Possible Sanction Risk Forces Turkish Banks to Act on Russian Payment System 
US officials say they expect more banks to cut off Russian payment system Mir; experts warn expanded use of the system might trigger secondary sanctions 
Washington — Two private banks in Turkey suspended their use of Russian payment system Mir earlier this week following warning signals from the United States. The system, a rival to the Belgium-based SWIFT network, is not directly targeted by sanctions. But U.S. officials say there is a worry that Russia is expanding its use of Mir to try to evade sanctions. Experts say banks that allow the expanded use of Mir could trigger secondary sanctions. Reuters news agency reports the issue is expected to be discussed Friday at a meeting of top officials including Turkish President Recep Tayyip Erdogan. Turkey's largest private lender, Is Bankasi, said on Monday that it halted the use of the Russian payment system while it assessed the new guidance from the U.S. Department of the Treasury. Denizbank, another private lender in Turkey, said on the same day that it was no longer able to provide service for the Russian payment system Mir. Denizbank, currently owned by Emirates NBD, was controlled by Russian Sberbank until 2019. The decision by two banks announced within hours of each other follows additional sanctions and further guidance by the U.S. Treasury's Office of Foreign Assets Control, known as OFAC. Responsible for enforcing economic sanctions designated by the U.S., OFAC said in a statement earlier this month that Russia is trying to find new ways to process payments in response to crippling western financial sanctions. "Directly and indirectly, Russia's financial technocrats have supported the Kremlin's unprovoked war. Today's designations target those efforts," . Although the two Russian financial systems themselves are not currently blocked entities under the , Treasury has warned banks that expanded agreements with them risk supporting Russia's efforts to evade U.S. sanctions. The Mir payment system was developed by Russia in 2014 as an alternative to the rival SWIFT payments messaging service that supports payments in more than 200 countries. Mir further expanded after two credit card giants, Mastercard and Visa, blocked services to Russian financial institutions in compliance with Western sanctions. When asked about their reaction to the Turkish bank's suspension, a senior administration official said in a statement to VOA that the steps these Turkish banks took "make a lot of sense." "Cutting off Mir is one of the best ways to protect a bank from the sanctions risk that comes from doing business with Russia," the senior official said Tuesday. U.S. officials say they expect more banks to cut off Mir, "because they don't want to risk being on the wrong side of the coalition's sanctions." Experts speaking to VOA say the OFAC guidance aims to prevent the systems from being used to evade U.S. sanctions. They say the recent move by Turkey's two banks to suspend Mir reflects their effort to avoid any possible sanctions risk as the West ramps up economic measures against Russia. State Department's former coordinator for sanctions policy, Daniel Fried, who crafted U.S. sanctions against Russia following its aggression in Ukraine in 2014, told VOA that the two Turkish banks were "acting rationally in an abundance of caution." Fried, who is also the former U.S. Ambassador to Poland and currently a senior fellow with the Washington-based Atlantic Council, said the OFAC guidance indicates "there is a degree of risk" for dealing with Mir. Timothy Ash, an emerging market analyst with London-based Bluebay Asset Management, thinks that the two banks have realized that the business might not be worth the risk of getting caught in possible secondary sanctions. Three other lenders in Turkey — Halkbank, Vakıf Bank and Ziraat Bank, which are all state owned — are also using Mir. Halkbank is already tied up in a case where U.S. prosecutors accuse the bank of evading sanctions against Iran. The case has been one of the issues straining U.S.-Turkish relations. "The state-owned banks will take the lead from the government," Ash said in the comments he sent to VOA on Wednesday. "Maybe the Turkish government will just limit Mir transactions through that institution to limit broader risks and damage to the Turkish banking system." Steve Hanke, professor of applied economics at Johns Hopkins University, who served on former President Ronald Reagan's Council of Economic Advisors, said it's hard to predict whether the three Turkish state banks will also drop the system. He told VOA that cutting off Mir completely might indirectly impede Russian visitors at a time when Turkey needs the revenue. Russian President Vladimir Putin's order to call-up 300,000 reservists on Wednesday has sparked an exodus of thousands from the country. According to Russia's popular flight booking platform, Aviasales, direct flights from Moscow to Turkey's Istanbul and Armenian capital Yerevan were . Russian payment system Mir is frequently used by Russian tourists in Turkey. that the Russian association of tour operators, ATOR, recommended Russians travel to Turkey with cash in hand due to "shrinking card payment options." According to a , Brussels is also preparing to express its concerns about Russian-sanctions evasion risks for Turkish officials. EU's financial services commissioner, Mairead McGuinnes, is expected to visit Turkey next month. Former U.S. sanctions coordinator Fried predicts the United States is going to devote a lot of sources to "drying up the channels of Russians." "I think the pressure from the U.S. to go after sanctions evaders will grow. The countries in Central Asia and South Caucuses will start to pay more attention to what their banks are doing to avoid falling afoul of sanctions," he told VOA.