Putin Backs National Card Payment System

Putin Backs National Card Payment System

MOSCOW--President Vladimir Putin Thursday backed plans for Russia to create its own national payment system to protect itself against the kind of disruption caused when Visa and MasterCard cut ties with Russian banks hit by U.S. sanctions over the annexation of Crimea.
Russia has floated developing such a system for years although few steps have ever been taken. But the idea resurfaced after the international payment providers stopped servicing four banks last week when Russia came up against a broader round of sanctions.
Thursday marked the first time the idea received presidential backing. "Why do we not do this? This definitely should be done and we will do this," Mr. Putin said in a meeting with members of Russia's upper house of parliament. "We need to protect our interests, and we will do it."
He pointed to similar national systems in Asia which he said should be used as models for creating Russia's own network.
"These systems work, and work very successfully in such countries as Japan and China. They originally started as exclusively national [systems] confined to their own market and territory and their own population, but have gradually become more and more popular," he said, noting that Japan's JCB system is now accepted in nearly 200 countries.
Valentina Matvienko, the upper house's speaker and herself a target of western sanctions, said sanctions made it clear Russia had to be prepared to rely more on its own resources.
"It seems to me that this should make us mobilize to rely on our own resources first and to increase the efficiency of our economy," she said.
Analysts said Mr. Putin's sudden attention to the project suggested he viewed the possibility of broader sanctions as a real threat that needed to be minimized.
"The threat of further sanctions gives it a bit more urgency and I expect as long as that threat is in place, the government will look at it more seriously," said Chris Weafer, senior partner at Macro-Advisory Ltd. "It's a knee-jerk reaction and the system is mush less optimal than being part of the global economic system but he views Russia being vulnerable to foreign systems as a potential strategic weakness."
On Friday, Visa and MasterCard cut off service to four Russia banks: Bank Rossiya, which was directly named on the U.S. sanctions list; its subsidiary Sobinbank; and SMP Bank and a subsidiary, which are majority owned by two people on the list. Over the weekend service was resumed to SMP and its subsidiary but Bank Rossiya and Sobinbank remain cut off.
Card holders with accounts at these banks are unable to pay for goods and services using their cards, but can use them to withdraw cash from the bank's ATMs, or ATMs of other banks, serviced by a national network linking Russian banks.
SMP Bank said the move caused its customers to withdraw around 9 billion rubles ($252.7 million) in deposits. Russia's central bank has said it is ready to support any bank that is hit by sanctions. Mr. Putin said he would open an account at Bank Rossiya in response to the sanctions.
On Thursday, Mr. Putin said the international providers would regret turning their backs on Russian banks.
"This will simply lead to them losing certain segments of the market, quite a profitable one," he said.
Mr. Putin also said Russia should look closely at the threat presented by its own nationalist groups to spark upheaval similar to that which resulted in the ouster of Ukrainian President Viktor Yanukovych last month, which Russia has claimed was driven by ultranationalist groups. But he said Russia didn't need to impose further restrictions on its already stringent rules on public demonstrations.
"No doubt, we should analyze the events that are taking place around us, " he told the members of parliament. "Only, I am asking you not to make any decisions that would considerably restrict civil liberties and citizens' right[s] to express their opinion."


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