Largest Western bank under pressure to cancel investment in Russia

The US is pressuring Raiffeisen Bank, the largest Western bank in Russia, to cancel a $1.6 billion industrial investment.

According to Reuters, the bank has chosen an interesting exit strategy from Russia. In its plan to repatriate its remaining $1.6 billion assets in Russia, it planned to buy shares in the Austrian construction company Strabag, originally owned by Russian businessman Oleg Deripaska.

The 28 percent stake would be realized through Raiffeisen’s subsidiary in Russia, after which the holding would be transferred to Vienna. The idea was touted as a way to unlock some of the billions of euros worth of assets frozen in Russia.

But things did not go as expected. According to Reuters, the deal is facing scrutiny from Washington. Deripaska is subject to sanctions over possible links to the Kremlin, making the deal a possible violation of Western restrictions.

US officials have already requested details of individuals and entities involved in the deal. According to sources, if the deal is found to violate US sanctions and Raiffeisen still goes ahead with the scheme, penalties could follow

Credit institutions in Turkey also under scrutiny

In Raiffeisen’s statement, the bank countered what it called “Reuters rumors”. It said it had verified the appropriateness of the deal and informed the US authorities, adding, “It is also acknowledged that this transaction has no connection with the US. It goes without saying that RBI will not proceed with any deal that would violate sanctions or expose RBI to sanctions risk.”

The company’s shares fell as much as 16 percent after the Reuters report. The publication also cited a note it had seen, saying the negative market reaction forced the bank to postpone the bond sale the same day. The US is increasing pressure on foreign banks that continue to facilitate transactions with Russia. This includes lenders in countries such as Saudi Arabia and Turkey.

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