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U.S. expects more banks will cut off Russian payment system Mir - senior official

·2 min read

WASHINGTON (Reuters) - Steps that Turkish lenders Isbank and Denizbank took to suspend the use of Russian payment system Mir make a lot of sense, a senior U.S. administration official said on Tuesday, and said the United States expects more banks will cut off Mir over sanctions risk.

Isbank and Denizbank on Monday announced separately they had suspended the use of Mir after Washington expanded its sanctions last week to include the head of the entity running the payment system, which is popular with the tens of thousands of Russian tourists who arrived in Turkey this year.

The suspension by two of the five Turkish banks that had been using Mir reflect their efforts to avoid the financial cross-fire between the West and Russia, as the Turkish government takes a balanced diplomatic stance.

"The steps these banks took make a lot of sense. Cutting off Mir is one of the best ways to protect a bank from the sanctions risk that comes from doing business with Russia," the U.S. official said, speaking on condition of anonymity. "We expect more banks to cut off Mir because they don’t want to risk being on the wrong side of the coalition’s sanctions."

Washington and its allies have imposed several rafts of sanctions targeting Moscow following Russia's Feb. 24 invasion of Ukraine, including targeting Russian banks and President Vladimir Putin.

NATO member Turkey opposes Western sanctions on Russia on principle and has close ties with both Moscow and Kyiv, its Black Sea neighbors. It also condemned Russia's invasion and sent armed drones to Ukraine as part of its diplomatic balance.

Yet Western nations are growing concerned over increased economic ties between Turkey and Russia, diplomats say, particularly after several meetings between leaders Tayyip Erdogan and Vladimir Putin, including last week in Uzbekistan.

Last month the U.S. Treasury sent a letter to big Turkish businesses warning they risked penalties if they maintained commercial ties with sanctioned Russians.

(Reporting by Daphne Psaledakis; Editing by Mark Porter and Leslie Adler)