Russia benefits from US sanctions
Mar 31, 2014
When President Obama decided to put sanctions on four Russian banks, he eliminated Visa and MasterCard from its lucrative business in Russia. Now Russia will set up its own National Payment Card System to replace it. Obama’s actions will disrupt payments for a short amount of time, but in the long run, Russia is the main beneficiary of Obama’s policy.
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.
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.
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.
The US policy is forcing Russia to set up a financial system that will compete with US businesses like Visa and MasterCard. Meanwhile, Visa and MC are being restricted by the US government from doing business in Russia. Further, the incremental nature of the sanctions allows Russia time to implement its changes with the least amount of disruption.
At the same time, Russia will now accept payment for oil and gas in roubles, rather than exclusively in dollars, so that the sanctioned banks can continue to do business around the world without using US dollars. This is the next step in the demise of the US dollar as the world currency.
Each of Putin's policy changes are measured and implemented without political rhetoric and with no inflammatory statements to match those of President Obama. Putin remains cool and simply takes steps to protect the Russian economy. It appears that the US government is leveling sanctions against itself.
Nice going, Mr. Obama. Will you take revenge by shooting Uncle Sam in the other foot?
Dr. Stephen Jones