A method for setting up a VPN is described. The VPN is set up in a backbone network having a plurality of PE routers for controlling the transfer of IP traffic to and from CE routers in satellite networks. In a PE router, a VRF is configured for the VPN and populated with local routes for the VPN. A VRF IP loopback address is assigned for the VRF, and a PE IP loopback address is assigned for the ingress PE router. A local route with the VRF and PE IP loopback addresses is then advertised to other PE routers in the backbone network.