Russian Court Decision Complicates Raiffeisen Bank International Planned Sale of Subsidiary Bank
The planned exit of Raiffeisen Bank International AG (RBI) from Russia has suffered a significant setback. A Russian court has issued a temporary injunction blocking the sale of the Russian subsidiary AO Raiffeisenbank. This decision could significantly delay the Austrian bank's efforts to reduce its presence in Russia.
The offices of Raiffeisen Bank International AG in Vienna. / Picture: © Raiffeisen Bank International AG / S. Klimpt
In a published announcement, RBI stated that the shares of its Russian subsidiary AO Raiffeisenbank are subject to a restriction on disposal with immediate effect due to the court decision. This means that RBI is currently unable to transfer shares to potential buyers. This affects the sale process planned since 2022, in which the bank is endeavoring to dispose of its Russian subsidiary.
Background to the legal dispute
The court's decision is related to ongoing legal proceedings initiated by Rasperia Trading Limited, a company owned by Russian oligarch Oleg Deripaska. In addition to AO Raiffeisenbank, the lawsuit is also directed against the Austrian construction company STRABAG SE and its main shareholders. Although RBI itself is not accused of any misconduct, the Russian subsidiary is involved in the legal dispute. Rasperia is demanding compensation of 195 billion roubles (approx. 2.2 billion US dollars) in these proceedings. A hearing before the arbitration court in the Kaliningrad region is scheduled for October 16, 2024.
Impact on the sales process
The restraint on disposal makes it impossible for RBI to sell its shares in AO Raiffeisenbank, which is likely to further delay the sales process. RBI has already had difficulties finding a buyer for its Russian subsidiary bank over the past two years after sanctions imposed by the U.S., the EU, and Russia as a result of the war in Ukraine complicated the sale. While other European banks, such as the French Société Générale, were able to sell their Russian subsidiaries shortly after the start of the war, RBI has so far failed due to the complexity of the political and legal situation.
An RBI spokesperson emphasized that the bank will continue to use all legal means to overturn the court decision. However, the operational business of AO Raiffeisenbank is not affected by the decision, nor are other property rights. Nevertheless, RBI's planned withdrawal from Russia remains a challenge.
Long-term burdens from the Russia conflict
The decision comes at a time when RBI has already been suffering from the consequences of the sanctions for years. Due to a de facto ban on dividend payments in Russia, the bank has so far accumulated profits amounting to 4.58 billion euros, which it does not have access to. The sale process of its Russian subsidiary was originally intended to facilitate an orderly withdrawal from Russia and bring the capital back to Austria.
With this latest development, this plan will be further delayed, which is an additional burden for the management of RBI, especially for CEO Johann Strobl. In addition to the legal hurdles in Russia, the bank is also under pressure from the European Central Bank to reduce its lending volume in Russia by 55 percent by 2026.
Operating the biggest foreign-owned institution in Russia, Raiffeisen has been trying, unsuccessfully, to sell or spin-off for almost two years. Those initiatives have thus so far been stymied by U.S., European Union, and Russian sanctions passed following President Vladimir Putin's attack on Ukraine. Some lenders, including Societe Generale SA, acted quickly. Within weeks before the February 2022 invasion, the French bank sold its Russian branch booking a loss of almost €3 billion.