How to travel the world without Mir: payment life hacks for Russian tourists

The United States intends to move from threats to Mir to real restrictions. The Wall Street Journal at the end of September reported that the US authorities want to impose sanctions against the Russian payment system. On the same day, information appeared that three Turkish state-owned banks at once refused to work with Mir cards. Private financial organizations of this country stopped servicing the Russian payment system in mid-September, immediately after the US Treasury announced its intention to impose blocking sanctions on those who cooperate with it. Apparently, in Turkey, which is extremely popular with Russian tourists, there will no longer be banks that accept domestic cards. Problems with the Russian payment system are also observed in Vietnam, Kazakhstan, Uzbekistan and a number of other countries. Is there a way to get Mir out of sanctions and how now to solve their financial issues for Russians going abroad, experts told MK.

How the card will fall

Marina M., a 29-year-old resident of Yekaterinburg, decided to spend her vacation in Turkey. She arrived in Antalya two weeks ago and wanted to diversify her vacation with shopping in Ankara. However, all her plans failed, as the girl had difficulty paying for goods using the Mir card. There was very little cash with me – literally for a tip, since the lady was not the first time on vacation in Turkey and, according to tradition, decided to bring the main amount with her on the “plastic”. As Marina wrote on her social network, even after the appearance of messages about the refusal to pay with Russian cards, she tried not to worry and calmly relate to what was happening. The girl was not shy about asking for payment again and again until it passed. The Russian woman still found a period when the payment on the Mir card went through two or three attempts. In the end, her payment went through on the fifth or tenth attempt, but it cost her a lot of nerves. In her post, she warns those tourists who will go on vacation to Turkey in October to think about payment issues in advance in case no bank will service Russian cards.

After the departure of the international payment systems Visa and Mastercard from Russia in March, which together accounted for 70% of the market in our country, their competitors – the cards of the Chinese payment system UnionPay and the Russian Mir – analysts predicted explosive growth. With the Chinese payment system – the only international one that agreed to work in Russia – problems began almost immediately. UnionPay banned the largest acquiring banks in our country from issuing their cards, which fell under the toughest US blocking sanctions. And virtually all the largest credit organizations in Russia turned out to be like that. Then the Chinese payment system, in addition to earlier problems, introduced a ban on servicing its cards issued by foreign banks in the terminals of sanctioned Russian acquiring banks. As a result, the attractiveness of using UnionPay for Russians has declined sharply.

But on the other hand, the interest of citizens in the Russian payment system increased right before our eyes. According to Vladimir Komlev, head of the National Payment Card System (NSPK, operator of the Mir payment system), the total number of issued Mir cards reached 134 million by mid-2022: in fact, one for every inhabitant of the country, minus babies. Moreover, in the period from January to June this year, banks issued over 20 million cards. The possibility of servicing them abroad, at least in friendly countries, added a special attraction to these cards in the eyes of compatriots. Moreover, the management of the payment system initially set as its goal to look for partners precisely in those countries where the largest number of Russian tourists go on vacation, as well as in neighboring countries in the CIS, with which Russia traditionally has a high trade turnover.

Until September, Russian “plastic” worked in such CIS countries as Belarus, Armenia, Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan. Mir cards operated and continue to operate on the territory of the LPR, DPR (since September 30, this is part of Russia), Abkhazia and South Ossetia. Cyprus, Israel, the United Arab Emirates, South Korea, Cuba, Vietnam and, of course, Turkey cooperated with the Russian payment system in the far abroad. However, each of these countries had limits on the amount that could be withdrawn at one time or per day, and there were regular reports of interruptions in cash withdrawals.

The plans of NSPK and the Bank of Russia for Mir were very ambitious. Negotiations were underway to expand the geography of accepting Russian cards in Egypt and other countries of the Middle East, in Latin America, Southeast Asia and China. But after the announcement of the US authorities about secondary sanctions, it will be at least very difficult, if not impossible, for Mir to continue its international expansion.

Go with Peace

Recall that the US Office for Foreign Assets Control (OFAC) in mid-September warned financial institutions of third countries against expanding cooperation with the Russian payment system. And the US Treasury, for its part, allowed the introduction of blocking sanctions for those foreign banks that continue to operate with it. At that moment, this was not an official statement, but was in the form of informing about the intention. However, this was enough for the Turkish private banks Isbank and Denizbank to stop accepting Mir cards. Then the same decision was made by the Kazakh Halyk Bank, the Vietnamese BIDV, as well as the Uzbek payment system UZCARD. Curiously, in Uzbekistan, banks attributed the difficulties with servicing Mir to technical problems, but did not specify when they would be fixed. Moreover, co-badged (joint) cards “UZCARD – World” continue to work in this country, but they are serviced only within the state. On the websites of some local banks, sections about joint cards with the Russian Mir were missing. In Tajikistan, Dushanbe City Bank, which ranks second in this country in terms of the number of holders of Mir cards, has suspended their services. In a press release from the credit institution, it is reported that the bank’s management made this decision amid technical problems. At the same time, the National Bank of Tajikistan stated that credit organizations would independently make a decision on the use of cards of the Russian system. The Central Bank of Armenia also left the right for local banks to independently determine the parameters for servicing Russian cards.

And on September 28, it became known that the administration of US President Joe Biden still intends to impose sanctions against the Mir payment system and the Deposit Insurance Agency (DIA), which was reported by The Wall Street Journal. This is the second blow to the Russian payment system in the last two weeks. “All banks and other financial institutions that still work with Russian cards will be under the threat of restrictions – secondary sanctions,” says Artem Golubev, Associate Professor at the Department of Economics at the RANEPA. – Despite the fact that while the cards are still working in countries such as Armenia, Belarus, Kyrgyzstan, Tajikistan and South Korea, as well as in South Ossetia and Abkhazia, the likelihood of stopping work when information about sanctions from the United States is confirmed is very high. In this case, Mir will only work in South Ossetia and Abkhazia, and possibly also in Belarus.”

And now information has already appeared from Turkey, where the three largest state-owned banks – Halkbank, Ziraat Bank and VakıfBank – are suspending the service of cards of the Russian payment system. In this country, local businesses are also protesting against the refusal to accept Mir cards: on September 29, a rally organized by one of the local political parties took place in Antalya. According to the newspaper Aydınlık, people gathered on it chanted: “Leave alone the cards “Peace” and “Trade with Russia must be continued.” Meanwhile, it became known that the Turkish side is working on an alternative to Mir. President Recep Tayyip Erdogan, having gathered a special meeting, gave such an instruction to the ministers of his government. True, the details of the new mechanism, as well as the timing of its implementation, remain unknown.

“Financial institutions around the world are actively working with dollars and US correspondent accounts in active and passive operations,” says Mark Goykhman, chief analyst at TeleTrade. – Depriving them of these opportunities due to cooperation with the Russian payment system would greatly undermine the business of such banks. Therefore, the “parade of failures” of accepting Mir cards will probably continue.” It will be supported mainly by either small financial institutions that are not very dependent on operations with American assets, or structures that are already under sanctions. For example, Belarusian or Iranian, the analyst believes.

Back to cash

Is it possible to find any way out in the current conditions of the Russian payment system together with partner countries? Theoretically, yes: for example, launch co-badged products, that is, combined cards of a Russian and some local payment system. But in practice… “This will not help, since such projects require money and time, and the West can destroy them by imposing another sanction,” says Alexander Pushko, deputy director of the Institute of Communication Management at the National Research University Higher School of Economics.

But, as analysts rightly point out, not all countries are ready to unconditionally obey orders from the United States. For the governments of countries where Russian tourists travel en masse, the loss of sustainable cash flow can become very sensitive. That is why Turkey is urgently looking for a way out of the situation, in which the head of state personally does not consider it shameful to intervene.

According to Artem Golubev, workarounds that allow using the Mir card abroad are possible if they do not affect the international activities of a foreign partner bank. That is, an interested country can create a special bank exclusively for operations with Mir cards (such an option, according to some reports, is just being considered by the Turkish side). Or such operations will be carried out by one of the local banks without branches abroad and with minimal dependence on the external financial system, on which it is difficult to impose any sanctions, even from Washington, even from Brussels. But everything will depend on the determination to continue cooperation in this direction among the partner countries, the expert believes.

In the near future, it is best for travelers from Russia to take currency with them. “Another option is to open cards in banks of other countries in your own name,” says Yegor Diashov, CEO of the Dialot investment company. “In the CIS countries, there are now many options for opening such cards.” But this path will take time and is not 100% guaranteed, since banks will check Russian clients, and in certain cases you will even have to personally come to the country to issue such a card. Therefore, Russians who are going abroad right now are advised by experts to bring good old cash with them.