VIENNA, March 23 (Reuters) – The European Central Financial institution is urgent Austria’s Raiffeisen Financial institution Worldwide (RBIV.VI) to unwind its extremely worthwhile enterprise in Russia, 5 folks with data of the matter advised Reuters.
The strain comes after a high U.S. sanctions official raised issues about Raiffeisen’s enterprise in Russia on a go to to Vienna final month, mentioned one other particular person acquainted with the matter, asking to not be named as a consequence of its sensitivity.
The push from Washington and the ECB is upping the stakes for Austria and its second-biggest financial institution, which performs a key function within the Russian financial system but additionally an more and more contested one as Moscow’s year-long battle in Ukraine drags on. Many Western corporations, together with French financial institution Societe Generale, have already left Russia.
Whereas the ECB shouldn’t be asking Raiffeisen to depart the nation instantly, it desires a plan of motion for unwinding the enterprise, two of the folks mentioned. One particular person mentioned such a plan may embody the sale or closure of its Russian financial institution.
“We’ve got been asking banks to maintain intently monitoring the enterprise in Russia, and ideally, cut back it and wind it down as a lot as doable,” 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 analyzing choices for its Russia enterprise “together with a fastidiously managed exit” and that it was “expediting” its evaluation, including that it had additionally decreased lending within the nation.
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, corresponding to Italy’s UniCredit, are nonetheless current.
ECB officers are reluctant to strain Raiffeisen into an instantaneous sale, fearing the monetary hit it may set off, one particular person mentioned, after per week of world banking turmoil.
A spokesperson for Austria’s finance ministry mentioned that whereas there may very well be no return to the established order in relations with Russia, “most” worldwide corporations, together with banks remained there.
“There may be substantial commerce occurring between Russia and the remainder of the world in commodities like grain, fertilisers, oil, gasoline, nickel and different metals, which…require funds,” mentioned the spokesperson.
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 advised 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 modelled 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. Division of State, spelt out American issues over Raiffeisen and its enterprise with Russia throughout discussions in Vienna in February, one of many folks mentioned.
“Ambassador O’Brien and Austrians mentioned our shut cooperation on sanctions in response to Russia’s unlawful additional invasion of Ukraine,” a State Division spokesperson mentioned when requested concerning the go to.
The Raiffeisen spokesperson mentioned that the financial institution was within the “early phases” of amassing info to answer the inquiry letter from the U.S. Treasury Division’s Workplace of Overseas Property Management (OFAC).
Throughout Austrian President Alexander Van der Bellen’s go to to Kyiv final month, Ukrainian President Volodymyr Zelenskiy criticised Austrian companies nonetheless working in Russia, singling out Raiffeisen, for supporting Moscow.
The financial institution has additionally been sharply criticised by traders after collaborating in a Russian scheme to grant mortgage cost holidays to troops combating in Ukraine.
Though the stakes are excessive, some Austrian officers hope they’ll maintain out lengthy sufficient for a negotiated decision to the battle, permitting for a resumption of regular enterprise with Russia, three of the folks acquainted with the matter mentioned.
Austria’s overseas minister Alexander Schallenberg has mentioned that whereas it’s “authentic” for U.S. authorities to method Raiffeisen, Austria had main accountability for implementing sanctions.
U.S. authorities can go so far as stopping a financial institution from processing greenback transactions, a step that might deal a critical blow to Raiffeisen and that euro zone regulators worry may destabilise the financial institution.
Latvia’s ABLV Financial institution shortly unravelled after being positioned underneath U.S. sanctions in 2018 as a consequence of issues about illicit exercise linked largely to Russia.
Some Austrian lawmakers are additionally vital of the federal government’s stance.
“Supervisory authorities should look at the dangers from Raiffeisen’s exercise and that from day one of many battle,” Stephanie Krisper, a lawmaker from the liberal Neos opposition celebration advised Reuters final week.
“For a few years, connections to Moscow permeated our political system – now, the financial and political dependence on Russia has lastly turn into seen.”
Further reporting by Francesco Canepa in Frankfurt; Writing By John O’Donnell; Modifying by Elisa Martinuzzi, Kirsten Donovan
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