BRICS to unify national payments systems

There is currently a proposal to merge Russia's Mir payment system with those of the other BRICS countries. The experience of merging Russia's Mir system with Iran's Shetab could serve as an example, Tehran believes. Similar projects are already being discussed with Turkey and India, Russia's main trading partners. And if China also decides to merge with the Russian payment system, it will be a major blow to the United States.
A proposal has been made to merge the national payment systems of the BRICS countries. Iranian foreign ministry spokesman Nasser Kanani suggested that this could be done by merging Russia's Mir system with Iran's Shetab system. Russia has agreed to this proposal and negotiations are underway, Kanani told IRIB television.

Iran and Russia have already merged their national payment systems, Mir and Shetab, through their central banks, creating the conditions for mutual settlements in national currencies. This was announced at the weekend. The parties also signed an agreement to provide companies with liquidity in local currencies.

From 22 August, Iranians will be able to withdraw rubles from Shetab cards at all Russian ATMs and pay for purchases in Russian shops, and Russians will be able to use Mir cards in Iran. Russia and Iran have been working on the project for two years and have now completed it. This experience can serve as an example for other countries.
Besides Russia, Mir cards are currently accepted by only four countries: Belarus, Cuba, Abkhazia and South Ossetia. Now Iran has joined them. Other countries are on the way.

The financial issue will also be discussed with Indian Prime Minister Narendra Modi during his visit to Moscow for talks with Vladimir Putin. They will also raise the issue of money transfers between the two countries and the use of national bank cards, The Economic Times reported. Nearly 60% of trade between India and Russia is conducted in local currencies, so a mechanism for fast payments is needed.

In addition to India, BRICS includes another major trading partner of Russia - China. In addition, Turkey, which is also an important trading partner of Russia, intends to join BRICS.

"It is important for Russia to integrate payment systems with similar national systems in other countries, as Western countries have imposed restrictions on the Mir payment system, effectively banning other countries from accepting Mir cards under threat of secondary sanctions. At the same time, Visa and Mastercard have left Russia, and these cards issued by Russian banks are no longer accepted outside the Russian domestic market," says Natalia Milchakova, senior analyst at Freedom Finance Global.

What are the benefits of merging the Mir system with the national payment systems of friendly countries, including the BRICS?

"This will allow Russian Mir cardholders to overcome their isolation and travel with confidence to partner countries of the Russian payment system, where they will be accepted at all ATMs.

(except, perhaps, branches of banks in countries unfriendly to the Russian Federation) and where they can be used to pay in shops, restaurants, cultural institutions, etc.," Milchakova points out.
"The main advantage is the ability to make payments to BRICS countries in local currencies and reduce dependence on global payment systems. Accordingly, this will facilitate interaction between exporters and importers and simplify payment transactions. However, this is only in theory," says Anna Kokoreva, stock market expert at BCS World of Investments.

"The unification of the national payment systems of the BRICS countries will help speed up and facilitate trade, reduce the dependence on foreign currencies and bank commissions when conducting international transactions, and increase the transparency and reliability of financial transactions, which can contribute to the growth of import and export volumes," notes Denis Perepelitsa, Director of the Federal Methodological Centre for Financial Literacy, Associate Professor of the Department of World Financial Markets and Fintech at the Plekhanov Russian University of Economics.

It is very important to reach an agreement with India. "Given the very rapidly growing volume of mutual trade, India is becoming one of Russia's largest trading partners. This means that more and more Indian businessmen will come to Russia and more and more Russian businessmen will come to India, not to mention the fact that the mutual flow of tourists between India and Russia is growing rapidly. India can certainly agree to such a project in the interests of local business and the development of tourism with Russia," Milchakova believes.
"In the context of a potential increase in oil exports to India, the unification of payment systems could help increase transaction volumes and reduce financial barriers," says Perepelitsa.

In 2022, India began buying Russian oil for almost the first time and very quickly "took" most of the volumes previously delivered to the European market. China remains the largest buyer of Russian oil delivered by sea and pipeline. And India has become the largest buyer of Russian oil transported by sea. India's interest is understandable: oil refineries were once built on the Indian coast specifically to buy crude oil on the market, refine it and sell it immediately for export. India thus became a major supplier of oil products to the world market. When Russian oil appeared on the market and could be bought at a discount, the Indians immediately seized this "gold mine". After all, they can now buy oil at a lower price than on the market, but sell the oil products made from it at full market prices, including to Europe. This gives the Indian company an additional margin.

In June 2014, Russian Urals crude oil supplies to India broke a historical record and reached 1.6 million barrels per day. This is 13% higher than in June 2023 and 2.2% higher than in May 2024, when the previous record was set.

(Kpler data). However, India buys not only Urals oil from Russia, but also Far Eastern grades - ESPO and Sokol. As a result, the total volume of oil supplies from Russia to India amounted to 2.13 million barrels per day. This is the second largest result in history.
"As far as China is concerned, the question is which payment system Mir will merge with. The fact is that China's Union Pay has long ceased to be exclusively national and has become one of the major international payment systems, used in the Big Seven countries, among others. If it were to merge with the Mir system, it would face sanctions. Therefore, in the future, Mir may merge with another Chinese payment system that is purely national," says Milchakova.
If Mir does eventually merge with the Chinese payment system, it could be a sensation, also from a geopolitical point of view.

"It would be a breakthrough in relations with Beijing and a blow to the US. But China is acting very cautiously and only in its own interests.

If Beijing thinks it will do more harm than good, it will not rush to merge the systems," says Anna Kokoreva.

As for Turkey, if it joins BRICS, the likelihood of merging the Turkish national payment system and the Mir system will increase significantly, Milchakova notes. However, the authorities of the two countries have been discussing the possibility of creating a bilateral payment system for Russian and Turkish tourists outside BRICS for two years. It is possible that a breakthrough with the Turks on this issue will come before Turkey itself becomes a member of BRICS.

"In the foreseeable future, the chances of implementing the idea of unifying the payment systems of the BRICS countries are high, but it is necessary to take into account various factors and interests of different participants in this process. The process of unifying national payment systems requires considerable effort and time to coordinate rules and protocols, different financial systems, legislation and technical aspects," Perepelitsa notes.
The main restraining factor is geopolitics, the likelihood of confrontation with the US and sanctions. Countries that agree to unify payment systems with Russia are taking a big geopolitical risk. Therefore, the unification process is unlikely to be rapid, but the need for an alternative to the globally accepted analogues is long overdue," Kokoreva concludes.