Putin Passes Law Requiring $3.8B Security Payments From Visa, MasterCard
themoscowtimes.com
themoscowtimes.com
"The law also creates the basis for a new Russian national payment system that hopes to compete with the two U.S. companies."
This seems to achieve several goals at once:
1) Highlight that foreign payment processors are unreliable for Russians.
2) Either edge them out of the market or get a crap-ton of 'insurance' money. I wonder if the companies can even pay this money, according to U.S. authorities?
3) Keep the profit from becoming the de facto payment standard for Russians.
If the new payment companies are making money for Putin's government I would not bet against them, using bitcoins or anything else.
Visa and MasterCard have been working in Russia for years, apparently unmolested judging from their joint market share. Now they are being turned into weapons by US politicians .... again. This is a huge, massive trend in US politics: seizing control of power points in the financial system and squeezing them as part of proxy wars against people, countries or classes of businesses they don't like (see Operation Choke Point).
As someone in Europe, I don't see this as Russia becoming communist. I see it as Putin standing up for his country and I wish the EU would do the same, instead of allowing SWIFT to be turned into a tool of the US Treasury.
Putin is abusing his power changing the constitution so he can prop his regime up, crushing his opposition, jailing journalist, spreading propaganda, significant restrictions on free speech, implementing extreme protectionist measures in business and culture, illegal invasions, doing business with the worst violators of human rights. It is so sad that the Russians who want to do best for their nation are not able to speak their mind for fear of jail or death.
Russia is an extremely ignorant and backwards country, from my view. Just a few days ago people held rallies in Red Square for May Day (http://spectrumhr.org/?p=1972). There was lots of racism (sign calling Obama a black monkey), ignorance, misogyny (sign denouncing feminist), praising a rapist sociopath (http://www.suomensotilas.fi/en/artikkelit/change-game), honoring corrupt mass murders, etc.
The only thing Putin stands to fulfill is power and ego.
Geopolitically, Russia is trying to establish an "alternative" to the US/EU-centric global economy that's basically a free-market version of the Soviet Union. That way they can use their military and intelligence services to pressure their neighbors (Ukraine and others) into participating in this alternate economy where the money flows through Russia instead of the US and EU.
Combine the two and you can see their ambitions: Putin and his allies just want to get rich. And if you live in Russia, they can throw you in jail for pretty much no reason, so I wouldn't mess with them.
"The law on a national payment system, which seeks to guarantee uninterrupted service of payments in Russia by foreign payment systems and prevent them from cutting services to Russian clients, as Visa and MasterCard did in response to U.S. sanctions in March."
Visa and MasterCard cut their local intra-Russian services "because of the U.S: sanctions"(!) Note that both these named Visa and MasterCard aren't "American Visa and MasterCard." The ones operating in Russia had to be registered as Russian companies to provide the services at all. So it's Russian companies (they are daughter companies, but legally independent except for brand, initial investments, connecting to the international infrastructure etc) cutting their own services to Russians because of the external political influences.
It's totally reasonable to adjust the laws to make it harder for such Russian companies to do such things in Russia.
When I combine the two I see a Putin who wants freedom from the dependance on a globalized economy that is largely run by western powers. I doubt Putins end goal has anything to do with "just" getting rich.
"cutting services to Russian clients (...) in response to U.S. sanctions in March."
So it's the opposite of your claim 1). The answer to your claim 2) is that the given money amounts "equivalent to the value of two days of (their) transactions processed in Russia."
Your claim 3) is confusing. Visa and MasterCard are already de-facto standard: they "together service about 90 percent of payments in Russia."
(all quotes from the article)
Sure sucks to be on the receiving side of something like this. The only thing this will do as a result is to slightly increase Visa and Mastercard fees.
One way VISA/MC could strike against this law is by simply cutting off all Russian cc's. That would hurt them as well but they could simply stop doing business there for a week or so. I think that Putin would very quickly recant once it becomes evident how much of the Russian economy is now dependent on such instruments.
The new Russian owned payment system is dead in the water from a non-Russian perspective, the only reason VISA and MC are so popular in Russia is because people do not trust local alternatives, not because they don't have other options.
They already did that, to Bank Rossiya. This move by Russians is a retaliation for that.
> The new Russian owned payment system is dead in the water from a non-Russian perspective, the only reason VISA and MC are so popular in Russia is because people do not trust local alternatives, not because they don't have other options.
The reason why VISA and MC are so popular is because there is nothing else. Not only in Russia, but in other countries too. (Note that Maestro is owned and operated by MC).
JCB, AMEX, Discover and a bunch of others would disagree.
JCB, AMEX, Discover are virtually unusable outside NA. Yes, you might find a restaurant or two that do accept Discover, but you cannot rely on that. Just like you cannot rely on Maestro in NA, for example.
VISA and MC are the only two accepted somewhat worldwide. Even VISA has work to do, to expand their coverage (e.g. Austria and Germany; they are not as universally accepted as Maestro or local "bank cards").
http://www.geek.com/news/visa-is-the-exclusive-payment-partn...
But any entity which fulfills the functions of a bank will pose these problems, especially with high market penetration...
At least in the West there is something like due process, which is enough to put an upper limit on the abuse these companies can dish out.
It wasn't Russia that started this trend. It was America.
There is very scarce evidence that politicians in the US have used this technique against "businesses they don't like"...
Of course, the "security deposit" isn't for security against these companies failing. The deposit will help with the squeeze Russia is feeling, and on the other hand this whole law would allow the Russian one-party government (which doesn't know any kind of division of power, by the way) to extort Visa and MasterCard.
I don't know if building a state-controlled credit card processor is worth it to risk being cut off from Visa and MasterCard. You would certainly expect foreign businesses to be extremely careful or suspicious toward such an entity...
My partner is Ukrainian and apparently the Crimeans which were recently annexed and now have to switch are utterly shocked by state of e-banking at their new Russian banks; which doesn't bode well for their efforts...
The use of card payment schemes as a mechanism for sanctions in this case demonstrates external political influence. Maybe in this specific case some would agree with that, given Russia's recent track record. But just imagine the response if Russia could do the same to the US or the major economies of Western Europe. Or consider a more ethically dubious example, like the UK invoking terrorism legislation to freeze assets when Iceland was in financial difficulty not so long ago. More than the political influence, these measures demonstrate the rather arbitrary nature of the services these big companies provide, or don't provide, particularly across borders. For any first world national economy in the 21st century to remain vulnerable to some big commercial interest getting upset and taking the ball home, whatever the underlying reason, seems unwise on the part of the corresponding government.
The use of the financial sector as a political weapon is concerning (but that is more possible with state run financial institutions). I'm not sure how you prevent that without basically allowing mega-corporations to be above any national laws.
What we really need is an international court that can arbitrate these kinds of disputes.
I guess that Visa will now quietly back away from the sanctions and in return Russia will either extend the deadline, reduce the security deposit or allow them to participate in development of the national payment system. Probably latter.
Then the US executives say, OK, then we won't process payments in Russia. And then Russia says ....
Ukraine gave up deterrent weapons (world's 3rd largest nuke stockpile) on promise that the USA would fill the strategic power gap accordingly. Latter didn't, Russia doesn't care about mere "sanctions" in light of empire-building goals, there's only one thing that stops such "acting out".
Who exactly is building an empire here?
Boots on the ground probably will be the answer in the end. And when people see what it produces they may finally come to their senses.
Certainly, westerners being told they can't go on holiday to Russia or buy Russian made software or other things is not going to suddenly make the people in east Ukraine decide they actually love the unelected government they got landed with.
The US has been too free with sanctions handing them out like detention slips lately. Maybe it's time to remember sanctions are a two way street.
As for those who ask "how do we deal with Russia"? Well, for starters, how about we don't support those trying to overthrow a government on their borders? We wouldn't tolerate that in the US.
I'm not saying Russia is right nor their motives are pure. But neither are those of the West. And frankly, I think the western banking system could use a bit of competition.
What kind of corruption are you afraid of, that the world doesn't already have to deal with?
Now sure, international lenders would be more wary of Russia after that, but when you have the resources Russia does maybe credit is less important? Besides, if lenders are going to be used to destroy your economy why not behave proactively?
I doubt it will come to this level... at least immediately, but some people think only the west has the capability to cause financial chaos and pain. I don't think this is the case. This is why I believe we should be more cautious about hostility, financial or otherwise.
Note that the US government is no stranger to strong-arming payment processors into refusing payment to businesses it deems undesirable, not always on a legal basis. For example, donations to wikileaks. The Russian position is that Putin insists on being the one strong-arming opponents. This is not an improvement.
(I wonder if this thread is going to be "yay, someone breaking the payments cartel and going after the banks" or "boo, Putin"?)
The biggest mistake non-Russians seem to make with regards to interpreting the "West vs Putin" debate is, that they forget that western political systems are hugely more transparent and reliable.
Essentially this means that virtually any "misdeed" on the part of a western government will come out over time, whereas there will be no such evidence or a wider discussion over what Putin is doing.
Given the choice over the U.S. strong-arming payment processors in very few cases, and Putin strong arming them for whatever reasons he sees fit, I'll choose the U.S. any time...
For that matter even if the U.S. government took back every sanction, private businesses will be wary of the risk.
Personally, I don't think any country should rely on Visa or Mastercard since like the article said any countries that face U.S. sanction is basically fucked. This is equivalent of using closed source software to run your govrt.
Russia or any countries for that matter have the rights and should develop their own domestic payment transaction.