By Ebru Tuncay and Jonathan Spicer
ISTANBUL (Reuters) -Turkish lenders Isbank and Denizbank have suspended use of Russian payment system Mir, the banks said on Monday, following a U.S. crackdown on those accused of helping Moscow skirt sanctions over the war in Ukraine.
The moves, announced separately, came after Washington expanded its sanctions last week to include the head of the entity running Mir, which is popular with the tens of thousands of Russian tourists who arrived in Turkey this year.
The suspensions by two of the five Turkish banks that had been using Mir reflect their effort to avoid the financial cross-fire between the West and Russia, as the Turkish government takes a balanced diplomatic stance.
Isbank, whose shares tumbled 10% on Monday, said it halted Mir payments and is evaluating the U.S. Treasury's new sanctions. Isbank also said it was keen to comply with national and international laws, regulations and commercial business principles.
Asked for comment, Denizbank said: "We are currently unable to provide service" in Mir. The bank "acts in accordance with international sanction regulations," it had said earlier on Monday.
NATO member Ankara opposes Western sanctions on Russia on principal and has close ties with both Moscow and Kyiv, its Black Sea neighbours. It also condemned Russia's invasion and sent armed drones to Ukraine as part of its diplomatic balance.
Yet Western nations are growing concerned over increased economic ties between Turkey and Russia, diplomats say, particularly after several meetings between leaders Tayyip Erdogan and Vladimir Putin, including last week in Uzbekistan.
Last month the U.S. Treasury sent a letter to big Turkish businesses warning they risked penalties if they maintained commercial ties with sanctioned Russians.
Turkey's Finance Minister Nureddin Nebati at the time called concerns over the letter "meaningless." In April, he said Russian tourists - critical to Turkey's beleaguered economy - could easily make payments since the Mir system was growing among Turkey's banks.
Many Russians have gone to Turkey since the February invasion left them few other travel options, and sanctions cut off their use of major U.S. credit cards.
Russia calls its actions in Ukraine "a special military operation."
After the two private lenders suspended Mir, it is still operated by state lenders Halkbank, Vakifbank and Ziraat.
Istanbul's banking index tumbled sharply last week and shed more than 9% Monday, triggering circuit breakers halting trading. One banker said worries that so-called secondary sanctions could target Turkish banks or firms affected markets.
The expanded U.S. sanctions last week targeted the chief executive of the Bank of Russia's National Card Payment System (NSPK), which runs Mir.