Let it never be said that Russia doesn’t want peace. On the contrary. since Mastercard and Visa left Russia In March 2022, Russia has been vigorously promoting an all-Russian debit card, called “Mir,” which is Russian for “peace.” But awkwardly, “mir” in Russian also means “world,” and that’s where the problems begin.
Russia would like its “Mir” card to be accepted all over the world, but at present that’s not happening. In fact, fewer than eleven countries accept “Mir,” most of them in the Former Soviet Union. But as of last year, one of the exceptions happened to be Turkey, and five Turkish banks (one of them actually owned by the UAE) were using it. By the summer of 2022 both the US and the EU were determined to put a stop to it.
Turkey is not a member of the European Union. It has declared itself neutral in the Ukrainian War, and it has not endorsed the Western sanctions against Russia, with which it continues to do a healthy business. Overall, it has been one of the biggest beneficiaries of the war.
So one of the biggest challenges for the EU and the US has been how to rein in the growing Russian-Turkish economic partnership. But addressing the Turkish problem illustrates the wide differences between the EU and US sanctions systems, and the difficulty of coordinating them.
Potential conflict between the EU and US sanctions?
The biggest single difference between the US and EU sanctions is that EU sanctions only apply to the target’s dealings with entities inside the European Union, whereas US sanctions apply to everyone that does business in the United States or uses the US dollar, and they can lead to “secondary sanctions” against “third countries,” i.e., other than the target. The EU rejects this “extraterritorial” reach, calling it contrary to international law, and it sharply opposes the US’s use of secondary sanctions.
Since Turkey is not a member of the European Union, the EU’s sanctions do not apply to it. And since the EU does not use secondary sanctions, it has no formal means of preventing Turkish banks from continuing to do business with Russian counterparts, particularly in the use of “Mir.” But for the US, on the contrary, to sanction a Turkish bank would be entirely consistent with US practice. This creates ample potential for conflict—as indeed it has on several occasions in the past. How is it playing out this time?
The exit of the Turkish banks from Mir
By last summer, both Brussels and Washington were determined to raise the priority of enforcement, which both agreed was a weak spot in their Russia sanctions policy. Turkey was an obvious place to begin. But there were good reasons for caution. First, Turkey is a member of NATO, and its cooperation is vital on multiple levels. Second, it controls the Dardanelles, and it serves as a mediator in managing grain exports out of the Black Sea. Third—and especially important for the EU—Turkey acts as a buffer in limiting the flow of migrants from the Middle East to Europe.
The easiest target was the Mir card. In August, US deputy Treasury secretary Wally Adeyemo spoke by phone with Turkish finance minister Yunus Elitaş to signal concerns about Russian evasion and Turkey’s use of Mir. At about the same time, the Treasury Department’s sanctions enforcer, the Office of Foreign Asset Control (OFAC), issued a warning that although Mir was not itself under sanctions, any non-US financial institution that worked with it could be at risk if it handled transactions for sanctioned Russian persons or activities.
The threat, though veiled, was clear, and it brought immediate results. On September 19 two of the five Turkish banks stopped accepting the Mir card; one week later the other three followed suit. The key drivers behind these decisions were reportedly senior executives in the banks themselves, who were fearful of losing access to the US market and the dollar if OFAC acted against them.
The Turkish exit from Mir suddenly left literally millions of Russians, both tourists and the rapidly increasing numbers of Russian emigres in Turkey. without access to their accounts back in Russia, and unable to pay for hotels, meals, or travel. It also blocked larger transactions, such as purchases of property by well-heeled Russians. The only alternative left was cash, and the Russian government issued advisories to prospective Russian visitors to Turkey to arm themselves with plenty of it.
Up to this point, the EU had played no public role. But two weeks later a senior official from the Commission, Mairead McGuinness, the EU Commissioner overseeing the financial sector, traveled to Istanbul and Ankara. The ostensible purpose of her visit was to brief Turkish officials and businessmen on the EU’s just-adopted eighth package of sanctions. But the timing of her visit suggests that her larger mission was to bring diplomatic pressure. McGuinness is an accomplished politician, the velvet glove, one might say, to the US Treasury’s mailed fist. But her presence delivered the message: that the US and the EU were in smooth alignment.
Yet the Turkish exit from Mir was just the easy part. Russian money was continuing to flow through Turkish banks, notably for real estate purchases and other investments, in which the Russian “beneficiaries” are concealed behind non-Russian fronts. In early February 2023, the US Undersecretary of the Treasury for Terrorism and Financial Intelligence, Brian Nelson, traveled to Istanbul. In a blunt statement in Istanbul to a gathering of Turkish bankers, O’Brien warned of “reputational and sanctions risks” incurred by the Turkish banks. The bankers promised to comply.
The US escalates against Russian transit
However, there remained the much larger flow of controlled goods being re-exported through Turkey to Russia, primarily from Europe. The US, still acting on its doctrine of extraterritoriality, under which “third countries” were fair game, stepped up the pressure. Two weeks after Nelson’s visit, Secretary of State Antony Blinken traveled to Ankara, where he met with Turkish foreign minister Mevlüt Čavuşoğlu. He had a broad agenda, including a visit to the site of the recent earthquake in eastern Anatolia, and he brought the welcome news of expanded U.S. support (totalling some $185 million) for the region’s recovery. He praised Turkey’s contribution as a long-standing member of NATO. But he insisted that its membership carried with it an obligation to support NATO’s Russia sanctions. Two weeks later, even as it continued to insist that it did not do sanctions, Turkey stopped the transit of sanctioned goods to Russia, amid loud complaints from Russian shipping companies, which were caught by surprise.
In this latest exchange the EU remained in the background, but in parallel, both the US and the EU have been increasing their collaboration in enforcing the sanctions. In January 2023 the EU named one of its most distinguished senior officials, David O’Sullivan, to a new post, that of “International Special Envoy for the Implementation of EU Sanctions.” O’Sullivan, among his many past positions, spent five years in Washington as the EU ambassador, and is well acquainted with OFAC and US sanctions policy.
At his first press conference in February, O’ Sullivan signalled that he intended to use his position to “focus on implementation and tackle circumvention.” He leads a newly-created international “Sanctions Coordinators Forum,” which held its first meeting in February, chaired by Mairead McGuinness and attended by the top sanctions coordinators of the US, and EU, and the UK. “The event gathered all the EU Member States and a broad coalition of international allies and like-minded partners – the U.S, the UK, Japan, Canada, Australia, New Zealand, Norway, Switzerland and, importantly, Ukraine.” But not Turkey, which continues to insist that it will not impose sanctions on Russia.
And that, for the moment, is where matters stand. So far, the EU and US’s joint efforts to limit trade and financial flows through Turkey have been well coordinated and effective, despite the differences between the two sanctions systems. But more tests of the West’s unity lie ahead, as Putin and Erdoğan look for new ways to evade its sanctions.
Don’t throw away your “Mir” card just yet.
Thane Gustafson is the author and co-author of eight books on Russian affairs, including most recently Wheel of Fortune: The Battle for Oil and Power in Russia (2012), The Bridge: Natural Gas in a Redivided Europe (2020), and Klimat: Russia in the Age of Climate Change (2021), all with Harvard University Press.
This piece originally appeared on Thane Gustafson’s Substack and has been republished with permission.