Raiffeisenbank International’s Russia deal thwarted by sanctions

Raiffeisen Bank International (RBI), the largest Western financial institution in Russia, has faced pressure to withdraw from the market following the outbreak of war. Despite initial plans to step back from the lucrative market, the bank’s efforts have been impeded by the existence of sanctions.

Austria’s Raiffeisen Bank International (RBI) experienced a setback in its attempt to exit the Russian market. The bank recently announced its withdrawal from an agreement to acquire shares in the construction group Strabag, a move intended to transfer blocked profits from Russia to Vienna, due to concerns from relevant authorities.

The deal, which would have allowed RBI’s Russian subsidiary to acquire shares in Strabag from Russian oligarch Oleg Deripaska, was met with controversy from the start. Deripaska’s status as a confidant of Vladimir Putin and his connections to Western sanctions raised legal concerns regarding the transaction.

The complications surrounding the transaction, including uncertainties over the entities involved and compliance with sanctions regulations, thwarted RBI’s plans to leverage the deal to access profits in Russia. Despite initial assertions that the transaction was permissible, RBI’s decision to withdraw from the agreement underscores the bank’s challenges in navigating the complex regulatory environment in Russia.

The pressure on RBI to exit the Russian market has intensified as the bank remains a major player in the country’s financial landscape. With significant profits generated by its Russian subsidiary, RBI faces reputational risks and scrutiny over its commitment to its planned withdrawal from the market.

While RBI has taken steps to reduce its loan volume in Russia and has indicated intentions to deconsolidate its Russian subsidiary, concerns remain about the bank’s continued presence in the country. The recent decision to walk away from the Strabag deal highlights the challenges and uncertainties facing RBI in its efforts to disentangle from the Russian market amidst geopolitical tensions and regulatory complexities.