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Russian capital controls prevent Raiffeisen from withdrawing its profits, which have risen to 4.4 billion euros, from the country.
Raiffeisen Bank, through several service firms, continues to supply the Russian military as it continues to fight against Ukraine, Bloomberg reports, citing bank statements and other documents it has obtained.
The Austrian bank, which operates the largest Western-owned banking branch still active in Russia since the invasion of Ukraine, has effectively been blocked in the country despite pressure from the US and the European Central Bank to withdraw.
According to Bloomberg, Raiffeisen's Russian unit received over 62 million rubles ($620,000) last year for its services from the chemical company Unichim, which supplied the sanctioned firm Rawenstvo with materials needed to produce military systems.
It is "almost certain" that Raiffeisen has other clients supplying the Russian military-industrial complex, Bloomberg writes, citing anonymous European officials familiar with the documents as saying, as President Vladimir Putin has put the country's economy on a war footing.
According to the U.S. Treasury Department, Ravenstvo develops and produces navigation radar systems. It is part of the state-sanctioned Concern Granit-Electron, which produces key elements of missile systems for the Russian Navy.
The US Treasury also says Granit-Electron is linked to the Tactical Missile Corporation, one of the largest weapons manufacturers in Russia.
Granit-Electron's website says it was "awarded an award by the Russian president for its great contribution to the creation of new special equipment, strengthening the country's defense capabilities, and high performance in production activities."
An RBI spokesperson told Bloomberg that the bank is compliant with all EU, US and UK sanctions on Russian entities.
Although Raiffeisen reduced its Russian loan book by almost 25% in the third quarter of 2024, following an order from the European Central Bank, the bank cannot avoid dealing with clients who, in a wartime economy, are connected in one way or another to the defense industry.
Russia allows account closures only in certain circumstances and does not recognize sanctions imposed on its companies. Furthermore, Raiffeisen's Russian unit is regulated by the Central Bank and subject to Russian law.
Since the start of the war in Ukraine, Raiffeisen's Russian unit, which remains one of the few in the country that continues to make payments in foreign currency, has become the most profitable subsidiary of Raiffeisen Bank International. In the first three quarters of 2024, Raiffeisen's Russian unit generated over $1 billion in after-tax profit, paying 227 million euros in Russian taxes.
However, Russian capital controls prevent Raiffeisen from withdrawing its profits, which have risen to 4.4 billion euros, from the country.
If Raiffeisen is allowed to sell its Russian business, it can only do so at a discount of 60% to its real valuation. It would also be forced to make a “voluntary contribution” of 35% of the deal to the Russian state.
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