
Putin Passes Law Requiring $3.8B Security Payments From Visa, MasterCard - cek
http://www.themoscowtimes.com/business/article/putin-passes-law-requiring-38bln-security-payments-from-visa-mastercard/499532.html
======
ipsin
The last paragraph is the heart of the article.

"The law also creates the basis for a new Russian national payment system that
hopes to compete with the two U.S. companies."

This seems to achieve several goals at once:

1) Highlight that foreign payment processors are unreliable for Russians.

2) Either edge them out of the market or get a crap-ton of 'insurance' money.
I wonder if the companies can even pay this money, according to U.S.
authorities?

3) Keep the profit from becoming the de facto payment standard for Russians.

If the new payment companies are making money for Putin's government I would
not bet against them, using bitcoins or anything else.

~~~
higherpurpose
This has happened in the past (a few decades ago). I remember a story from a
business professor about how they forced some companies to make their
factories there, and then they just took over them. Putin is quickly moving to
turn Russia into another China. Before we know it, I think they'll require
every foreign business to give 51 percent ownership to the state, if they want
to do business there.

~~~
sdm
How is this "moving to turn Russia into another China"? While China has been
pushing the economic reform agenda and cracking down on SOEs -- as was seen at
the report of the Third Plenum -- Russia is going in the opposite direction
with things like this. In China you don't have to give any ownership to the
state. Just setup a WFOE ([https://en.wikipedia.org/wiki/Wholly_Foreign-
Owned_Enterpris...](https://en.wikipedia.org/wiki/Wholly_Foreign-
Owned_Enterprise)). Yes, you have to jump through a lot more hoops than
setting up a business in the west but, speaking from having done it, it's not
that hard. And yes there are certain sectors you can't participate in; but,
pretty much every country on the planet has restricted sectors. Even the US:
just look at the defence industry. China has been working opening these up
while Russia has been been closing these. A good recent example for China is
the recent reduction in rice self sufficiency. Plus compared to Russia, China
is rather stable, prosperous, and corruption free. It would serve Russia well
to become a bit more like China -- but this move is not it.

~~~
josh2600
I think it's absolutely amazing that you would call China corruption free,
even in contrast to Russia.

~~~
nealabq
Transparency International rates perceived public-sector corruption in 175
countries. China ranks at 80, Russia 127, USA 19, Canada 9, New Zealand and
Denmark tied for first place. Contrast China with Hong Kong at 15.

[http://cpi.transparency.org/cpi2013/results/](http://cpi.transparency.org/cpi2013/results/)

------
jacquesm
It's a funny turn of events. I know plenty of companies that were sunk by
arbitrary fines from Visa and Mastercard in the past (whole IPSPs tanked
because of ridiculous and ill motivated fines).

Sure sucks to be on the receiving side of something like this. The only thing
this will do as a result is to slightly increase Visa and Mastercard fees.

One way VISA/MC could strike against this law is by simply cutting off all
Russian cc's. That would hurt them as well but they could simply stop doing
business there for a week or so. I think that Putin would very quickly recant
once it becomes evident how much of the Russian economy is now dependent on
such instruments.

The new Russian owned payment system is dead in the water from a non-Russian
perspective, the only reason VISA and MC are so popular in Russia is because
people do not trust local alternatives, not because they don't have other
options.

~~~
vetinari
> One way VISA/MC could strike against this law is by simply cutting off all
> Russian cc's. That would hurt them as well but they could simply stop doing
> business there for a week or so. I think that Putin would very quickly
> recant once it becomes evident how much of the Russian economy is now
> dependent on such instruments.

They already did that, to Bank Rossiya. This move by Russians is a retaliation
for that.

> The new Russian owned payment system is dead in the water from a non-Russian
> perspective, the only reason VISA and MC are so popular in Russia is because
> people do not trust local alternatives, not because they don't have other
> options.

The reason why VISA and MC are so popular is because there is nothing else.
Not only in Russia, but in other countries too. (Note that Maestro is owned
and operated by MC).

~~~
jacquesm
I mean across the board.

JCB, AMEX, Discover and a bunch of others would disagree.

~~~
vetinari
"Nothing" as for large values of nothing.

JCB, AMEX, Discover are virtually unusable outside NA. Yes, you might find a
restaurant or two that do accept Discover, but you cannot rely on that. Just
like you cannot rely on Maestro in NA, for example.

VISA and MC are the only two accepted somewhat worldwide. Even VISA has work
to do, to expand their coverage (e.g. Austria and Germany; they are not as
universally accepted as Maestro or local "bank cards").

~~~
acqq
Regarding Europe, Visa and the dirty tricks, see London 2012:

[http://www.geek.com/news/visa-is-the-exclusive-payment-
partn...](http://www.geek.com/news/visa-is-the-exclusive-payment-partner-of-
the-olympics-literally-1507979/)

------
bayesianhorse
With Russia and Putin, you never really know: Is this move extraordinarily
stupid or extraordinarily brilliant? Russia is an authoritarian state, that on
the one hand isn't doing terribly bad economically, but on the other hand
notoriously corrupt and not getting a foot in the door innovation-wise.

Of course, the "security deposit" isn't for security against these companies
failing. The deposit will help with the squeeze Russia is feeling, and on the
other hand this whole law would allow the Russian one-party government (which
doesn't know any kind of division of power, by the way) to extort Visa and
MasterCard.

I don't know if building a state-controlled credit card processor is worth it
to risk being cut off from Visa and MasterCard. You would certainly expect
foreign businesses to be extremely careful or suspicious toward such an
entity...

~~~
Silhouette
I sometimes wish more states would build state-controlled basic financial
infrastructure and cut out the established financial services companies from
the low end of the market -- whether that is the big card companies or the big
banks or the big insurers or the big mortgage lenders. These financial
services organisations make staggering amounts of money for providing services
that almost everyone depends on to function in society, yet with very little
real accountability and rarely serving the little guy well, and with a long
track record of fighting against any state-led efforts to improve the
situation on either count. I'm not generally a fan of over-centralising
government and infrastructure, but in this case I suspect there are now strong
arguments for providing basic state-run financial services that look much the
arguments for having currency and the lender of last resort run by the state
and not for private profit.

The use of card payment schemes as a mechanism for sanctions in this case
demonstrates external political influence. Maybe in this specific case some
would agree with that, given Russia's recent track record. But just imagine
the response if Russia could do the same to the US or the major economies of
Western Europe. Or consider a more ethically dubious example, like the UK
invoking terrorism legislation to freeze assets when Iceland was in financial
difficulty not so long ago. More than the political influence, these measures
demonstrate the rather arbitrary nature of the services these big companies
provide, or don't provide, particularly across borders. For any first world
national economy in the 21st century to remain vulnerable to some big
commercial interest getting upset and taking the ball home, whatever the
underlying reason, seems unwise on the part of the corresponding government.

~~~
SoftwareMaven
Because the Soviet Union's state-run banks served the little guy so well. The
reason the "little guy" gets poor service is because the risk profile is
extremely high for the return; however, micro-lending is filling in some of
that (see [http://kiva.org/](http://kiva.org/), for example).

The use of the financial sector as a political weapon is concerning (but that
is more possible with state run financial institutions). I'm not sure how you
prevent that without basically allowing mega-corporations to be above any
national laws.

What we really need is an international court that can arbitrate these kinds
of disputes.

------
huhtenberg
That's actually a very reasonable response to what Visa/MC did.

I guess that Visa will now quietly back away from the sanctions and in return
Russia will either extend the deadline, reduce the security deposit or allow
them to participate in development of the national payment system. Probably
latter.

~~~
ovi256
Visa and its competitors cannot back away from the sanctions at will, as they
are ordered by the US federal government. As such, Visa et co. are caught
between a rock (US ordered sanctions) and a hard place (this Russian law
saying "don't dare apply those sanctions to Russian citizens").

~~~
gst
That new law seems to address this: "... and require them to base their
processing center in Russia". How would sanctions work with a local subsidiary
that does the processing?

~~~
mike_hearn
The same way the USA has been taking control of the rest of the financial
system. They say to American VISA/MC executives, "we require any transactions
processed by your subsidiary to comply with US sanctions, or else we're going
to tell the whole world that you're a bunch of financial terrorists and throw
you in jail".

Then the US executives say, OK, then we won't process payments in Russia. And
then Russia says ....

~~~
boobsbr
Feels similar to FATCA requirements: report all transactions that involve even
the remotest link to an "American person or company" or you're sancioned from
operating in the US and with any "American person or company".

------
modeless
Economic sanctions are counterproductive. Severing economic ties makes war
more likely, not less.

~~~
hnal943
How do you suggest the world punish Russia for acting out?

~~~
ctdonath
Fulfill protection treaties. Either put "boots on the ground" or don't promise
to in the first place.

Ukraine gave up deterrent weapons (world's 3rd largest nuke stockpile) on
promise that the USA would fill the strategic power gap accordingly. Latter
didn't, Russia doesn't care about mere "sanctions" in light of empire-building
goals, there's only one thing that stops such "acting out".

~~~
jqm
The US meanwhile continued to expand NATO and attempted to box Russia in.
Contrary to the agreements you mention.

Who exactly is building an empire here?

Boots on the ground probably will be the answer in the end. And when people
see what it produces they may finally come to their senses.

~~~
ctdonath
Separate interests, perfectly and fairly satisfied, rarely favor everyone
involved. NATO and Russian sovereignty & protection interests involve
conflicting desire to control border areas, as both are suspicious of the
intentions of the other. NATO having all but abandoned Ukraine, Russia is
emboldened to re-take that buffer area, putting boots on the ground where
answered only by rhetoric.

------
godzillabrennus
Knowing how corrupt the Russian government is I'm certain this new electronic
payment system will be... As Borat would say, a great success...

~~~
mike_hearn
As opposed to the stagnant duopoly VISA/MasterCard, who routinely manage to
find ways to stiff their merchants with fines, fees and who are deeply in bed
with US politicians? As opposed to PayPal that routinely seizes funds for no
reason at all?

What kind of corruption are you afraid of, that the world doesn't already have
to deal with?

------
jqm
Putin could kick it up a notch, nationalize the companies assets in Russia and
forgive all dept held by the companies in Russia. What kind of a hit would
this cause the shareholders of these companies I wonder?

Now sure, international lenders would be more wary of Russia after that, but
when you have the resources Russia does maybe credit is less important?
Besides, if lenders are going to be used to destroy your economy why not
behave proactively?

I doubt it will come to this level... at least immediately, but some people
think only the west has the capability to cause financial chaos and pain. I
don't think this is the case. This is why I believe we should be more cautious
about hostility, financial or otherwise.

------
pjc50
Interesting. I wonder whether they'll pay the protection money or choose to
leave? I wonder if this will drive Bitcoin adoption in Russia?

Note that the US government is no stranger to strong-arming payment processors
into refusing payment to businesses it deems undesirable, not always on a
legal basis. For example, donations to wikileaks. The Russian position is that
_Putin_ insists on being the one strong-arming opponents. This is not an
improvement.

(I wonder if this thread is going to be "yay, someone breaking the payments
cartel and going after the banks" or "boo, Putin"?)

~~~
bayesianhorse
Well "boo, Putin" wouldn't be such a bad attitude. He is, after all, a former
KGB officer who runs an authoritarian nation, where the mere notion of free
press or due process is ridiculous.

The biggest mistake non-Russians seem to make with regards to interpreting the
"West vs Putin" debate is, that they forget that western political systems are
hugely more transparent and reliable.

Essentially this means that virtually any "misdeed" on the part of a western
government will come out over time, whereas there will be no such evidence or
a wider discussion over what Putin is doing.

Given the choice over the U.S. strong-arming payment processors in very few
cases, and Putin strong arming them for whatever reasons he sees fit, I'll
choose the U.S. any time...

~~~
pjc50
"boo, Putin" is certainly valid and correct, and I'm not asserting general
moral equivalence. I'm just saying that actions which erode due process make
it much harder to fight this kind of action.

------
EugeneOZ
One more reason to leave this stupid country.

------
Eye_of_Mordor
Oh, the US government will just retaliate with sanctions against Russian
companies.

~~~
bayesianhorse
They don't need to. Foreign companies have a hard time trusting a widely
state-controlled economy which on top of being utterly corrupt and lacking
innovation also breaks its promises left and right.

For that matter even if the U.S. government took back every sanction, private
businesses will be wary of the risk.

------
adnam
Max Keiser is going to blow an artery with excitement.

------
soAsian
Why so many Visa and MasterCard ass kissing here? It doesn't matter what you
guys think of Russia and Putin. Visa and Mastercard ain't innocent here
either. They fudged their rate and have been sued multiple time since their
existence.

Personally, I don't think any country should rely on Visa or Mastercard since
like the article said any countries that face U.S. sanction is basically
fucked. This is equivalent of using closed source software to run your govrt.

Russia or any countries for that matter have the rights and should develop
their own domestic payment transaction.

~~~
nitrogen
People aren't upset about Russia ensuring independence from US payment
networks. They are upset that Russia appears to them to be trending toward
isolation from the world while expanding its territory. They worry about that
combined isolationism and expansionism resulting in a new global cold war.

------
Voley
Visa already announced that it stays. After all this is ugly practice that
Visa chosen to block certain banks for imaginary reasons and customers of that
bank suddenly can't use their cards anymore.

