[LINK] "Visa, MasterCard Weigh Russia Exit as Ukraine Vote Looms"

[rfmcdonald]

Bloomberg's Elizabeth Dexheimer reports on the possibility that Visa and Mastercard might effectively be forced out of Russia by proposed new banking regulations prohibiting either from blocking transactions to groups named under sanctions. The symbolism of this would be noteworthy.

Visa Inc. (V) and MasterCard Inc. (MA) have about six weeks to decide whether a new Russian law requiring them to pay hundreds of millions of dollars to operate in that country is worth the cost. For now, Visa’s answer is nyet.

Russia’s current demands “just go beyond what we’d be willing to do,” Visa Chief Executive Officer Charlie Scharf said yesterday at an investor conference in Boston. “I would hope that we get to a different conclusion than to get to July 1 and just say we’re not willing to participate.”

Scharf and MasterCard CEO Ajay Banga said yesterday they’re talking with Russian lawmakers about making changes to the legislation, passed in response to sanctions the U.S. imposed to protest the Russian role in Ukraine’s turmoil. At stake is about $403 million in combined annual revenue for the two payments networks as well as their foothold in a market that’s shifting from cash to electronic forms of payment. U.S. threats of even more sanctions ahead of next week’s Ukrainian presidential elections loom over the discussions.

“They’ve got three options -- do we stay, can we leave or can we negotiate?” William Pomeranz, deputy director of the Kennan Institute for Advanced Russian Studies at the Woodrow Wilson International Center for Scholars in Washington D.C., said in a phone interview. “If additional sanctions are introduced after the Ukraine elections, then it’s less likely that the Russian government will back down.”

[. . .]

Should the two companies completely withdraw, the biggest effect would be on the 15 percent of Russia’s population who regularly travel abroad, Aslund said. The firms’ decisions will be closely watched by all U.S. companies that do business in Russia, Pomeranz said.

“What happens to them will be a signal of what’s ahead,” Pomeranz said. “If Visa and MasterCard can’t work there, who is going to be able to work in Russia?”