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I would like to be able to be able to tunnel a local IP address (i.e through my router that supports IPSec to a remote VPS (i.e. Network map is here: Is this possible?

I believe that an IPSec VPN is the only way to go about this. Is this true? If I was going to do it from a single machine I would just create an SSH tunnel but obviously that isn't going to work in this situation.

Router is a TP-Link TD-W8960N and the VPS is running ubuntu 11.10. I have absolutly no experience with VPN's but I believe something like openswan would be the thing to use. Am I right? Is this the right path to take? Has anybody got and suggestions?

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It is certainly possible to configure a site-to-site vpn between the network behind your TP-Link router and a network behind your unbuntu VPS. For this you need to configure some kind of "dummy" network, for example on your vps box, and an IPSec stack such as freeswan / openswan / racoon .. on the other.

Then, this is quite a lot of work to set it up, especially if you do not have a real subnetwork on your vps ( it would be the case if your unbuntu was an hypervisor for example, with a subnet of virtual machines ). Why wouldn't you use ssh ? You can connect as many clients as you want from to your vps.

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