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Austria’s Raiffeisen Bank International said it decided to back out of a deal involving stakes in sanctions-hit Russian oligarch Oleg Deripaska because of pressure from regulators and Western governments.
The lender, still operating in Russia, said on Wednesday it was no longer pursuing an asset swap plan announced in December that involved Deripaska’s 25 percent stake in Austrian construction giant Strabag.
“In recent discussions with the relevant authorities, RBI was unable to obtain the necessary security to proceed with the proposed transaction,” the Vienna-based bank said.
It continues: “Out of great caution, the bank has decided to refrain from the transaction.”
Through a series of interconnected transactions and ownership changes, RBI hoped to acquire the Strabag shares held by Deripaska in return for some of its assets in Russia. Raiffeisen is now the West Bank with the largest presence in the country.
The bank has repeatedly insisted that the transaction would not violate sanctions restrictions against Deripaska, one of the first oligarchs to be friends with Russian President Vladimir Putin and hit by punitive economic measures in Europe after Moscow’s war in Ukraine.
The RBI came under increasing pressure from regulators and foreign governments after reaping profits from its Russia unit as its rivals retreated following Moscow’s all-out invasion of Ukraine in February 2022.
However, his profits remain trapped in the country due to legislation introduced by the Kremlin, and any attempt to sell his local business requires presidential approval and would likely result in a heavy loss. The Deripaska deal was an attempt to repatriate profits to the company’s headquarters in Austria.
The RBI has reduced its lending in Russia over the past two years, but gains have been offset by fees on foreign exchange transactions and the spread the bank maintains between the low interest rate it pays depositors and the high interest rate paid by Russia’s central bank , can achieve, increased bank.
The Austrian lender in Russia continues to flock to depositors despite its unattractive interest rates due to its perceived status as a Western refuge bank.
The US authorities are now closely examining RBI’s efforts to wind down and sell its Russian business. Last month, the bank also said it had been ordered by the European Central Bank to accelerate its withdrawal from Russia, which it said could derail talks to sell its highly profitable unit in the country.
The Financial Times reported in the week of April that Raiffeisen had posted dozens of job advertisements for Russia-based positions that hinted at ambitious growth plans in the country, apparently at odds with its commitment to reduce operations.
The bank said the text of the ads was out of date and promised to update it.