In 2015, Russia will introduce an alternative to VISA and Mastercard. The MIR payment system is widespread at home. But because even supposed friends keep their distance from the Kremlin, many Russians yearn for accounts abroad.
Since February, the West has imposed sanctions on Russia for attacking Ukraine. The USA and the EU are particularly involved in this. The vast majority of countries in the world remain neutral. But the influence of the West is great. Many Russians who have fled to supposedly friendly foreign countries since the partial mobilization on September 21 are feeling this too. “Recently, in countries like Uzbekistan, Kazakhstan or Turkey, they can no longer withdraw cash or make transfers,” explains Alena Epifanova by the German Society for Foreign Policy (DGAP) in the ntv podcast “Learned something again”.
A development that goes back to a decision, the Russian news agencies reported on September 19. “Major Turkish banks Is Bankasi and DenizBank confirm that they have stopped serving Russian MIR cards,” RIA Novosti said. Several Turkish hotels in the country popular with Russian vacationers announced the same decision.
Because according to the “Financial Times” The US Treasury, EU authorities and the British government are currently working behind the scenes to close possible gaps in their sanctions packages. Above all, the largely inactive NATO member Turkey is said to have come into focus: According to this, Western representatives are clearly warning the government in Ankara, but also Turkish banks and companies, that secondary sanctions are imminent if they continue to help Russia to circumvent the Western punitive measures.
No surprise
A threat that works. While the Russian newspaper “Commercial” explained what alternatives there could be for Turkish banks, other supposed Russia friends followed suit: Since September 20, Armenia, Kazakhstan and Vietnam have also stopped accepting transactions with cards from the Russian MIR system. Three days later gave Uzbekistan same decision known. And China, the “best friend” of the Russian leadership, had been ignoring the VISA and Mastercard alternatives for almost half a year by then.
For Alena Epifanova, this development does not come as a surprise. In personal conversations in the summer, companies and private individuals from Kazakhstan or Uzbekistan said what would happen if the question of implementing sanctions should arise, says the Berlin expert on Russian technology policy: If there is pressure from the West, we will switch off the Russian payment systems , she summarizes the answer to her question. Because nobody would want to risk bad relations with the US or the EU.
Annex Crimea, introduce MIR
The Kremlin actually wanted to prevent this development by making Russia independent of the West in as many areas of the economy as possible – including through the MIR system, which the Kremlin announced in 2014 after the annexation of Crimea. After the illegal annexation of the Ukrainian peninsula, the EU and the USA imposed sanctions on several Russian banks. The American credit card giants VISA and Mastercard then set the affected financial institutions on a black list for companies and banks whose transactions may no longer be processed.
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For the Kremlin, it was the signal that Russia needs its own payment system. In doing so, he wanted to prepare for a foreseeable exclusion from the SWIFT system, which directs and processes international money flows between banks and other financial institutions. A blockade of Western payment service providers such as VISA, Mastercard, but also Applepay, Googlepay and Paypal should be cushioned in this way.
New account abroad
At first glance, the plan worked: Since the Russian VISA replacement cards were introduced in 2015, around 100 million of them have been issued to Russians. More than half of the population owns one. Almost a quarter of Russian transactions are processed with MIR.
At the same time, only eight countries have accepted the service. Among them are six former Soviet republics: Armenia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and Belarus. Then there are Turkey and Vietnam. But the service is now severely restricted: a Russian tour operator recommends customers to travel to Turkey with cash if possiblebecause there are hardly any options to pay by card.
Problems that cannot be completely avoided even in the Russian homeland. Because without worldwide alternatives such as the VISA card, transfers abroad are in most cases no longer possible. This becomes a particular problem when Russian companies have to pay invoices for imported goods.
That’s why a new type of “holiday trip” has developed in Russia, explains Alena Epifanova from the DGAP: account or bank tourism. Many Russians would withdraw as much cash as possible at home, travel to Central Asia or Turkey and open an account for a credit card there, says the political scientist. “Then they have the same payment options in Russia as with a VISA card or a Mastercard that was issued in the EU.”
Uzbekistan tightens rules
The most popular countries for account tourism are according to the Russian business portal RBC Kyrgyzstan, Uzbekistan and Armenia. Between April and June, between 16 and almost 40 percent more VISA and Mastercard cards were issued there than in the same period last year.
Recently, however, demand is said to have dropped again. On the one hand, because more and more EU countries such as Finland are closing their borders to Russian citizens and VISA and Mastercard cards are needed in addition to transfers, above all for trips abroad. On the other hand, Uzbek banks, for example, have tightened the conditions for foreign citizens to open accounts, reports the independent Russian online medium “The Bell” from exile. Recently, they have to stay in Uzbekistan for at least 15 days before they can open an account.
Bold domino effect
Even the supposed friends of Russia don’t want to mess with the USA and the EU, says DGAP researcher Epifanova, explaining the attitude of governments, banks and companies in Turkey and the former Soviet republics. In addition, there is a kind of domino effect: “You can see that Kazakhstan has suspended payments with the MIR system, as have Armenia to some extent. And Uzbekistan. ‘If the others dare, we can do it too,'” she describes the procedure.
Because after the collapse of many economic relations, people in Astana and Tashkent are hoping for investments from the West, not sanctions. “Besides, they don’t want to be drawn into a war that they don’t support anyway – even if they would never say so publicly,” says the political scientist.
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