Raiffeisen drops bid for industry stake linked to Russian tycoon

The collapse of the deal represents a fresh setback for the biggest Western bank in Russia, already facing criticism for its ties to Moscow. The announcement followed weeks of pressure on the bank over its plan to buy a stake in construction group Strabag linked to Oleg Deripaska, aimed at unlocking bank funds now frozen in Russia.

Austria's Raiffeisen Bank International (RBI) has abandoned a bid to buy a 1.5 billion euro ($1.6 billion) industrial stake linked to a Russian tycoon, following pressure from Washington to scrap the deal. The collapse of the deal represents a fresh setback for the biggest Western bank in Russia, already facing criticism for its ties to Moscow.

The announcement followed weeks of pressure on the bank over its plan to buy a stake in construction group Strabag linked to Oleg Deripaska, aimed at unlocking bank funds now frozen in Russia. "In recent exchanges with the relevant authorities, RBI has been unable to obtain the required comfort in order to proceed with the proposed transaction," the bank said on Wednesday.

The plan had come under fire from the U.S. Treasury because Deripaska is sanctioned, exacerbating tensions between Washington and RBI, which is already under scrutiny from U.S. sanctions enforcement agency OFAC, sources told Reuters. Some Austrian officials had also privately cautioned the bank against the deal, believing it could be declared a breach of sanctions, people with direct knowledge of the matter previously told Reuters.

Raiffeisen had wanted to buy a stake in Vienna-based Strabag from a company the construction group identified as controlled by Deripaska. Deripaska has denied any current links to Strabag and dismissed Western sanctions against him as misguided and based on false information. U.S. officials, however, suspected he would benefit from the sale, sources have told Reuters.

Strabag is one of Europe's biggest construction firms and built the Olympic stadium for the Sochi winter games and luxury apartments in Moscow. Two years after Russia's full-scale invasion of Ukraine, RBI's continued presence in Russia underlines the ties between Moscow and Vienna - whether via Russian gas pipelines or Vienna serving as a hub for cash from Russia and former Soviet states.

RBI's Russian business is a money spinner but has tarnished the group's image. Investors welcomed the prospect of the Strabag deal but the bank was forced to drop a planned bond sale when the U.S. objections emerged in a Reuters report. RBI, which acts as an international payments bridge for Russia, has resisted pressure to cut ties with Moscow, although it says it has long explored doing so.

The bank is a critical financial lifeline for millions of Russian customers who want to send euros or dollars abroad. Western regulators want this to change. The European Central Bank is demanding the bank pare back its Russia business. So far, key Austrian officials, irked by what they see as U.S. bullying of a small, neutral country, have fought the bank's corner. Many, however, were not prepared to do the same for the Strabag deal.

Although Italy's UniCredit also has a business in Russia and is similarly reluctant to leave, RBI is far larger and has become a test of Western resolve to end ties with Russia. ($1 = 0.9308 euros)

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