Egypt freezes Russian MIR payments

According to a source at Egypt’s largest state-owned bank, Egypt has abandoned plans to implement the Russian MIR payment card system in its resorts and hotels due to concerns over potential US sanctions.

“Sanctions imposed on Russia by the US and European allies have forced the Egyptian decision-makers to scrap their support for the MIR system,” the source from the National Bank of Egypt said.

Under the condition of anonymity, the source claimed that the recent increase in tourist arrivals in Egypt has prompted Egyptian officials to abandon plans to integrate the MIR programme with the country’s own Meeza card system. The local Masrawy news reported that Egypt was also concerned that using the Russian payment system may jeopardise its ongoing talks with the IMF for a loan to support its economy despite a severe lack of foreign currency. The US holds the largest single voting group at the IMF, with more than 16 percent of the total vote.

The MIR system was supposed to be implemented by Egypt’s central bank in September, but the plans were shelved after numerous Turkish banks left the Russian system in response to a US threat of penalties. The US Treasury issued a warning to banks handling MIR payments that they run the danger of aiding Russia’s efforts to dodge Western sanctions for its involvement in the Ukraine War. One of the punishments might be a prohibition on using US currency.

The MIR payment system, which works independently of the Western financial system and enables foreigners to conduct digital transactions with Russian banks without using the SWIFT interbank payments system, enables international trade with Russian banks. Russian tourists would be able to access ATMs and pay in rubles inside Egyptian hotels and resorts if Egypt accepted MIR cards, which would simplify their transactions.

Russian travellers’ top five travel destinations include Egypt. 40% of tourists from Russia and Ukraine come to Egypt for vacations, but their numbers have significantly decreased since Russia invaded Ukraine in February. One of Egypt’s main sources of foreign exchange is tourism. In 2021, Egypt earned $13 billion from tourism.

The leader of the budget and planning committee for the House of Representatives, Fakhri El-Fiqi, claimed that the central bank of Egypt has been working to connect MIR with the country’s own Meeza network for the previous six months. That “would also help Egypt pay for Russian commodities like wheat in rubles rather than US dollars,” he added, boosting Russian tourism.

Economists believe that utilising the ruble will benefit Egypt because Cairo is a significant importer of Russian wheat. Egyptian banks, however, would be unable to adopt the Russian MIR system to promote tourism due to the threats of US sanctions. Egypt’s trade with Russia increased to $4.7 billion in 2021 from $4.5 billion the previous year.

Egypt has had an 85.4 percent rise in tourists this year, with 4.9 million arriving in the first half of 2022 compared to 2.6 million last year, according to the national statistics office CAPMAS. 50.6 percent of tourists from Eastern Europe travelled to Egypt in 2021, followed by 18.9 percent from the Middle East, 16.4 percent from Western Europe, and 7.1 percent from Africa.