US expanded its sanctions to include the head of entity running Mir, which is a popular payment system when it comes to Russian tourists. The suspensions by two of the five Turkish banks that have been using the system shows efforts to avoid a potential financial cross-fire between West and Russia.
Isbank said it halted Mir payments and is evaluating the U.S. Treasury's new sanctions. Isbank also said it was keen to comply with national and international laws, regulations, and commercial business principles.
After the two private lenders suspended Mir, it is still operated by state lenders Halkbank, Vakifbank, and Ziraat. Therefore, as mentioned by the Washington Post, Russia requested that several state-owned Turkish banks allow correspondent accounts for Russia’s biggest banks and that Russian industrial producers be allowed to operate out of free economic zones in Turkey.
Payment in rubles remains a source of financial support for both Russia and Turkey. Putin and Erdogan agreed to start moving to partial payment in rubles for deliveries of natural gas at talks in Sochi.
Many Russians have gone to Turkey since the February 2022 invasion left them few other travel options, and sanctions cut off their use of major US credit cards.
In August 2022, the U.S. Treasury sent a letter to big Turkish businesses warning they risked penalties if they maintained commercial ties with sanctioned Russians.
The pressure on Turkey comes as western capitals pivot towards tighter implementation of existing sanctions rather than the imposition of new measures. The shift acknowledges that economic sanctions imposed after Vladimir Putin’s invasion of Ukraine in February 2022 failed to damage Russia’s economy as much as they had hoped. But they maintain closing off loopholes in the current measures will squeeze the Kremlin’s financial lifelines.
As part of efforts to strengthen enforcement EU’s financial services commissioneris aiming to visit Turkey in October 2022, according to Financial Times.
In addition to Turkey, the crackdown on potential back doors for sanctions evasion is targeting countries in the Caucasus, central Asia, and the Gulf.
While Russia managed to keep their cards active for domestic transactions at least until they expire, Visa and Mastercard cards can no longer be used abroad and on international ecommerce sites.
Russia’s answer has been to accelerate both domestic and international adoption of the homemade Mir cards. As of 1 March 2022, Mir claimed 116 million cards in Russia – which accounted for 25.7% of bank card operations in Russia and 32.5% of new card issuance. But Mir cards can be used only in a handful of countries — Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Uzbekistan, and Vietnam, as well as Abkhazia and South Ossetia, two territories which have been controlled by Russia since the Russo-Georgian war in 2008.
However, using Mir cards in retail may still pose a problem because not all outlets work with the banks that partner with Mir. In addition, Mir cards might not work for technical reasons in some of the outlets that are supposed to accept them through these banks.
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