US PRESSURE LEADS TURKIYE BANKS TO ABANDON RUSSIAN MIR PAYMENTS

Wed 28 September 2022:

Turkish banks have completely ceased the facilitation of transactions through the Russian payment system MIR, following significant pressure and the threat of sanctions from the United States.

According to the Turkish channel, NTV, no banks in Turkiye now accept MIR cards, after Turkiye Halk Bankası, TC Ziraat Bankası and Turkiye Vakıflar Bank were reported to be the last three to stop processing payments through the Russian system. Their decision came a week after the major private banks, Isbank and Denizbank first made that move.

The complete ceasing of the payment system’s use is a direct result of the US treasury’s warning in August of possible sanctions against businesses in Turkiye – and other countries – if they continue to do business with Russia and deal with it economically. Facilitating the MIR system, according to the Treasury, “would risk supporting Russia’s efforts to evade US sanctions”.

Prior to the banks’ decisions, Turkish President Recep Tayyip Erdogan last week discussed alternatives to MIR with his top finance officials, who had themselves held discussions with their Russian counterparts. The Turkish government is reportedly set to announce its official decision on the matter this week or soon after.

Following the developments, Kremlin spokesman, Dmitry Peskov, stated that “It’s clear that banks and economic operators are under the strongest possible pressure from the United States and they are threatened with secondary sanctions on the banking system. And this decision, of course, was made under this unprecedented pressure”.

Throughout Russia’s ongoing invasion of Ukraine, Ankara has maintained and strengthened ties with Moscow, while opposing the invasion and attempting to play a mediatory role. Those ties have particularly expanded in the economic sector, and the facilitation of the MIR payment system was a key component of that after the Russian economy was cut off from the worldwide Western SWIFT payment system.

Over the past seven months, that cooperation enabled Russian businesses and citizens to use Turkiye – along with other countries such as Belarus and others in central Asia and Latin America – as a conduit through which they operate financially with international markets and circumvent Western sanctions.

The decision by Turkish banks marks a major turning point, showing that they are under increasing scrutiny and pressure by Washington, especially as Ankara has not joined in the imposition of sanctions against Moscow.

After similar decisions by Kazakhstan, Uzbekistan and Tajikistan to also suspend the use of the MIR system, some of the only countries which continue to facilitate it are Armenia, Belarus and Kyrgyzstan.

The abandonment of MIR in Turkiye is predicted to impact not only the Russians who are currently residing in the country – who have greatly increased since the invasion of Ukraine – but also the influx of Russians recently fleeing their country following the Kremlin’s announcement of a partial mobilisation of reserves, which resulted in a conscription drive throughout Russia.

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