciprocal tariffs on every country that taxes U.S. imports by April 1 and his aides have said countries with large imbalances will be closely scrutinised.

U.S. duties have the potential to seriously disrupt Vietnam's export-reliant economy, which counts the U.S. as its main market. Vietnam hosts many China-based manufacturers which have invested heavily in the Southeast Asian country after Trump's first administration imposed tariffs on China in 2018.