Raiffeisen Bank International Delays Exit from Russia as Austria Defends Ties with Moscow

Raiffeisen Bank International (RBI) has decided to postpone its plans to exit the Russian market, according to three individuals familiar with the matter.

The Austrian bank, which is the largest Western bank in Russia, had intended to spin off its Russian business by September due to pressure from European regulators. However, Austria, along with RBI, is resisting this move in the hopes that the conflict in Ukraine will soon come to an end. Austrian officials are defending RBI in Europe and Washington, arguing that the bank has been unfairly targeted. They are reluctant to sever longstanding ties with Russia, believing that it may still be possible to restore relations.

RBI has not yet presented its plan to the European Central Bank (ECB), delaying the spin-off process. The bank is waiting for ECB approval before seeking the green light from its shareholders, a process that could take several months. Additionally, approval from Russia's central bank, finance ministry, and potentially President Vladimir Putin would be required for RBI to proceed with the spin-off. Russian authorities have expressed their desire for RBI to remain in the country, as it facilitates international payments.

While RBI maintains its commitment to reducing its Russian business and pursuing a sale or spin-off, its slow pace has led to tensions with the ECB, which has urged the bank to exit Russia. The ECB even advised RBI against paying dividends this year due to concerns over its Russian operations. The bank is also exploring the option of a sale to unlock the capital tied up in its profitable Russian arm. However, recent uncertainties caused by events like the Wagner group's march on Moscow have made it challenging to find a buyer, as Russia's business elites have been shaken by such developments.

Key Austrian officials, including the central bank Governor Robert Holzmann, are advocating for RBI and intensifying efforts to resist pressure on the bank. Austria and Russia have deep-rooted ties in various sectors, including energy and finance, and Vienna serves as a hub for financial activities involving Russia and its former Soviet neighbors. Meanwhile, RBI is also facing pressure from the United States, as it has handed over transaction data related to Russia to the Treasury Department's Office of Foreign Assets Control (OFAC). Austria's finance minister has engaged in discussions with U.S. Treasury officials to emphasize cooperation.

RBI's presence in Russia has caused internal divisions within the bank's management and among the regional Landesbanks that control the group. Some parties argue in favor of RBI leaving the Russian market. Despite the challenges and external pressures, RBI remains committed to reducing its Russian business and complying with sanctions regulations.

By fLEXI tEAM