ECB pressures Austria’s Raiffeisen financial institution to give up Russia -sources

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VIENNA — The European Central Bank is urgent Austria’s Raiffeisen Bank International to unwind its extremely worthwhile enterprise in Russia, 5 folks with data of the matter informed Reuters.

The strain comes after a prime U.S. sanctions official raised considerations about Raiffeisen’s enterprise in Russia on a go to to Vienna final month, mentioned one other individual accustomed to the matter, asking to not be named on account of its sensitivity.

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The push from Washington and the ECB is upping the stakes for Austria and its second-biggest financial institution, which performs a key position within the Russian financial system but in addition an more and more contested one as Moscow’s year-long conflict in Ukraine drags on. Many Western firms, together with French financial institution Societe Generale, have already left Russia.

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While the ECB just isn’t asking Raiffeisen to depart the nation instantly, it desires a plan of motion for unwinding the enterprise, two of the folks mentioned. One individual mentioned such a plan may embrace the sale or closure of its Russian financial institution.

“We have been asking banks to keep closely monitoring the business in Russia, and ideally, reduce it and wind it down as much as possible,” a spokesperson for the ECB mentioned, including it had been doing the identical with all establishments involved since Moscow launched its invasion of Ukraine.

Raiffeisen, nevertheless, doesn’t intend to current such a plan but, the folks mentioned, and a few Austrian authorities officers see the strikes as unwarranted overseas meddling.

A Raiffeisen spokesperson mentioned that it was inspecting choices for its Russia enterprise “including a carefully managed exit” and that it was “expediting” its evaluation, including that it had additionally diminished lending within the nation.

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The Austrian lender is now an important Western financial institution in Russia, providing a funds lifeline and accounting for roughly one quarter of euro transfers to the nation, though different banks, reminiscent of Italy’s UniCredit, are nonetheless current.

ECB officers are reluctant to strain Raiffeisen into a direct sale, fearing the monetary hit it may set off, one individual mentioned, after per week of world banking turmoil.

A spokesperson for Austria’s finance ministry mentioned that whereas there could possibly be no return to the established order in relations with Russia, “most” worldwide firms, together with banks remained there.

“There is substantial trade going on between Russia and the rest of the world in commodities like grain, fertilizers, oil, gas, nickel and other metals, which…require payments,” mentioned the spokesperson.

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HIGH STAKES

In January, the U.S. sanctions authority launched an inquiry into Raiffeisen over its enterprise associated to Russia.

Two folks with direct data of the matter informed Reuters that the probe involved potential breaches of Western sanctions. Raiffeisen mentioned the inquiry was of a basic nature.

The inquiry, which has strained relations between Vienna and Washington, may show perilous for Austria, which had modeled itself as a bridge between east and west, turning Vienna right into a magnet for Russian cash.

James O’Brien, a senior sanctions official with the U.S. Department of State, spelt out American considerations over Raiffeisen and its enterprise with Russia throughout discussions in Vienna in February, one of many folks mentioned.

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“Ambassador O’Brien and Austrians discussed our close cooperation on sanctions in response to Russia’s illegal further invasion of Ukraine,” a State Department spokesperson mentioned when requested in regards to the go to.

The Raiffeisen spokesperson mentioned that the financial institution was within the “early stages” of gathering data to answer the inquiry letter from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC).

During Austrian President Alexander Van der Bellen’s go to to Kyiv final month, Ukrainian President Volodymyr Zelenskiy criticized Austrian companies nonetheless working in Russia, singling out Raiffeisen, for supporting Moscow.

The financial institution has additionally been sharply criticized by traders after collaborating in a Russian scheme to grant mortgage fee holidays to troops preventing in Ukraine.

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Although the stakes are excessive, some Austrian officers hope they will maintain out lengthy sufficient for a negotiated decision to the conflict, permitting for a resumption of regular enterprise with Russia, three of the folks accustomed to the matter mentioned.

Austria’s overseas minister Alexander Schallenberg has mentioned that whereas it’s “legitimate” for U.S. authorities to strategy Raiffeisen, Austria had major duty for imposing sanctions.

U.S. authorities can go so far as stopping a financial institution from processing greenback transactions, a step that may deal a critical blow to Raiffeisen and that euro zone regulators worry may destabilize the financial institution. Latvia’s ABLV Bank shortly unraveled after being positioned below U.S. sanctions in 2018 on account of considerations about illicit exercise linked largely to Russia. Some Austrian lawmakers are additionally essential of the federal government’s stance.

“Supervisory authorities must examine the risks from Raiffeisen’s activity and that from day one of the war,” Stephanie Krisper, a lawmaker from the liberal Neos opposition get together informed Reuters final week.

“For many years, connections to Moscow permeated our political system – now, the economic and political dependence on Russia has finally become visible.” (Additional reporting by Francesco Canepa in Frankfurt; Writing By John O’Donnell; Editing by Elisa Martinuzzi, Kirsten Donovan)