Erdogan Says Turkish Banks Are Adopting Russian Payment System

Turkish President Recep Tayyip Erdogan announced on Saturday that five Turkish banks will begin using Russia’s Mir electronic payment system — a sign of deepening ties between NATO member Turkey and outlaw Russia, and a step toward dismantling the international financial system that allows Western nations to impose economic sanctions on rogue regimes.

Erdogan made his announcement after meeting with Russian leader Vladimir Putin in Sochi, Russia’s largest resort city and host of the 2014 Winter Olympics. Turkey’s Daily Sabah portrayed the trip as an extension of Erdogan’s July 19 meeting with Putin in Tehran, with Sochi providing a friendlier atmosphere to discuss issues that would have annoyed the Iranians, including Turkey’s military operations against the Syrian Kurds.

“The fact that Turkey’s foreign minister, defense minister, intelligence chief and head of defense industry were present points to negotiations focusing on security and defense. Moreover, the ministers of treasury and finance, trade, energy and agriculture as well as the head of the central bank were in Sochi — which suggests that the meeting had a multidimensional economic agenda,” Daily Sabah wrote.

Why is the Sochi meeting significant? – by Burhanettin Duran @burhanduran | DS Columnhttps://t.co/0CVLe7xqyp

— DAILY SABAH (@DailySabah) August 7, 2022

Erdogan seeks to position Turkey as a broker between NATO and Russia, and perhaps to signal to the West that continually frustrating him on key issues like the Syrian Kurds or territorial conflicts with Greece could push Turkey further into Moscow’s orbit. Erdogan’s meetings with Putin also signaled there is only so much criticism of economic ties between Turkey and Russia that Erdogan is willing to accept.

Erdogan told reporters the Mir payment deal would boost Russian commerce, investment, and tourism in Turkey. He said Turkey would soon begin paying for some of its natural gas deliveries from Russia with rubles.

Erdogan added that his government wished to help get Russian grain exports moving across the Black Sea again, building on the first few shipments of grain to depart Ukraine since the Russian invasion began.

The Financial Times reported on Sunday that Erdogan’s announcement was not taken well in Western capitals, where policymakers are “increasingly alarmed at the deepening ties” between Putin and Erdogan. 

Concerns are growing that Turkey’s economic relationship with Russia could blossom into full-blown sanctions evasion, which might compel the U.S. and Europe to take punitive action against Turkey that would enrage Erdogan.

One of the Financial Times’ sources said Turkey adopting the Russian payment system might be provocative enough to make Western governments ask private firms to begin pulling out of Turkey – and some of those companies might well refuse, unwilling to lose their share of the Turkish market.

“The move puts Erdogan at odds with the United States, which has led the international push to sanction Russia following the invasion of Ukraine on February 24. Ruble payments help Russia avoid dollar payments and restrictions placed on those payments because of sanctions,” Deutsche Welle observed.

Mastercard and Visa suspended their operations in Russia after it invaded Ukraine, so Erdogan embracing the Mir system will help Russians work around that handicap, Business Insider noted. 

Some major Russian banks were also locked out of the SWIFT international transaction system, which makes it harder for Russians to spend their money abroad, but Turkey patching into the Mir system will begin alleviating that problem as well.

Russia just poured $3 billion in currency into the Turkish economy, thanks to Russian state energy company Rosatom financing a Turkish nuclear power plant.