Archives for December 2014

(Reuters/Kai Pfaffenbach, Lucy Nicholson, Alexander Demianchuk, Kevin Lamarque)

2014 was a weird financial year. Oil hit a record high and low, economic war erupted over Ukraine, bankers found new tricks to cheat, China’s role significantly increased, and while the US pulled itself out of recession, Europe looks poised to re-enter.

Oil hits high and low

June saw oil prices peak at $116 a barrel, and just six months later they have halved to $60 a barrel. Prices plunged further when OPEC decided to keep production at 30 million barrels per day. Exporters such as Canada, Norway, and Russia have seen their currencies tumble on the back of weaker oil prices.

READ MORE: Oil slumps into tailspin as OPEC leaves output unchanged

The ruble suffers perfect storm

Russia’s currency was decreased in tandem with oil prices, and entered a free fall when it lost more than 20 percent on December 16, 2014. Since, authorities have reversed the plunge with more frequent ruble interventions.

READ MORE: Ruble recovers, as big exporters ordered to behave

Russia and West go to economic war over Ukraine

The US and EU slapped Russia with several rounds of sanctions, starting in March after Crimea rejoined Russia. The US and EU then hit Russia’s economy- including its oil and finance sector, with the Kremlin responded by banning all agriculture imports from countries that have imposed sanctions against Russia. The ban has hurt Europe, one of Russia’s closest business and trade parters, at a time it is trying to kick-start its economy.

READ MORE: Who is hit hardest by Russia’s trade ban?

Goodbye World Bank, hello BRICS Bank

Brazil, Russia, India, China, and South Africa established a $100 billion bank and $100 billion currency pool to cut out Western financial dominance. The bank will be a resource pool to fund infrastructure projecs in the 5 emerging economies.

READ MORE: BRICS establish $100bn bank and currency pool to cut out Western dominance

China overtakes US in terms of PPP

In 2014 China reached $17.6 trillion or 16.48 percent of the world’s purchasing-power-adjusted GDP, while the US was slightly less, 16.28 percent or $17.4 trillion, according to International Monetary Fund data. This puts it ahead of the US by purchasing power. By GDP the US is still king.

READ MORE: China surpasses US as world’s largest economy based on key measure

Chinese company makes IPO history in US

Another sign of China’s monumental growth is the mega $25 billion debut of Alibaba, the Chinese e-commerce giant that is now the world’s most valuable tech company, valued at $230 billion.

READ MORE: Alibaba debuts in New York in biggest IPO ever

US stops printing money, EU considers it

This year the US Federal Reserve stopped printing money as economic activity picks up. On the other side of the Atlantic, the eurozone is facing recession, as it is on the brink of a deflation and fails to fight unemployment and low growth. The European Central Bank is pushing for a US-style stimulus plan, but Germany, the austerity boss, is so far vetoing the idea.

READ MORE: Federal Reserve ends quantitative easing bond-buying program

Tax havens lose allure

As the global economy grows, so does the cost of running. That’s why major economies are getting more serious about companies and wealthy individuals paying taxes onshore, and not off.

In October, 51 countries declared banking secrecy ‘obsolete’, and signed a pact in Berlin.

Russia introduced a full amnesty for funds returning to the country, as it seeks to bring trillions of dollars back home.

READ MORE: Putin offers amnesty for money coming back to Russia

In November, President Vladimir Putin signed an anti-offshore law.

Gold on the run

Between Ukraine reportedly losing $10 billion or nearly all of its gold stockpile, and the Netherlands suddenly deciding to repatriate $5 billion from New York back home, it’s definitely been a weird year for gold. Others, like Germany and Switzerland, have opted to keep some their bullion at the US Federal Reserve.

READ MORE: Swiss, French call to bring home gold reserves as Dutch move 122 tons out of US

Argentina defaults, blames US

A New York ‘vulture fund’ demanded Argentina prematurely pay off its debt holders, forcing South America’s third biggest economy into default. Argentina blamed ‘imperialist’ US ‘vulture funds’ for going after the money just 13 years after its $100 billion economic meltdown.

READ MORE: Argentina accuses US judge of being ‘imperialist’ after debt plan ruling

Cheaters cheat more

Stealing billions of dollars rigging the libor rate was so 2008. This year, bankers are paying for manipulating currency benchmarks, and the investigation has just begun, there is much more to come.

READ MORE: Banks fined record $4.3 bn for corrupting integrity of currency trading

Banker suicides

Even though the financial crisis has officially ended, there were an unprecedented number of banker suicides this year, from Wall Street to Bitcoin entrepreneurs.

READ MORE: Financial world shaken by 4 bankers’ apparent suicides in a week

Article source: http://rt.com/business/217115-russia-world-business-2014/

Alibaba Group Executive Chairman Jack Ma looks back at a giant electronic screen showing real-time sales figures of the company’s Taobao.com and Tmall.com, on the “Singles’ Day” online shopping festival, at the company headquarters in Hangzhou, Zhejiang province (Reuters / Stringer)

The 400 richest billionaires in the world added another $92 billion to their names in 2014 and now sit on assets worth $4.1 trillion, but Russia’s super-wealthy have been hit by economic problems resulting from the Ukraine crisis.

The biggest winner in 2014 was China’s Jack Ma, who co-founded the Alibaba Group Holding ltd, (BABA), China’s largest e-commerce company, Bloomberg reports.

Ma, who has a personal fortune of $28.7 billion, has added $25.1 billion to his wealth since the September initial public offering saw shares surge by 56 percent.

READ MORE: Alibaba sets IPO record at $168 billion

Other big winners in 2014 were Warren Buffett and Mark Zuckerberg. Buffet increased his net worth by $13.7 billion as dozens of businesses he had brought over the past five decades produced record profits.

Zuckerberg, who founded Facebook, the world’s largest social networking company, added $10.6 billion to his cash pile. Facebook has flourished this year as advertising increased and marketing initiatives expanded, and the 2012 acquisition of Instagram has also paid off; with the photo sharing app now worth $35 billion.

Bill Gates, the founder of Microsoft, remains the world’s richest man with an $87.6 billion personal fortune, up $9.1 billion this year.

Russian blues

The Majority of Russia’s billionaires have seen their fortunes shrink this year, as the EU and the US imposed sanctions and limited Russian companies’ access to financing from Western banks, as a result of the crisis in Ukraine.

Vladimir Yevtushenkov, the main shareholder in the Russian conglomerate AFK Sistema, was hardest hit. Once Russia’s 14th richest man, he lost 80 percent of his wealth after a money laundering investigation into the $2.5 billion purchase of oil producer Bashneft, which saw him sentenced to house arrest.

READ MORE: AFK Sistema shares skyrocket after co-owner released from custody

Leonid Mikhelson, the CEO of Novatek, Russia’s second largest natural gas producer, was the biggest loser in terms of dollars. He has lost $7.8 billion since the beginning of the year and is now worth $10.1 billion.

Alisher Usmanov dropped from first place and is now Russia’s second richest person after his MegaFon mobile phone company lost almost half of its value since June. Viktor Vekselberg is currently Russia’s richest person and is worth $14.1 billion.

Oleg Deripaska, an aluminum billionaire who owns Rusal was one of a handful of Russians who saw their fortune grow in 2014, adding $1.6 billion to Rusal and increasing his worth to $8.2 billion.

Stanislav Belkovsky, a former Kremlin adviser who is a now a consultant for Moscow’s Institute for National Strategy, said that this will make it harder for Russians doing business in the West.

“The reputation of Russian business in the West has become worse, and will continue to get worse. That means that the capabilities for Russia’s billionaires to run businesses abroad are going to decrease,” he told Bloomberg.

Article source: http://rt.com/business/218751-worlds-richest-get-richer/

AFP Photo / David McNew

Conventional oil producers are not the only ones affected by falling oil prices. The energy crisis has also hit shale production and green energy in the US, Marin Katusa, chief energy investment strategist from Casey Research told RT.

“In America most of the green energy, whether you talk about solar or wind, the technologies aren’t cost efficient yet without government subsidies,” said Katusa, adding that a lot of the money now comes into the sector and rapidly goes away because of the high risks the market carries.

Since 2008 the US domestic shale sector has increased its corporate debt by $150 billion. Katusa believes cheap money is the cause of most of the troubles.

“The big effective QE was coming into the shale sector because people were chasing yield, so a lot of this cheap money came in, the technology, the exploration came in, and so the question is how this debt can be rolled over,” he said, adding that it would be hard for oil companies to settle the issue in case oil prices plunge lower.

The price of Brent crude has fallen to $57.47 in Tuesday trading at 14:30 PM MSK while the price of WTI was $53.29.

“At $45 you cannot finance that debt. There’d be a lot of defaults that would trigger derivative effects. This spillover can be a domino, this is very bad news, it’s like the black swan that nobody’s talking about in the US shale sector of the economy,” he said.

Thousands of workers have been made redundant in the US since crude oil lost 50 percent of its value during 2014. At least four American oil producing states are facing budget problems as their revenues have decreased dramatically. Alaska, Louisiana, Oklahoma and Texas are reportedly suffering the most.

READ MORE: Crude price drop triggers major layoffs in US oil industry

In Alaska, around 90 percent of its budget comes from oil revenues. The state government is considering a 50 percent capital spending cut in infrastructure due to the oil price drop.

The State of Louisiana’s 2015-16 budget is going to fall short by $1.4 billion. Texas is also counting millions in losses as WTI (West Texas Intermediate) crude oil has fallen to $54.73 a barrel this week, from more than $100 six months ago.

North Dakota, Oklahoma and Wyoming, where the number of drilling rigs is decreasing, are seeing large job cuts caused by a sharp decline in oil prices.

Some countries, though, believe the US is playing its oil card against other exporters such as Russia, Venezuela and Iran. Venezuelan President Nicholas Maduro said lowering oil prices is a deliberate action.

“There is a planned war to destroy Russia… but neither Russia nor Venezuela will allow twisting their arms,” he said Monday in a televised address.

He agreed with Bolivian President Evo Morales who said the fall in oil prices is caused by the direct economic aggression of the US towards Russia and Venezuela.

Article source: http://rt.com/business/218655-us-oil-renewables-shale/

A general view shows the headquarters of Gazprom (Reuters / Sergey Karpukhin)

Gazprom has bought out the shares of South Stream Transport BV, a company that was in charge of the construction of the cancelled gas pipeline marine section.

Italy’s Eni, Wintershall of Germany, and France’s EDF have decided to withdraw from the South Stream project. They have sold their shares to Gazprom, which already owned 50 percent of South Stream Transport BV.

“Due to the fact that it’s difficult to predict receiving permission for South Stream, and calculate the economic consequences of delaying its construction for an indefinite period, the participants decided to close the project,” said Wintershall’s spokesperson commenting on the decision to sell the stake.

READ MORE: Why Putin pulled the plug on South Stream project

South Stream Transport B.V. was established to construct the offshore part of the South Stream gas pipeline from Anapa in Russia to Varna in Bulgaria.

The €23.5 billion project was designed to supply Europe with 63 billion cubic meters of Russian gas annually, bypassing unstable Ukraine.

On December 1 President Vladimir Putin said Russia had been forced to cancel South Stream, as the EU didn’t support the project that was supposed to provide energy security for the region.

READ MORE: Putin: Russia forced to withdraw from South Stream project due to EU stance

Instead, Russia chose to redirect its offshore gas pipe to Turkey, renaming it Turkish Stream and setting up a gas hub on the border of Turkey and Greece.

Estimates suggest European companies are poised to lose about €2.5 billion from the cancellation.

Bulgaria, under US pressure, stopped the project several times, saying it didn’t comply with EU anti-monopoly legislation. But a couple of weeks ago Prime Minister Boyko Borisov said Bulgaria was ready to issue all the necessary permits for the construction of the South Stream pipeline.

READ MORE: Bulgaria ready to issue South Stream permits

Article source: http://rt.com/business/218635-gazprom-owner-south-stream/

AFP Photo/Mario Tama

Disappointing Russian economic data has been released on Monday, as the country’s manufacturing activity declined in December for the first time in six months. November GDP shrank by 0.5 percent, the first time since 2009.

The pool of negative data dragged the Russian ruble down during Monday trading at the Moscow Stock Exchange. The currency finished the day at 56.9 against the US dollar compared to 54 against the greenback at Friday’s close.

#Russia econ appears to be deteriorating rapidly now, w/ GDP reported -0.5% YOY Manufacturing PMI 50 (viaPierpont) pic.twitter.com/xA9Ud5d9Af

— Holger Zschaepitz (@Schuldensuehner) December 29, 2014

Russia’s GDP is 0.5% down in November for the first time in five years, according to the monthly report from the Ministry of Economic Development and Trade released Monday. The country’s overall GDP from January through November has grown by 0.6 percent, reports the ministry.

The negative impact on the dynamics of GDP in November came from manufacturing, construction, and services, as well as net taxes on products and imports, the ministry said.

At the same time a positive contribution to economic growth came from the extractive industries, power, gas and water generation, as well as retail business.

The performance of Russian factories has been measured by the HSBC Purchasing Managers’ Index (PMI), which considered business conditions of Russia’s 300 manufacturing companies. Russia’s PMI fell to 48.9 in December from 51.7 in November, which points to an industry contraction.

The PMI survey is a composite indicator giving an overall single figure snapshot of operating conditions in country’s manufacturing economy. It takes into account a number of indicators, including general output, new orders, employment etc.

Readings above 50.0 indicate an overall improvement in business conditions, below 50.0 an overall deterioration.

The consumer goods sector, that used to be a key manufacturing driver, suffered the most, according to Aleksandr Morozov, Chief Economist (Russia and CIS) at HSBC.

“In essence, the consumer goods producers stopped benefiting from retail sales growth. This suggests that the import substitution in this sector further to the ruble depreciation may be problematic and will take time, at best,” Morozov concluded.

Article source: http://rt.com/business/218423-russian-pmi-manufacturing-index/

Reuters/Thomas Peter

Stocks in Greece have plunged 11 percent after the government decided to call snap parliamentary elections on January 25 after parliament failed to elect a president in a key vote Monday.

The index recovered to be down 3.91 percent by 16:00 GMT.

The snap elections will decide whether the country receives more financial assistance from the ‘troika’ of creditors (European Commission, the European Central Bank and the IMF) and continue its policy of austerity. The policy of spending cuts and international borrowing has already boosted Greece’s external debt to 177.7 percent of GDP, while dropping austerity could mean exiting the eurozone.

The IMF said Monday it is suspending financial assistance to Greece until the new government is formed, AFP reports.

Former European Commissioner Stavros Dimas, the government’s preferred candidate, was supported by only 168 out of 300 lawmakers, and needed 180 votes for confirmation. Following Greek law a failure to elect a new president means an early general election, with voting scheduled for January 25.

“These elections will be a struggle between the fear of leaving the eurozone and anger provoked by austerity measures,” George Pagulatos, Professor of European Politics and Economics of the University of Economics and Business in Athens told Bloomberg.

The benchmark 3-year yield rose by almost 1 percent, up to its highest since July at 11.175 percent. The yield on Greek 10-year government bonds jumped by one percentage point to 9.3 percent, reflecting growing concern that Greece may be heading for another debt crisis.

If Greece’s anti-austerity left party SYRIZA is elected in January, there are fears the country may lose a chance to receive €240 billion in international assistance.

“The government will be emphasizing the risks associated with SYRIZA’s anti-bailout stance and SYRIZA will try to convince voters that it can offer a viable alternative, without endangering the country’s euro membership,” Pagulatos said.

Athens-based journalist Aris Chatzistefanou says with an election looming next month, he expects a scaremongering campaign against the left.

“We have ahead of us a campaign of fear and terror imposed on public opinion by the powers that are losing their positions in the Parliament, and they’ll probably say that ATMs will stop giving us money, that the economy will collapse and that the foreign countries will invade. I don’t know what they can think of. But that’s exactly the same scenario that they were trying to impose during the previous elections and it was quite successful I would say,” he told RT.

Political uncertainty surrounding Greece caused the euro to fall to a two-year low against the dollar on Monday, with the European currency trading at $ 1.2197. The Athens Stock Exchange share index has fallen by 27 percent from the beginning of 2014, according to Bloomberg.

READ MORE: Biggest Greek stock market drop since 1987 over surprise election

In December, eurozone finance ministers decided to extend financial aid to Greece until February to give Athens and the ‘troika’ of creditors extra time to settle differences on the economic program.

The Greek government has promised the people that 2014 will be the last year of austerity and the constant oversight by creditors.

The ‘troika’ has allocated almost €245 billion to Greece since 2010. The country’s economy has been able to return to growth, and GDP rose 0.7 percent quarter on quarter in July-September of 2014 which was the best among the eurozone countries. Annual growth could reach 0.6-0.8 percent by the end of the year.

However, the unemployment rate in Greece remains the highest in the eurozone at around 25 percent, because of the austerity measures.

Article source: http://rt.com/business/218483-greece-elections-indices-drop/

A bank clerk counts Chinese yuan banknotes at a branch of Industrial and Commercial Bank of China in Huaibei (Reuters/Stringer) and Russian ruble banknotes (Reuters/Ilya Naymushin)

China and Russia have effectively switched to domestic currencies in trading using financial tools as swaps and forwards, as they seek to reduce the influence of the US dollar and foreign exchange risks.

The agreement signed in the end of October comes into force Monday, December 29, and provides a currency swap of CNY150 billion (up to US$25 billion).

READ MORE: Defying the dollar Russia China agree currency swap worth over $20bn

The country’s Foreign Exchange Trade System will carry out similar transactions with the Malaysian ringgit and the New Zealand dollar.

From now on yuan swaps are available for 11 currencies on the foreign exchange market.

“China won’t stop yuan globalization or capital account opening because of the volatility in emerging market currencies,” Ju Wang, a senior currency strategist at HSBC Holdings Plc in Hong Kong told Bloomberg.

China has set up bilateral currency swap lines with more than 20 countries and regions since 2009, including Switzerland, Brazil, Hong Kong, Indonesia and South Korea, Xinhua News reported in July.

A swap is a financial tool to ease transactions by exchanging certain elements of a loan in one currency, like the principal or interest payments into an equivalent loan in another currency.

Currency forward is an obligation of two parties to convert an agreed amount of one currency into another by a certain date at an exchange rate specified at the moment of signing the deal.

Russia and China have long been looking for ways to cut the dollar’s role in international trade. The question is significant for China as 32 percent, or $4 trillion of its foreign exchange reserves are in US bonds, which means there is a vulnerability to fluctuations in the exchange rate.

READ MORE: Russia’s biggest bank launches financing in Chinese yuan

Russia’s foreign exchange reserves are worth $398 billion, and the US dollar accounts for about $162.45 billion.

The country’s economic growth has slowed amid a standoff with Western countries over the Ukrainian conflict. After the country’s financial sector faced EU and US sanctions it became hard for Russian businesses to raise finance in the West.

Chinese authorities are particularly interested in currency swap lines with developing countries, mainly from the Asia-Pacific region. Australia, New Zealand, Brazil, Singapore, Hong Kong, Argentina, and Malaysia are actively involved in transactions with China.

Article source: http://rt.com/business/218315-china-russia-ruble-yuan/

A rotary dredge works on the coal face of the Borodinsky opencast colliery, near the Siberian town of Borodino, east of Krasnoyarsk (Reuters / Ilya Naymushin)

Russia will supply coal and electricity to Ukraine without prepayment, Vladimir Putin’s spokesman said. Ukraine is trying to cope with energy problems amid an ongoing crisis in the industrial east.

This proves the president’s political goodwill and support, “particularly before New Year,” said presidential spokesman Dmitry Peskov on Saturday, as quoted by TASS.

“Against all the odds as President Putin said earlier in the hard times he had never given up the consistent policy towards supporting the Ukrainian people and providing real and not eventual support, due to the critical energy situation Putin took a decision on such supplies regardless the absence of prepayment, which is the condition of making them,” he added.

Moscow will supply 500,000 tonnes of coal to Ukraine per month, according to Russian Vice-Premier Dmitry Kozak.

“If an additional corresponding agreement may be reached, we’re ready to supply another 500,000 tonnes, totally 1 million tonnes of coal, to Ukraine in order to help it solve energy problems,” Kozak told Rossiya24 TV channel.

He added that energy carriers will be supplied to Ukraine on easy terms. However, the amount of electricity planned to be transferred to Ukraine is unclear.

The decision comes in response to Ukraine’s request, he said. Previously, Ukraine’s President Petro Poroshenko ordered the Energy Ministry to discuss the supply issue with Russia.

READ MORE: 50,000 tons of Russian coal enter Ukraine

Earlier on Saturday, the Ukrainian Regional Development Ministry said on its website that Kiev will begin receiving Russian coal without prepayment, citing the presidential press service. However, the ministry’s spokeswoman, Nadezhda Petruniak, later said that the website had been hacked and the ministry did not have any information about energy supplies from third countries.

Kozak expressed hope that Russia’s decision will help ensure reliable energy supplies to Crimea. On Friday, Ukraine again fully ceased electric power supplies to Crimea without any notification, said Crimea’s fuel and energy minister, Sergey Yegorov. Power cuts started on Wednesday.

Though Crimea joined Russia in March, it is still dependent on power supplies from Ukraine. It is suffering from supply disruptions due to a production deficit in Ukraine.

READ MORE: Russia resumes gas deliveries to Ukraine after six-month hiatus

Ukraine is experiencing a shortage of gas and coal for public utilities such as heating and electricity. The gas shortage was prompted by Ukraine’s debt to Russia, while the lack of coal is related to military operations in the Donetsk Basin, which houses most of the country’s coal mines.

Article source: http://rt.com/business/218103-russia-coal-electricity-ukraine/

AFP Photo / Alexander Nemenov

The ruble has seen a full week of recovery after its drastic 20 percent drop on December 16 dubbed as ‘Black Tuesaday.’ This was triggered by the call from the Russian government for businessmen to sell currency earnings.

READ MORE: Ruble’s ‘perfect storm’ over – finance minister

The Russian ruble closed Friday session at 54 against the US dollar, which compares to the average of 56 on Monday.

“We are now seeing how the ruble is strengthening. It is now approaching, in my view has already approached, the area of a balanced rate, which is also called a fundamental one,” Russia’s Economy Minister Aleksey Ulyukaev said Friday in an interview with Rossiya 24 TV.

A drastic drop in the ruble’s exchange rate has triggered some of Russia’s biggest exporters in agriculture and energy to either accumulate foreign currency earnings or increase sales overseas.

READ MORE: Ruble at 2-wk high as Central Bank pulls out big financial tools

In agriculture, increased exports of grain have caused a shortage within Russia which also pushed prices up.

To balance the market, the Russian government ordered the introduction Thursday of a 15 percent plus €7.5 export duty on wheat from February 1, 2015. The duty was calculated so the price is no less than €35 per ton.

As for oil companies, they started hoarding foreign currency earnings from selling crude which also poses risks to the domestic economy, as the supply was low compared to the increased demand.

READ MORE: Ruble plummets losing more than 20% in a day, hitting new dollar and euro lows

After the CBR and a number of businesses raised concerns over the currency risks, President Putin ordered the Government Issue guidelines for all exporting companies to sell their currency earnings.

On December 23 the government urged the five largest state-owned exporting companies including Rosneft and Gazprom to bring the amount of their net foreign currency assets to an amount not exceeding the level of October 1, 2014.

Russian Finance Minister Anton Siluanov said Thursday the weakening period of the ruble has stopped and the national currency is seeing a strengthening trend.

Article source: http://www.rt.com/business/217831-ruble-recovers-sales-revenues/

Reuters / Kevin Lamarque

MasterCard and Visa have suspended service for Russian banks in Crimea, saying the decision complies with US sanctions.

“According to the US sanctions imposed against Crimea on December 19, 2014, Visa currently cannot provide services and offer their products in the Crimea. This means that we can no longer issue or accept bank cards in Crimea, and service them in ATMs,” the company has confirmed to TASS.

“As for the time period, these limitations will last until the sanctions are lifted from Crimea. At the moment it is unclear when this will happen; it will depend on the development of the political and diplomatic situation. VISA continues to follow closely the events and will provide you with the information as soon as it appears,”a statement to journalists added.

The Central Bank of Russia has promptly responded saying Crimea banks continue to operate as usual, TASS says.

“Russian credit institutions operating in the territory of the Republic of Crimea and the city of Sevastopol work as usual, including the opening of bank accounts, transferring funds, and deposits and withdrawals of funds,” said the Central Bank.

As of December 16, about 31 banks were operating in Crimea.

Last week US President Barack Obama authorized individual and sectoral sanctions against Crimea. This included a ban on the export and import of goods, technology, and services, as well as new investment in the peninsula.

The head of the Duma financial markets committee, Natalya Burykina, has said the move isn’t new and plastic cards haven’t been working in Crimea since March.

“Visa did not provide a card service in Crimea,” Burykina said, as cited by RIA Novosti.

She explained the cards in use since March had been issued by Russia’s Sberbank, and were part of their inner payment system.

“This happened after Crimea joined Russia,” she said, adding that it’s the same with MasterCard.

READ MORE: Obama authorizes ‘economic embargo’ on Russia’s Crimea

In March Visa and MasterCard temporarily stopped servicing clients of blacklisted Russian banks, which triggered concerns in Russia over the excessive reliance on the Western financial system.

Since then the Central Bank and economic ministers have accelerated efforts to develop a self-sufficient and independent financial system in Russia.

On Friday, the CBR launched its domestic alternative to the SWIFT global system for banking transactions.

READ MORE: CBR launches SWIFT alternative for domestic payments

In mid-December, Russia’s sanctioned Rossiya and SMP banks started testing the country’s own payment system.

Kiev cuts electricity, transportation

On Friday, Ukraine also cut off electricity and train services to Crimea. It is the second time in a week that Crimea has been hit by blackouts because, according to the Ukrainian energy ministry, the peninsula failed to curb consumption as required.

“There remains an energy deficit in Ukraine and they [Crimea] exceeded their limit and therefore electricity supplies were switched off. As soon as they return to the limit, they’ll be reconnected,” an energy ministry spokesman said.

Ukraine’s state rail company has also ceased operating its Crimean service for an uncertain time, including both passenger and cargo trains to the Black Sea peninsula.

“In order to ensure the safety of passengers … [the railway] will cut the route to Crimea off at Novooleksiyvka and Kherson,” the company said in a statement.

Article source: http://rt.com/business/217867-visa-russia-banks-crimea/