This is one headline that may not rise to the top of the endless flood of news coming out of Russia and Ukraine, but it may wind up being one of the more important ones. After remaining on the sidelines for more than a week, both Visa and Mastercard are “suspending” operations in Russia in response to the “unacceptable events” that their CEOs have witnessed unfolding in Ukraine. At first glance, I thought they were just going to shut down their corporate offices in Moscow, but that wasn’t the entire plan. They are turning off all of the credit cards held inside of Russia so they can’t be used for purchases outside of the country. And all cards in other nations will no longer work if you attempt to purchase something from a Russian business or service. (Fox Business)
Financial services companies Visa and Mastercard announced Saturday they are suspending business in Russia in response to the country’s invasion of neighboring Ukraine.
“Effective immediately, Visa will work with its clients and partners within Russia to cease all Visa transactions over the coming days,” Visa said in a press release. “Once complete, all transactions initiated with Visa cards issued in Russia will no longer work outside the country and any Visa cards issued by financial institutions outside of Russia will no longer work within the Russian Federation.”
Al Kelly, chairman and chief executive officer of Visa Inc., said in the statement that the company feels “compelled to act” following Russia’s “unprovoked invasion of Ukraine” and the “unacceptable events that we have witnessed.”
As some of us have been suggesting from the beginning of this mess, the heavy personal sanctions on Vladimir Putin and his oligarch buddies were never going to move the needle all that far. They’ve got enough cash tucked away to weather the storm for quite a while. But if Putin’s actions cause too much personal hardship for the average Russian citizen for too long, they’re going to start to notice, even if all non-state media has been cut off to them.
And this seemingly minor change could add up to some serious problems for the Russians who (like so many people everywhere) tend to depend on their credit cards for the day-to-day transactions everyone has to engage in. These range from placing orders to paying bills. If people can no longer use plastic, they may be forced to resort to cash transactions. And that may not provide much of a solution since the Russian financial infrastructure has already been crippled and banks were fearing bank runs as people scrambled to recover their cash.
This could also provide another serious headache for the Kremlin. How will Putin spin this one on state media? People are obviously going to start noticing when their credit cards are suddenly being rejected. Will he try to convince them that it’s yet another plot by NATO to harm the Russian people despite the fact that Putin has “done absolutely nothing wrong?”
The CEO of Visa said that his company regrets “the impact this will have on our valued colleagues, and on the clients, partners, merchants and cardholders we serve in Russia.” Those regrets were outweighed, however, by their need to “respond in line with our values.”
Like most economic sanctions and boycotts, the effects of the suspension of operations by Visa and Mastercard will take a while to sink in for most of the population. (The companies won’t even be able to stop any in-progress transactions for a few days.) But the cumulative impact may turn out to be more damaging than a well-placed cluster bomb. If Ukraine can hold on long enough – and they’re doing a fine job of that so far – Putin may find himself facing the only kind of pressure that could actually convince him to relent. The tide of objections and unrest among his own people.