From panic to panic. From the fear of no longer being able to pay interest on one’s debt, not in rubles at least, to that of being cut off from international payment mechanisms, after the partial ouster of Russian banks from the global Swift circuit. In Moscow, there must be some nervousness if, as it seems, Vladimir Putin ‘s government has set out on the hunt for microchips for the manufacture of payment cards to be used in an in-house circuit and outside the range of sanctions. A HOME-MADE SWIFT
What happens
With the hasty flight of the great microchip manufacturers, last of all Intel, the former USSR and practically ran out of microprocessors. Without considering the break the lines of Visa, MasterCard, Apple Pay and Google Pay, which have suspended operations in the country for weeks due to the embargo, prompting the same chip manufacturers to bundle up. But first, a step back, to the move by the Kremlin designed to survive the ouster from the network of international transactions.
That is the creation of the National Payment Card System, recognized by its Russian initials Nspk, the mechanism that manages the monetary system at the basis of credit card transactions in Russia. A creature that is the result of Moscow’s eight years of efforts to isolate the Russian economic system from Western monetary stress. Connected to the NSPK and then the Russian personal card company, known as Mir, which is based precisely on the infrastructure of the NSPK. To date, more than 100 million Mir credit cards have been issued since launch in 2015, with the stated goal of bypassing Swift, including using the Russian Spfs messaging system. BIG MICROCHIP HUNT
Mir cards cannot function without the technological component. The Kremlin knows this, so much so that they have turned to a customer of excellence, a faithful ally, at least on paper: China. It is above all the sanctions that have hit the Russian financial system that have pushed Moscow into the arms of the Chinese chip makers for bank cards. The measures adopted by Western countries after the invasion of Ukraine have in fact increased the demand for credit cards and debit cards linked to the Mir national payment system. And Putin’s ace in the hole, if it can be defined as such, has a name and surname: UnionPay. And the reason for this choice is, on the whole, logical and strategic. CHINESE JOLLY FOR PUTIN
UnionPay, also known as China UnionPay, is based in Shanghai. Founded twenty years ago, in 2002, in 2015 it had already surpassed Visa and Mastercard in the total value of payments made by customers, but only 0.5% of the volume of payments took place outside of China. The Chinese credit card giant, active in 180 countries, has been present on the Russian market for eight years but was not, so far, particularly widespread.
To date, about ten Russian banks issue UnionPay cards but others are evaluating the possibility of doing so by combining UnionPay with the Russian national payment system Mir. In other words, Chinese cards, already equipped with microchips, could enter the Mir circuit as an infrastructure for Russia. Also because with the resumption of Covid in China and Shanghai, the lockdown is not easy to find new chips for Russia. And the Chinese producers themselves must first think about the domestic market. Hence the choice of placing UnionPay cards directly on the Russian market. EYE THE GREAT COLD
But China will be willing to help Moscow
Difficult to say, given the ambiguity that has so far permeated the Dragon’s support for the war in Ukraine. And there is a precedent. In recent days, as written by Reuters, Beijing has invited its giants PetroChina, Cnooc, Sinochem not to sign new contracts for spot supplies, i.e. to be agreed at market price and not on the basis of long-term agreements that usually directly involve governments.
The call for caution comes after several transactions have been reported in recent weeks in which Chinese refineries have bought Russian crude taking advantage of particularly favorable prices. In short, Beijing tries to maintain, at least apparently, a position of equidistance between Moscow and Western countries, it does not like operations that could suggest direct support for the Russian economy hit by Western sanctions. It will also vary for the cards
