With the “World” on a string – Newspaper Kommersant No. 177 (7378) of 09/26/2022

While more and more foreign banks, even from friendly countries, refuse to work with the Mir payment system, Turkey, on the contrary, is looking for ways to maintain acceptance of Russian cards in the country. According to experts, we can talk about permission to open branches of friendly banks in Russia, a Mir co-badge with the Turkish Troy payment system, and a number of other schemes. However, none of the options discussed so far looks like a guarantee against sanctions.

On September 26, at a meeting chaired by President Recep Tayyip Erdogan, the Turkish government will consider, in particular, the use of Mir cards and possible alternatives to them, TASS reported, citing a source. The meeting on September 23, which Mr. Erdogan held in Istanbul with the participation of the heads of the Ministry of Finance and the Central Bank of Turkey, as well as heads of leading local banks, was also devoted to this issue.

Turkish Is bankasi and Denizbank were the first to respond to the warnings of the US Treasury about possible sanctions and on September 16 announced the suspension of acceptance of Mir cards (see “Kommersant” dated September 20). Ziraat Bankasi, VakifBank and Halkbank, which, at least officially, also accept Russian cards, did not report the termination of work with them. But this was done by a number of banks in Kazakhstan and Armenia, although the central banks of both countries stressed that it is the right of credit organizations to choose which payment system to work with. A similar statement was made by the National Bank of Kyrgyzstan, the country’s banks continue to work with Mir cards. Uzbekistan announced that cross-border operations on Uzcard-Mir co-badged cards were temporarily suspended “for technical reasons.” There were no explanations from the National Bank of Uzbekistan.

In the light of these events, the search for alternative payment methods for Russian tourists announced by the President of Turkey is considered by experts to be a timely initiative that could be extended to other countries.

According to the head of the National Payments Council, Alma Obayeva, the solution to the problem could be the opening of branches of Turkish, Armenian, Kazakh, Kyrgyz and other banks from friendly countries in Russia. “It would be better if the Central Bank of the Russian Federation issued requirements for a branch of a foreign bank in Russia, then we would all be able to open accounts in foreign banks and have cards of any international payment system,” she says. Now the opening of branches of foreign banks in the Russian Federation is prohibited, for work in the country it is necessary to create a subsidiary credit organization.

As Ekaterina Orlova, head of legal practice at CM Grace Consulting, explains, in 2013 the term “foreign bank branch” itself was excluded from the text of the law “On Banks and Banking Activity”. According to her, by December 1, the law will be updated and will probably allow the creation of branches of foreign credit organizations again, but only from friendly countries. “Permission to create a branch is justified: for these banks, the regulatory risk is negligible, their interest rates and reserve requirements are not much different from Russian ones,” she says.

At the same time, Ms. Orlova does not rule out that the European and American authorities may consider the opening of a branch in the Russian Federation by foreigners as assistance in circumventing sanctions prohibitions, since such branches will not be limited in their rights to money transfers via the SWIFT system, as well as VISA/Mastercard cards.

There are other schemes that may be considered by the Turkish and Russian authorities.

Thus, Dmitry Vishnyakov, an independent expert in the payment card market, believes that an alternative could be a coin with Mir from the Turkish payment system Troy. Alma Obaeva also calls coinage a good solution: in Russia, the card works like Mir, and in Turkey it works like Troy, and Turkish banks do not violate any sanctions.

However, the creation of a co-badge with Troy may be complicated by the fact that the Turkish payment system is actively cooperating with the American AMEX and Discover. Issuing Mir cards by foreign banks carries the same risks as accepting them, as Western authorities have warned against cooperating with the Russian payment system.

According to Ms. Obayeva, as an alternative, the system of fast payments (SPB) of the Central Bank of the Russian Federation, in which cross-border transfers are already being tested, can be used. “But in this case, a number of technical issues will have to be resolved,” the expert clarifies. “We should not forget about the digital ruble – in the future, this may be the simplest solution.”

The head of the board of the Financial Innovations Association, Roman Prokhorov, is sure that there is simply no optimal solution in terms of implementation time, which would eliminate the risks of secondary sanctions, and President Erdogan’s statement about its development is just “an attempt to sweeten the pill.” “Various options for interaction are undoubtedly possible, but the most reliable ones in terms of avoiding secondary sanctions require significant investments, including temporary ones,” emphasizes Mr. Prokhorov.

In his opinion, the topic of expanding or even simply preserving the geography of accepting Mir cards now will generally “leave the forefront in the context of the expected significant reduction in foreign trips.” More relevant, Roman Prokhorov believes, will be, for example, cross-border settlements using cryptocurrencies, the possibility of which “seems to have finally agreed between the Central Bank and the government of the Russian Federation.”

Maxim Buylov