Austria's Raiffeisen Bank International (RBI) has encountered another setback in its efforts to sell a stake in its Russian subsidiary, according to sources familiar with the matter. The plan was reportedly blocked by Russian officials who aim to preserve one of the few remaining major financial connections between Russia and the West.
The Vienna-based bank has been under significant pressure from European and U.S. authorities to reduce its extensive operations in Russia following the full-scale invasion of Ukraine. However, Moscow's resistance highlights the strategic importance of RBI's Russian unit for the country's economy.
Key Takeaways
- Raiffeisen Bank International's latest attempt to sell a stake in its Russian business has failed.
- Russian officials opposed the sale, fearing it could lead to sanctions and sever a key financial link to the West.
- RBI is a critical channel for international payments for Russia, including for gas exports via the TurkStream pipeline.
- The bank has approximately 7 billion euros in profits that are currently trapped in Russia.
- RBI faces ongoing pressure from Western regulators to scale down or exit its Russian operations.
Russia Halts Raiffeisen's Exit Strategy
Raiffeisen has been actively exploring ways to divest from its Russian business, which has become a source of both significant profit and intense regulatory scrutiny. The latest plan involved selling a stake to a local buyer, a move the bank hoped would allow it to repatriate billions of euros in accumulated profits.
However, two individuals with knowledge of the discussions said Russian authorities were unwilling to approve the deal. Their primary concern was that a Russian entity acquiring the stake could be targeted by Western sanctions. Such a move would effectively sanction RBI by association, closing a vital channel for international transactions.
A spokesperson for Raiffeisen confirmed the bank is negotiating a sale of its Russian subsidiary but stated that a timeframe could not be provided. They emphasized that any transaction requires multiple regulatory approvals, including from Russian authorities. The bank's CEO, Johann Strobl, has reportedly made several visits to Russia in an effort to find a solution.
Pressure from Multiple Fronts
Raiffeisen's situation is complex. On one side, the U.S. Treasury and the European Central Bank are pushing for a reduction of its Russian presence. On the other, Russian law makes it extremely difficult for foreign companies from "unfriendly" countries to sell their assets, and the Kremlin sees RBI's continued operation as strategically beneficial.
A Vital Financial Link to the West
Since the imposition of widespread sanctions on Russia's financial sector, most major Russian banks have been cut off from the global SWIFT payment system. This has elevated the importance of the few foreign banks still operating in the country. Raiffeisen's Russian arm is the largest Western lender remaining and is not subject to the same isolating sanctions as its local competitors.
This unique status makes RBI a critical conduit for Russian companies to conduct international trade. According to sources, the bank processes payments for crucial exports, including natural gas.
Facilitating TurkStream Gas Payments
Raiffeisen's Russian bank handles payments for the TurkStream pipeline, which is Russia's only remaining route for sending natural gas to Europe. In the first eight months of this year, TurkStream delivered approximately 11.5 billion cubic meters of gas, valued at around $3.8 billion, to countries like Bulgaria and Hungary.
Russia's opposition to the stake sale is rooted in a desire to maintain this financial gateway. Despite a significant reduction in trade, Europe still purchases billions of euros worth of Russian energy, and RBI facilitates many of these transactions. A third person with knowledge of the bank's operations noted that Russian authorities want to keep it as a channel for money transfers with Europe.
Billions in Profits Trapped in Russia
Raiffeisen's long history in Russia has allowed it to build a highly profitable business. However, since 2022, currency controls and other restrictions have made it nearly impossible for the bank to move these earnings out of the country. As a result, an estimated 7 billion euros in profits are currently stranded within its Russian subsidiary.
The failed sale is a major blow to the bank's strategy to access these funds. The situation has drawn sharp criticism from Ukrainian officials, who argue that RBI's continued operations and the taxes it pays in Russia help support the war economy.
"RBI is negotiating about a sale of its Russian subsidiary," a Raiffeisen spokesperson said, adding that the bank could not give a timeframe "as numerous regulatory approvals are required, including approvals of the Russian authorities."
In response to regulatory pressure, Raiffeisen has stated it is actively reducing its business activities in Russia. The spokesperson noted that lending, deposits, and payment volumes have all been scaled back, and that all transactions are subject to severe restrictions and comply with existing sanctions.
Geopolitical Tensions and Historical Ties
The difficulties surrounding Raiffeisen's exit come amid escalating tensions between Moscow and the West. European leaders are discussing plans to use frozen Russian central bank assets to aid Ukraine, a move Russia has vowed to retaliate against. At the same time, Europe is working to eliminate its dependency on Russian gas imports entirely.
Austria's historical relationship with Russia adds another layer of complexity. Since the end of World War Two, Austria has maintained a policy of neutrality. It was the first Western European nation to sign a long-term contract for Russian gas, and its capital, Vienna, has long served as a key financial hub for Russian business interests.
This long-standing connection is now under strain. Former Russian President Dmitry Medvedev recently issued a warning to Vienna about the consequences of abandoning its neutral stance. For now, Raiffeisen's continued presence serves Russia's economic interests, even as the bank seeks a path to reduce its exposure.
The bank is also vulnerable to direct penalties from Russia. Earlier this year, a Russian court ordered RBI to pay 2 billion euros in damages related to the collapse of a separate, complex asset swap deal, further complicating its position in the country.
