The USSR was able to control its own economy and those of its allies in the Warsaw Pact. The entire structure was economically isolated from the west. Economic pressures were one of the factors that precipitated the collapse of the entire arrangement at the beginning of the 1990s. Most of the Warsaw Pact countries to the west of Russia are now members of the EU. Russia had been moving toward increasing economic integration with the west and the rest of the world. The crisis in Ukraine has seen growing ruptures in that integration. Sanctions imposed by the west are giving Russia reason to revert to isolationist arrangements.
Making a non-western payment card system in Russia
In late March, MasterCard and Visa froze service to cards issued by Bank Rossiya, after it was named in US sanctions. President Putin declared that Russia should limit its exposure to political risks in the financial system and build its own national system supporting electronic card payments.
Last week, the government decided to establish a Russian national clearing system as a separate corporation controlled by the Central Bank of Russia (CBR). The National Payment Card System (NPCS) would process all card payments inside the country; it is also likely that NPCS would serve as a central processing hub supporting all international card payments, which would allow Russia to bypass international payment systems.
More than twenty years after the breakdown of the command economy, Russia remains a cash-based society in transition to a financialised capitalism: 81 per cent of operations with plastic cards are cash withdrawals. Only 19 per cent are for card purchases. Card payments also account for 59 per cent of total transaction volumes, with the remainder paid for in cash.
The article poses several questions being raised about the new scheme. It is certainly too soon to know how well this will work and whether the network can gain sufficient traction to provide international credit independent of the western bank networks such as Visa and Master Card. What is significant about this at the moment is that it makes it clear that Russia does not necessarily see the western economic sanctions an insurmountable obstacles.