Court orders blocking sale of Raiffeisen Bank’s Russian branch

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A Russian court has blocked any possible sale of Raiffeisen Bank International’s Russian subsidiary, a move that leaves the largest Western lender still operating in the country stranded.

In a statement late Thursday, the Vienna-based RBI speak An interim injunction issued by a judge in the Russian exclave of Kaliningrad on the Baltic Sea has frozen the transfer of any ownership of shares in the Russian branch.

It is unclear how long the order will be in effect. A preliminary hearing is scheduled for October 16. The order relates to a civil lawsuit filed by companies linked to oligarch Oleg Deripaska, seeking $2.2 billion in damages for “failure to fulfill financial obligations.”

“This complicates the sale process where RBI seeks to sell a controlling stake in [its subsidiary] — and will certainly lead to further delays,” the bank said. “RBI will seek to reverse today’s court decision using all legal means.”

The move is similar to recent efforts by powerful Russian businessmen close to the Kremlin to use the country’s court system to control or seize Western businesses still operating there.

Germany’s Volkswagen has assets frozen by Russian court last year amid the company’s efforts to exit the country. The move was widely seen as a move to pressure the company into accepting an even lower price for its subsidiary.

Until now, the RBI has operated relatively freely in Russia, while facing increasing pressure from Western governments and regulators to scale back and divest its operations there, even as profits from the operations have soared.

Austrian bank executives have long insisted they were caught in a difficult position: on the one hand, threatened by Western sanctions because their bank continues to play a supporting role in the Russian economy, but on the other hand, unable to move forward with sale talks because of sanctions restrictions imposed by the Kremlin on ownership changes or dividend payments.

Meanwhile, Western security officials and politicians are increasingly impatient with the RBI, especially as the Russian economy continues to prove resilient to Western economic restrictions.

In May, the European Central Bank has ordered the RBI and other European lenders are still operating in Russia to speed up efforts to close their businesses there if they cannot sell them.

RBI had previously said it was in discussions with two potential partners in Russia interested in acquiring its subsidiary there, but the order requiring the bank to scale down operations had a negative impact on the talks.

However, RBI’s subsidiary in Russia contributed more half of the total profits of the banking group in the first six months of this year.

The bank has significantly reduced its Russian lending book and offered economically unattractive returns to local savers, but continues to attract Russian depositors because it is seen as a safe Western institution. Thanks to the high interest rates it earns on deposits at the Russian central bank, it has made large profits.

The RBI said the court order was issued as part of a lawsuit filed by the Russian company Rasperia, which was previously owned by Deripaska and continues to be linked to him, according to Western security officials.

Earlier this year, Rasperia attempted to swap its majority stake in Austrian construction company Strabag with RBI in exchange for control of RBI’s Russian subsidiary. a complex arrangement aimed at evading Western sanctions.

Transaction has been cancelled under pressure from the US government.

Kaliningrad court records show that on August 19, Rasperia filed a complaint against Strabag and several other entities, including the RBI’s Lower Austria branch and Strabag shareholder and founder Hans Peter Haselsteiner.