How Turkey courts Russian tourists

Turkey wants to become more attractive for vacationers from Russia.

They should help the crisis-ridden economy get back on its feet. To this end, the country is expanding the use of the Russian payment system Mir.

Turkey needs to revive its crisis-ridden economy. Among other things, she wants to increase income from tourism to the level before the start of the corona pandemic. But that’s easier said than done, because Turkey is heavily dependent on Russia for energy, trade and tourism. In 2019, the trade volume between the two countries reached 25.7 billion euros. In addition, Russia is one of Turkey’s most important energy suppliers.

This is another reason why NATO member Turkey rejects the Western sanctions against Russia and does not participate in them. With the economic crisis deepening and inflation hitting a 20-year high on rising energy and grain costs, the country wants to maintain good relations with both Russia and Ukraine.

Tourism income is considered essential to reducing the gaping current account deficit. However, the restrictions on payment and air traffic caused by the sanctions against Russia raise fears that the number of Russian tourists in Turkey could collapse. But it seems Turkey has found a solution.

A proprietary Russian payment system

US card giants Mastercard and Visa have suspended business with Russia under US sanctions targeting Vladimir Putin. But Turkey has found a way for Russian tourists in Turkey to bypass this ban: they can access their money through Russia’s Mir payment system, which Russia set up in 2014.

Even then, there were fears in Moscow because of the annexation of Crimea that Western sanctions against Russian banks and business people could make transactions with Mastercard and Visa impossible. Later, Mir was also introduced in a few other countries where a particularly large number of Russians travel or live.

According to the Central Bank of Russia, the Mir cards used for transfers are used throughout the Russian Federation and twelve other countries, including Armenia, Kyrgyzstan, Kazakhstan, Belarus, Vietnam and Cyprus. At the end of 2021, the number of Mir cards issued amounted to 113.6 million.

Three banks currently accept Mir card payments in Turkey: Isbank, Ziraat Bankasi and VakifBank. Isbank began accepting Mir cards in 2019, citing trade relations between the two countries. Banks are working to expand usage, despite Ukraine’s central bank asking Turkey to halt all transactions using cards in the Russian payment system.

Due to Western sanctions, Russians in Turkey currently only have the option of paying with a Mir card or cash. Turkish banks are reportedly reluctant to open accounts for Russians newly arrived in Turkey for fear of violating sanctions. Since the war began, thousands of Russians have come to Turkey to escape sanctions.

The Dilemma of War

Experts warn that Turkey’s actions could be seen as an attempt to circumvent the sanctions. The political and economic relations of the country, which, like Russia and Ukraine, lies on the Black Sea, are complicated, said Istanbul-based economics expert Güldem Atabay in an interview with Deutsche Welle: “Just as Germany cannot impose an energy embargo, it is also understandable that Turkey wants to protect itself with its attitude towards Russia.”

At the same time, she warns that Turkey must be careful: “Should an attempt be made to buy energy from Russia and resell it to the West, this attitude is no longer right, but wrong. The potential for such initiatives is high in our country. Should crude oil products be here bought and processed and then resold to the West, that could become a problem if Russia uses it to circumvent the Western embargo.” According to Atabay, this is also shown by the criminal prosecution of the state-owned Turkish credit institution Halkbank by the USA.

Timothy Ash, strategy consultant at BlueBay Asset Management in London, also commented on Twitter critical of Turkey’s approach to sanctions against Russia: Turkey is walking a fine line and runs the risk of being accused of actively contributing to the war and the misery of the wanting to benefit Ukrainians.

How realistic are more tourists from Russia?

Turkey’s government hopes tourism will rebound this year after the COVID-19 crisis, with revenues returning to pre-pandemic levels of $35 billion. However, Atabay is convinced that Turkey will not achieve this goal. She assumes that the Russian economy will collapse by ten percent this year: “The Russian currency has lost value, inflation is rising. The purchasing power of Russian tourists and Russians in general has fallen. Some Russians will forego vacationing. ”

Of the 24.7 million tourists who vacationed in Turkey last year, about 4.7 million came from Russia. According to figures from the Turkish Ministry of Culture and Tourism, they made up the largest group with 19 percent of tourists, followed by German tourists with 12.5 percent and Ukrainian tourists with 8.3 percent.