Western Union Payment System Being Removed From Russia-Central Asian Transactions

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In moves that echo Russia’s desire to promote alternative payment systems to American networks such as SWIFT, transactions between Russia and Tajikistan via Western Union, one of the largest regional operators, have been banned. Western Union is a US-owned money transfer system, and is a major operator in Central Asia. For many years, these remittances accounted for 50% of Tajikistan’s gross domestic product, and was the highest global percentage of total GDP to be transferred in this manner.

In this region, including Afghanistan and Kyrgyzstan, each family will typically have at least one family member in Russia, who sends each month the equivalent of US$300-500 that will support their family back home. It is thought that currently, these remittances represent 31% of Tajik GDP and 33% of that of Kyrgyzstan.

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The decision to bar Western Union has officially been due to ‘non-compliance’ issues, although analysts suggest the move comes to give the Tajik government more control and commission income from the financial trade flows remitted.

Instead, smaller operators have now been approved to handle the business. These are Unistream and Contact. Both are Russian-owned. Unistream’s chief Kirill Palchun and said that commissions on wire transfers had been reduced from 1.5% to 0.99%. The Tajik Central Bank said that it was only processing payments from the Unistream and Contact wire transfer systems.

Russia and its allies have been looking for ways to disengage with U.S. backed financial systems, and the effective barring of Western Union services in trade with Tajikistan is symptomatic of this on-going decoupling and the replacement of US systems by domestic ones.

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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Through our membership of the Leading Edge Alliance, we also have partner firms throughout Africa and have numerous Russian and African clients. For enquiries  please contact us at russia@dezshira.com or visit us at www.dezshira.com

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