Two Turkish banks suspend payments to Russia’s Mir after US sanctions

By Ebru Tuncay and Jonathan Spicer

ISTANBUL (Reuters) – Turkish lenders Isbank and Denizbank have stopped using Russia’s Mir payment system, the banks said on Monday, after the U.S. cracked down on those accused of helping Moscow evade sanctions over the war in to have helped Ukraine.

The separately announced measures came after Washington last week expanded its sanctions on the head of the organization that runs Mir, popular with the tens of thousands of Russian tourists who arrived in Turkey this year.

The suspensions of two of the five Turkish banks that had used Mir reflect their efforts to avoid the financial crossfire between the West and Russia as the Turkish government adopts a balanced diplomatic stance.

Isbank, whose shares fell 10% on Monday, said it had stopped Mir payments and was reviewing new sanctions from the U.S. Treasury Department. Isbank also stated that it is interested in complying with national and international laws, regulations and commercial business principles.

Asked for comment, Denizbank in Mir said: “We are currently unable to provide services.” The bank “acts in accordance with international sanctions regulations,” it had said earlier on Monday.

NATO member Ankara fundamentally opposes Western sanctions against Russia and maintains close ties with both Moscow and Kiev, its Black Sea neighbors. It also condemned Russia’s invasion and sent armed drones to Ukraine as part of its diplomatic balance.

Still, Western nations are increasingly concerned about the growing economic ties between Turkey and Russia, diplomats say, particularly after several meetings between leaders Tayyip Erdogan and Vladimir Putin, including last week in Uzbekistan.

Last month, the U.S. Treasury Department sent a letter to major Turkish companies warning that they would risk penalties if they maintained business relationships with sanctioned Russians.

Then-Turkish Finance Minister Nureddin Nebati described concerns about the letter as “meaningless.” In April, he said Russian tourists – who are crucial to Turkey’s struggling economy – could easily make payments as the Mir system grew at Turkish banks.

Many Russians have traveled to Turkey since the invasion in February left them with few other travel options and sanctions barred them from using major U.S. credit cards.

Russia describes its actions in Ukraine as a “special military operation.”

After the two private lenders suspended Mir, it is still run by state lenders Halkbank, Vakifbank and Ziraat.

The Istanbul banking index fell sharply last week and lost more than 9% on Monday, prompting a trading halt. A banker expressed fears that so-called secondary sanctions could target Turkish banks or companies in affected markets.

The expanded US sanctions last week targeted the chief executive of the Bank of Russia’s National Card Payment System (NSPK), which runs Mir.

(Reporting by Ebru Tuncay and Jonathan Spicer; Additional reporting by Ece Toksabay; Editing by Josie Kao)