Raiffeisen Bank Shares Frozen Amid Escalating Moscow-West Tensions

A Russian court has frozen Raiffeisen Bank International's shares, blocking its local arm's sale and intensifying tensions between Moscow and the West. Despite this, the bank's operations will remain unaffected as it attempts to reverse the court decision. The move highlights the ongoing financial standoff related to Russia-Ukraine conflicts.

A Russian court has frozen shares in Raiffeisen Bank International's local unit, the largest Western bank in Russia, blocking the sale and escalating tensions between Moscow and the West. Austria-based RBI had planned to spin off its Russian business, which operates as a payment lifeline for hundreds of companies. Despite two years of conflict between Russia and Ukraine, little progress has been made.

A Raiffeisen spokesperson confirmed the court's decision prevents selling the bank, but said it would not impact Russian operations or the European Central Bank-mandated efforts to reduce its presence. 'We can still appoint management and give instructions in Russia, but we cannot sell the bank,' they stated.

RBI plans to challenge the court ruling, marking the largest asset freeze involving a Western bank in Russia. Although Italy's UniCredit also has Russian operations and faces pressure to exit, RBI is significantly larger and has become a critical test of Western resolve to sever ties with Russia.

Russian authorities have signaled their desire for RBI to continue its operations given its role enabling international payments, a source told Reuters. Serving around 2,600 corporate clients, 4 million local account holders, and employing 10,000 staff, RBI remains a vital financial conduit for Russia. However, Western regulators are pushing for change, with the European Central Bank demanding a reduction in RBI's Russian business.

Raiffeisen, with expansive industrial holdings and a customer base of over 18 million from Vienna to Moscow, remains a financial cornerstone for Austria and Eastern Europe. The Ukraine conflict since 2022 has made Russia an even bigger revenue source for the bank, contributing significantly to its recent profits due to increased fees on international payments.

The share freeze is connected to a recent claim by Russian investment company Rasperia against Strabag and its Austrian shareholders, alongside Raiffeisen's unit. The bank clarified that it is not accused of wrongful conduct. RBI had aimed to purchase a stake in Vienna-based Strabag from a company formerly associated with Oleg Deripaska, who has denied current ties and criticized Western sanctions as baseless. The U.S. Treasury had identified a Russian company set to acquire Rasperia's assets.

The U.S. Treasury's Office of Foreign Assets Control initiated a probe into Raiffeisen's Russian activities earlier this year. Pressure from Washington led Raiffeisen to abandon the acquisition plan for Strabag, which sought to free up funds frozen within Russian territories.

(With inputs from agencies.)