EAEU members in Central Asia abandon the Russian Mir system
"Mir" and the EAEU
On April 3, the media was full of reports about the termination of the work of the Mir system cards in Kyrgyzstan. In general, this became an occasion to remember in which neighboring countries problems have already arisen with the “World” cards, and also to look for information about where these problems may still arise.
It cannot be said that the question belongs to the category of ordinary ones, even despite its familiarity News from the category of “another sanctions”. After all, “Mir” is a full-fledged payment system, and a national system, into which considerable funds have been invested since 2015. Now the system has problems in Armenia, Kazakhstan, Kyrgyzstan, Uzbekistan, and soon, obviously, in Tajikistan. This is not to mention countries not in the closest circle, such as South Korea or Turkey.
However, in this particular case, the severity of the problem is not determined by past investments or image costs.
It is clear that when South Korea or Cyprus refuse to work with our payment system, it is unpleasant, but generally tolerable.
When problems arise in Turkey, this already raises certain questions about building bilateral cooperation. But when this begins to concern work in Kazakhstan (member of the EAEU), Armenia (member of the EAEU), Kyrgyzstan (member of the EAEU), Uzbekistan (not a participant, but quite seriously dependent on income from labor migration), then questions of a deeper nature arise.
So what kind of economic association has been built over the years under the EAEU brand?
It’s good that the information about the termination of work with the Mir system by Belarus turned out to be incorrect.
As with the issues of migration (legal or not), there are two ways to go here.
The first way is to discuss the problem itself, the second way is to search for its roots. And just as in terms of migration, digging up the roots, we will inevitably come to the concept of the EAEU (as intended) and its practical implementation (as it happened), and in the issue of the payment system we will again find ourselves at this root.
Sanctions against NSPK JSC (the national operator of the Mir system), introduced on February 23, 2024, will be quite workable due to the fact that the “common economic space” is de facto not entirely common.
In itself, the US “sanctions hunt” for other people’s payment systems has long been a kind of norm. If only because such transactions fall out of the direct field of view of their financial monitoring. Finding them through subsequent traces is already quite expensive for the same American OFAC.
There are quite a lot of such payment systems operating in the Middle East, but no matter how much the United States tries to cope with them by reducing dollar receipts through the “wrong channels,” this turns out to be difficult even in Lebanon. But in terms of work between Russia and Central Asia, not to mention other countries, and regarding the national system, this is easier to do.
Why this happens and what to do about it, you can try to figure it out.
Why is this happening?
For an ordinary user, a payment system is, first of all, an opportunity to make payments and receive funds in countries where the payment system operates without significant costs. But these transactions are just the tip of the iceberg, but its base just shows whether we are simply dealing with a mechanism for transferring money from point A to point B, or with a common economic space, or, more precisely, a common cost space.
Sanctions regarding the Russian NSPK were expected. If only because after the start of the SVO, the NSPK “switched over” the work of both the Mir system tools and the accounts associated with issued cards of international payment systems - Visa and MasterCard. Cards previously issued under these systems by Russian banks continue to work.
This is a huge gap in profitability for these operators and significant difficulties for American and European financial monitoring in obtaining information.
If they can still obtain information about international transactions of legal entities in different ways through the “compliance procedure,” then this administrative machine is not able to cope with the data of individuals through such a filter. Or rather, she can cope, but it’s long and difficult.
As a result, as it was discussed in some detail material “Türkiye and secondary sanctions. About what we still have to experience in trade,” all US actions are in one way or another aimed at ending any cooperation with an individual or legal entity related to Russian jurisdiction. In this case, this is the basic operator for payments to individuals - NSPK.
Does this mean that it is basically impossible to send and receive money transfers?
No, because even before the full-fledged operation of Mir, similar “simple clearing” schemes existed and worked, but what is today called the “ecosystem,” which is always built around a full-fledged payment system, will, of course, not function. Similar ecosystems associated with other payment instruments, as in the situation with the Chinese UnionPay, will not operate.
The meaning of such an operation is clear - sooner or later all transactions will have to be concentrated within Russian jurisdiction. At the same time, it cannot be said that Russia holds the palm over the United States in this regard - Iran was the first to be cut off on this front. Here we are more likely to catch up with the Iranians.
Iranian experience
By the way, neither Mir, nor Visa, nor MasterCard, nor even UnionPay worked and do not work in Iran.
The pleasure that awaits us after some time is rather dubious. Apply for UnionPay directly in the countries you visit, make cards from local banks, and for those who live in style between tourism and relocation, it remains to use crypto-tools more widely.
In theory, it would be possible to invite more foreign banks to Russia that are interested in servicing at least tourist flows, but here again the problem is that the bank will need to register as a Russian legal entity, which will again raise the question of the work of the same UnionPay.
In general, in the long term, this will most likely result in a unique version of the Iranian system of financial representative offices, when a branch of a Russian bank will be opened in one of the countries (in the Iranian case, this is simply a local intermediary operator), which will accept transfers to Russia in currency and hand it over to the visiting country for subsequent depositing into a local account and working with local cards or the again ubiquitous UnionPay. It will be possible for enthusiasts to get used to this, but not right away.
Slowly but surely, the Russian economy, when working on the external track, is shifting and will continue to shift towards payments related to the yuan, both in countries close to us, such as Central Asia, and simply with those with whom there are regular trade relations. This is happening in terms of the work of legal entities, and now it will also affect individuals.
Our problem is that we will not be able to fully utilize Iranian experience. The circulation of cash dollars and the system of their exchange in Iran is tied to the financial, but non-banking sector in the Middle East (for more details, see below). “Why have Lebanese finances come under US scrutiny?”), the long-functioning offshore system for accepting oil payments and the associated UK and German banks are now increasingly shifting towards payments by China directly in yuan and the supply of goods and equipment under long-term investment contracts.
Creating a network similar to the Middle East in the remnants of the post-Soviet space is an unrealistic task. If only because, unlike that region, in Central Asia there is no excess of cash dollars that would ensure its functioning.
What remains are direct payments by legal entities through SPFS (financial message transmission system) - more and more with a bias in the yuan, and only partly in the ruble, and very little in local currencies. Transfers in rubles, similar to simple clearing like the well-known “Golden Crown”, and even then, over time, more and more through the transfer and receipt of funds in cash.
China deliberately does not force the growth of global payments in yuan, rather carefully manipulating both with Iran between the use of the so-called. yuan internal and external (reserve foreign trade currency), gradually narrowing the room for maneuver for Russia. He does this with the help of Western Europe and the USA, without showing any initiative, quite reasonably expecting that the cream will gradually turn into butter on its own.
It is difficult not to see that such large players as Iran and Russia are increasingly moving into the Chinese economic system, and with them the countries of Central Asia will slowly move there.
About 20% of their foreign trade turnover falls on Russia and, taking into account the fact that China’s share there is already above 40% (the rest falls on the EU), Beijing is quietly taking over the Russian share of trade. In the long term, working to limit and displace the influence of the EU. Europe is responding by increasing its direct investment programs, but it can be seen that blind adherence to American sanctions here is likely to work against Europe’s influence in the region and contributes to the growth of China’s influence.
The future of the EAEU
In this regard, as with the issue of labor migration, it is again reasonable to raise the question of how Russia sees the future of the EAEU?
The EAEU was not intended to be just a free trade zone. This was initially a value cluster project, where there is a common system of exchange trading and depositories, joint clearing systems and, at the top of the pyramid, a unified banking settlement system and payment system for individuals.
All in all, this gives the total cost of goods and services, as well as the synergy of economies, by the way, and an adequate distribution of labor resources between the participants, but the parts, although built well, like the “World” system, but separately, are vulnerable and do not bring results.
Obviously, in previous years we could not act like China, flooding regional markets with goods first, but we could invest in joint production. As a result, they chose their own separate path - the incorporation of labor resources and an emphasis on the payment system, while not even developing ruble payments until recently, not issuing ruble loans, etc.
It is possible to lament what has not been done, but, as usual, these emotions are counterproductive, in the language of modern diplomacy.
The situation in the field of migration, and now calls with payment systems, show again and again that the concept of the EAEU needs to be revised: shifting from the unrealizable and generally unprofitable (unfortunately) idea in the current conditions of a common value zone to the previous concept of the Customs Union, where priority allocated only to essential transit trade flows.
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