Turkey, Russia developing new payment system after US threatened to sanction MIR cards

Russia and Turkey have been working on an alternative approach to replace the Russian payment system MIR, reported RT business. This comes after the Biden administration had threatened Turkey with sanctions for servicing Russia's cards, said Aleksei Yerkhov, Russia’s ambassador to Turkey, on Thursday, February 9. MIR, which is a domestic alternative to Visa and Mastercard, had been developed by the Central Bank of Russia in 2014 after the first round of sanctions had been imposed on Russia. 

Russia's National Payment System has been accepted not only by Turkey but also by South Korea, Uzbekistan, Belarus, Kazakhstan, Vietnam, Armenia, Kyrgyzstan, Tajikistan, South Ossetia, and Abkhazia. Five Turkish banks have adopted Russia's National Payment System, MIR, that allows Russian travellers to pay for purchases in the country.

US threatens to sanction Russia's MIR payment system

Last year, the US Treasury's Office of Foreign Assets Control (OFAC) announced that it would impose sanctions on any financial institution outside Russia using MIR, citing the “risk of facilitating Russia’s efforts to evade sanctions.” In response to the US Treasury's Office of Foreign Assets Control threat, Turkish banks stopped using the Russian payment system, followed by banks in Kazakhstan and Vietnam.

“The work (on an alternative to MIR) is underway but it’s too early to announce results,” said the Russian ambassador Yerkhov.

Further, Yerkhov added that the countries would have to look for the prospects in the upcoming tourist season. Meanwhile, an alternative payment system could emerge by summer, informed Alexey Yegarmin, the head of the Russian-Turkish Business Council. 

Why did US threaten to sanction Russia's MIR cards?

US' threat to sanction Russia's National Payment System by the US was a response to Russia’s February 2022 invasion of Ukraine. The US and its allies took swift action to stop Russia’s access to the world’s financial infrastructure. In response, Russia has scrambled to find new ways to process payments and conduct transactions. Further, the US' OFAC has provided additional information on the heightened risk of facilitating Russia’s efforts to evade sanctions through the expanded use of the National Payment Card System (NSPK) or the MIR National Payment System, given the broad sanctions imposed on Russia’s financial system this year.