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Russia

Sanctions-hit Russia mulls payment system tie-up with China to cut reliance on the West

Moscow considers expanding its Karta Mir network through links to Chinese services

PUBLISHED : Wednesday, 01 November, 2017, 9:27pm
UPDATED : Wednesday, 01 November, 2017, 10:05pm

Russia and China were considering linking their national payment system, Russian Prime Minister Dmitry Medvedev said on Wednesday, as he called for a more balanced global finance structure.

Noting the rise of China’s UnionPay system and Beijing’s efforts to internationalise its currency, the yuan, Medvedev said in Beijing that Russia was developing its own payment system, known as Karta Mir.

“At the present moment it is being discussed whether Karta Mir should be linked to Chinese payment systems,” he said, while standing alongside Chinese Premier Li Keqiang.

That would have “good prospects” and “avoid those problems that sometimes arise when you use American payment systems”, Medvedev said, mentioning Visa and Mastercard without elaborating.

Russia started to create the Karta Mir system after Western sanctions were imposed on the country in 2014, during the Ukraine crisis. The system is now widely accepted in Russia.

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After new US sanctions were imposed, Moscow promised to intensify work to cut dependence on Western payment systems further. Among other things, it wants to create more domestic financial services such as its own ratings agency.

“I think that the more financial instruments there are in the modern world, the more stable the global financial system will be,” Medvedev said.

Visa and Mastercard stopped providing services to clients of one Russian bank after Washington imposed sanctions over Moscow’s annexation of Crimea from Ukraine and support of pro-Russian separatists in eastern Ukraine.

Vasily Kashin, a senior research fellow at the Institute of Far Eastern Studies at the Russian Academy of Sciences, said Russia and China would want to discuss alternatives to American financial institutions due to more potential US sanctions over Moscow’s alleged interference in the 2016 US election.

Kashin said the sanctions, which could affect 39 blacklisted Russian entities by early next year.

“Under new circumstances, quite a lot of Russian corporate entities will need to avoid dollars and any exposure to the US banking system, and there is very significant potential for cooperation between Russia and China,” he said.

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Around 14 million Mir cards, which translates as “World” or “Peace”, have been issued in Russia, according to the Russian National System of Payment Cards (NSPK), or about 10 per cent of the country’s population.

NSPK was established in 2014 and is wholly owned by the central bank.

More than 380 banks working in Russia accept the cards, which are issued by 120 banks. Practically all trade and service points, including cafes, shops, restaurants and service stations, accept them.

Mir cards are also welcome in sanctions-hit Crimea where Western banks are banned from operating.

Additional reporting by Sarah Zheng