Istanbul: Turkey wants to boost tourism revenue to pre-pandemic levels this year and revive a struggling economy after a currency crash wiped out half the value of the lira.
This is easier said than done, as Turkey is heavily dependent on Russian energy, trade and tourism. In 2019, the trade volume between the two countries reached 26.3 billion dollars (25.07 billion euros), while Russia is also one of Turkey’s main energy suppliers.
Turkey, a NATO member, opposes Western sanctions against Russia on principle and has not joined them. He wants to maintain good relations with Russia and Ukraine amid a deepening economic crisis in his country, with inflation reaching its highest level in 20 years due to rising energy costs. and cereals.
That’s why tourism revenue is seen as key to reducing the current account deficit, but restrictions on card payments and air operations due to sanctions have raised fears of a slump in Russian tourism to Turkey. However, Turkey might have found a solution.
Russians can pay with Mir cards
US card giants Mastercard and Visa have suspended operations in Russia as part of US sanctions meant to punish President Vladimir Putin. But Turkey has a formula to allow Russian tourists to travel to Turkey, bypassing the suspension of Visa and Mastercard: Russians in Turkey can access their funds through the Russian payment system Mir.
Russia created Mir (Russian for “peace” or “world”) in 2014, fearing that Western sanctions against Russian banks and businessmen following the annexation of Crimea would block transactions made with Mastercard and Visa. Mir was later introduced to some foreign countries where Russians travel and live.
Mir cards, used for bank transfers, are accepted throughout the Russian Federation and 12 other countries, including Armenia, Kyrgyzstan, Kazakhstan, Belarus, Vietnam and Cyprus, according to the Bank of Russia. At the end of 2021, the number of Mir cards issued amounted to 113.6 million.
Mir card payments in Turkey are currently accepted by Isbank, Ziraat Bankasi and VakifBank. Isbank started accepting Mir cards in 2019, citing trade relations between the two countries.
Turkish Treasury and Finance Minister Nureddin Nebati said the Mir card usage rate in Turkey is currently around 15%. Banks are scrambling to raise it, ignoring Ukraine’s central bank’s call on countries, including Turkey, last month to suspend all transactions with cards from Russia’s Mir payment system.
Currently, other than Mir cards and cash, Russians in Turkey have no other payment options due to Western sanctions. Media reported that Turkish banks were reluctant to open bank accounts for newly arrived Russians in Turkey for fear of violating sanctions. Since the war began on February 24, thousands of Russians have arrived in Turkey, seeing it as a haven from sanctions.
Turkey’s attempts could be interpreted as circumventing sanctions against Russia, some experts warn.
Turkey, which shares a Black Sea coast with Russia and Ukraine, has “complicated” political and economic relations with Russia and Ukraine, Istanbul-based economist Güldem Atabay told DW, adding that “just as Germany cannot impose an energy embargo, Turkey’s stance towards Russia is understandably trying to protect itself.”
However, she warns that Turkey must be careful in its approach.
“If there are efforts to buy energy from Russia and sell it to the West, then Turkey’s position will go from good to bad. Considering that we are a country where the potential for such initiatives is high, if we start hearing about petroleum products being bought and processed here, and sold to the West, that could be a problem, if it becomes a tool for Russia to evade the Western embargo.” The US lawsuit against Turkish state lender Halkbank, accused of helping Iran evade US sanctions, is one example, Atabay said.
London-based BlueBay Asset Management strategist Timothy Ash is also critical of Turkey’s approach to sanctions against Russia, warning on Twitter that Turkey is walking a fine line.
The Turkish government was hoping for a post-COVID-19 rebound this year, targeting pre-pandemic tourism revenue of $35 billion.
However, Turkey will not be able to achieve this goal, according to Atabay. She says the Russian economy is expected to contract by 10% this year. “Their currency has lost value, inflation has increased. Therefore, the purchasing power of Russian tourists and the Russian people has decreased. Some Russian citizens will also give up vacations,” she said.
Some 4.7 million Russian tourists, out of a total of 24.7 million foreign tourists, visited Turkey last year, accounting for 19% of total tourist arrivals, followed by Germany with 12.5% and Ukraine with 8.3%, according to figures from the Ministry of Tourism.