Russia is intensifying its efforts to establish a domestic payment system aimed at mitigating the impact of Western sanctions and enhancing its economic sovereignty. Prime Minister Mikhail Mishustin announced this initiative at the Moscow Financial Forum, emphasizing the need for a principles-based financial framework that operates independently of Western-controlled systems.
Mishustin articulated that the proposed payment system will be a collaborative effort involving various institutions, including the government, the Bank of Russia, and the financial sector. He stated, “We hope that through joint efforts, we will create a domestic settlement infrastructure that is an alternative to foreign systems.”
The envisioned system aims to address several critical functions which includes equality of countries, confidentiality and instant transactions.
In recent years, Russia has faced significant disruptions in its trade relationships, particularly with key partners like China and Turkey. Mishustin noted that approximately 70% of settlements between Russia and China are now conducted in national currencies, highlighting a shift away from reliance on Western financial systems. Despite this progress, sanctions have strained trade flows, threatening to diminish the nearly $300 billion in annual trade with these nations.
The push for a domestic payment system is not entirely new; it follows previous initiatives such as the establishment of the Mir payment system in response to sanctions imposed after Russia’s annexation of Crimea in 2014. The Mir system was created to provide an alternative to Visa and MasterCard, which had suspended services for several Russian banks. Currently, Mir cards are accepted by over 150,000 ATMs and 600,000 terminals across Russia.
In addition to developing a domestic payment infrastructure, Russia is also exploring the use of cryptocurrencies for international transactions. Starting September 1, 2023, Russia began utilizing cryptocurrencies as a method for conducting international trade. This shift is part of a broader strategy to circumvent economic sanctions and enhance trade flexibility.
The Central Bank of Russia has indicated that stablecoins—cryptocurrencies pegged to fiat currencies—will likely play a crucial role in these transactions. This new approach aims to facilitate smoother trade relations with countries within the BRICS alliance (Brazil, Russia, India, China, and South Africa), which are also looking for alternatives to traditional financial systems.
While Mishustin did not specify whether the new domestic payment system would differ from existing initiatives like BRICS Pay, which has been tested by member countries as a unified payment network, it is clear that Russia is committed to fostering an independent financial ecosystem.
The success of this initiative will depend on technological development, international cooperation and regulatory frameworks.
Russia’s ambition to create a self-sufficient payment system shows the country’s strategy to reduce dependency on Western financial institutions amidst ongoing geopolitical tensions.