Raiffeisen Bank International (RBI), the largest Western financial institution in Russia, has faced mounting pressure to exit the lucrative market since the onset of the conflict. However, their planned move to do so has been stalled by sanctions. The Austrian bank announced its decision to back out of an agreement to acquire shares in Strabag, a construction group, in an effort to transfer profits from its Russian subsidiary back to Vienna.
The deal was contentious from the beginning as Strabag’s shares were connected to Russian oligarch Oleg Deripaska, who is under Western sanctions due to his relationship with Vladimir Putin. Concerns were raised by US Treasury officials regarding the legality of the transaction, prompting RBI to abandon the agreement to avoid potential fines for violating sanctions regulations.
The complex swap transaction would have involved RBI’s Russian subsidiary obtaining shares in Strabag from Deripaska and transferring them to Vienna as a dividend. This would have allowed RBI access to Russian profits while freeing Strabag from Deripaska’s influence. However, uncertainties surrounding the intermediary company and Deripaska’s involvement led to the deal’s collapse.
As a result of these challenges, Raiffeisen Bank International now faces reputational risks and concerns about its continued presence in Russia’s most profitable market. Despite reducing their loan volume in Russia and receiving warnings from the ECB to expedite their exit, the bank still faces scrutiny over its operations in the country. The ongoing conflict in Ukraine and RBI’s substantial tax payments to Russian authorities further underscore these challenges.
Amidst escalating tensions between Russia and Ukraine and international sanctions imposed on Russia’s oligarchic elites, Raiffeisen Bank International must balance financial interests with ethical considerations before making any decision regarding withdrawal from Russia.
