Russia's international ambitions for its homegrown alternative to Visa and Mastercard have been dashed as even some of its closest allies have dropped its Mir payment system following a threat by the U.S. to sanction anyone who helps or supports its use.
Of the nine countries that had signed on to Mir, set up by Russia after the first wave of U.S. restrictions back in 2014, banks in six have dropped it in the two months since the Treasury Department issued its warning in September.
Surprised by the strength of the response, Bank of Russia officials are struggling to come up with alternatives, given Washington's long reach among international lenders, even in countries the Kremlin considers friendly, according to people familiar with the situation who spoke on condition of anonymity to discuss sensitive matters. Publicly, officials say only they're working on other options.
With U.S. efforts to limit trade with Russia over its invasion of Ukraine bypassed by major countries in many categories, Mir's struggles are an example of the continuing power of Washington's threats in the international financial system.
"For compliance issues, it's difficult to identify whether the user of this card is sanctioned or not," said Behzod Hamraev, deputy governor of the central bank in Uzbekistan, a central Asian country with close economic and political ties with Moscow. Its national processing center stopped handling the cards in late September.
The biggest blow came when Turkey, a popular tourist destination and a major country that didn't join the sanctions imposed by the U.S. and its allies, saw all five banks that processed transactions for the card
Over the last few month, banks in Kyrgyzstan and Tajikistan suspended use of the cards, as well. So did Kazakhstan's biggest bank. One of the two institutions in Vietnam accepting it also gave it up. Only Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan still accept it. The Mir site no longer lists the countries where it can be used.
"The concern on secondary sanctions outweighs the interest in commission incomes," said Viktor Dostov, president at the Russian E-Money and Remittance Association. "The advantage of the Mir system is that it is global and all Russians have it. Now everyone will be forced to use some kind of private solutions in many countries."
The press service of the Bank of Russia did not respond to a request for comment for this article. Admitting the challenges internationally, officials cite Mir's success in minimizing the impact inside Russia of the pullout of Visa and Mastercard. National Payment Card System, Mir cards operator, declined to comment.
Retailers and hotels in some countries still accept the card on an informal basis, but the lack of bank processing limits its appeal. Visa and Mastercard cut off service to Russian banks shortly after the start of the war and banks in neighboring countries, which had initially opened accounts for Russians, have since tightened rules.
Narrowing options
Mir's troubles are the latest example of how the options are narrowing for Russians seeking to travel abroad. Major airlines have canceled thousands of flights since the war, with only a small number of destinations remaining with direct flights. Many European Union countries are cutting visas for Russian tourists.
Still, tourist flows to places like Turkey are rising and more than 350,000 Russians fled to nearby countries since President Vladimir Putin announced plans to call up 300,000 reservists to fight in Ukraine on Sept. 21.
Just a few months before, in June, the first deputy chief of Russia's central bank, Olga Skorobogatova, was bragging that the ranks of countries accepting Mir would soon grow, allowing Russian tourists to pay while on the road even without Visa and Mastercard. The Mir system was meant to be a key part of Russia's sanctions defenses. Inside the country, it proved vital to keeping payments flowing after the big U.S. cards left.
But then on Sept. 16, the U.S. Treasury said it was ready to impose sanctions on entities outside Russia supporting efforts to expand Mir use outside the country. Two weeks later, it
The Central Bank of Sri Lanka said it won't accept Mir cards within the local banking sector due to U.S. sanctions. Indonesia is discussing the introduction of Mir, but U.S. sanctions "may affect decision-making process," Indonesian Ambassador Jose Antonio Morato Tavares
