By Mark Dovich
Almost all banks in Armenia have moved to block transactions made via Russia’s Mir payment cards after the United States sanctioned the system’s operator last month.
“Armenia’s commercial banks…have decided to stop cooperation with the Mir payments system,” the Union of Banks of Armenia confirmed in a statement Tuesday to the Sputnik Armenia news agency, noting the risk of secondary sanctions.
Earlier, the Russian business newspaper RBK reported the same, citing unnamed sources in Armenia’s financial sector.
Starting at the end of the month, 17 of Armenia’s 18 commercial banks will stop servicing Mir transactions made through ArCa, the country’s domestic payments system. Only VTB Armenia, the local subsidiary of one of Russia’s largest lenders, will continue to accept Mir cards.
Mir’s operator, the National Payment Card System, or NSPK, also confirmed the development to Russia’s RIA Novosti, telling the news agency it “does not limit its work with foreign partners,” while conceding it cannot force banks outside of Russia to accept payments.
For its part, Armenia’s Central Bank said in a press release the country’s banks came to the decision to halt Mir payments “independently” and based on “their own risk management strategies.”
What’s the background?
Last month, the United States blacklisted NSPK, along with some 500 other entities in Russia and around the globe, in a sweeping sanctions package timed to mark the two-year anniversary of Russia’s full-scale invasion of Ukraine.
“Mir has permitted Russia to build out a financial infrastructure that enables Russian efforts to evade sanctions and reconstitute severed connections to the international financial system,” the U.S. Treasury Department said in a statement.
Earlier, the agency had blacklisted NSPK’s chief executive, but until last month, it had refrained from sanctioning the payments system itself.
Russia began developing Mir in 2014 as a way to skirt sanctions imposed in response to the country’s illegal annexation of Crimea and initial invasion of eastern Ukraine that year. NSPK, which operates as a subsidiary of Russia’s Central Bank, has since issued over 287 million cards, according to figures seen by RBK.
Mir cards became the payment method of choice for many Russians after Mastercard and Visa pulled out of the country in response to Russia’s full-scale invasion of Ukraine in 2022. That includes members of Armenia’s large Russian expatriate community.
What’s the context?
The imminent end to Mir’s presence in Armenia comes at a time of immense change for the country’s banking system.
Last month, banking giant HSBC said it will exit Armenia after agreeing to sell off its local subsidiary for an unknown sum, leaving Armenia with no Western commercial banks. Weeks later, the Bank of Georgia Group said it had reached a $303.6 million deal to buy Ameriabank, one of Armenia’s leading lenders.
In the last two years, Armenia’s banks have posted record earnings amid unprecedented inflows of cash, mainly from Russia. In that period, Armenia’s banks have together posted more than $1.2 billion in profit, according to the Union of Banks.
In its most recent update last month, the ratings agency Fitch said it expects “Armenian banks’ credit metrics to remain better than historical averages for at least 2024-2025,” citing continued “immigration and capital inflows from Russia.” At least $7.5 billion has poured into Armenia from Russia since 2022, official figures show.
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