Raiffeisen and UniCredit remain in Russia: new laws block exit routes
18 October 2024 09:01
The last two major western banks remaining in Russia, Raiffeisen Bank and UniCredit, are rapidly losing their options to exit the Russian market. After Russia’s full-scale invasion of Ukraine, these financial institutions tried to sell their assets in Russia to minimise losses and avoid possible sanctions. However, the Russian government is resisting the sales and is trying to keep foreign banks in the country to support foreign currency transactions. This is stated in the material of Bloomberg, according to "Komersant Ukrainian"
Over the past two years, banks have been trying to find buyers, but the Russian authorities have been blocking any deals with companies that may be under sanctions. For example, Abu Dhabi-based Mubadala Investment Co. abandoned the possibility of acquiring a UniCredit unit in 2023 due to concerns about possible negative reactions from US regulators.
In addition, recent changes in Russian legislation have made it even more difficult for foreign companies to leave the country. Now foreign businesses can only sell their assets at a 60% discount. They also have to pay a tax of 35% of the transaction amount. These conditions make the sale of banking units almost impossible.
The Russians are trying to hold on to these two banks because they can carry out foreign exchange transactions that all but one of the Russian banks can’t do because of the sanctions. We are talking about Gazprombank, which the EU has prudently not sanctioned in order to pay Russia for gas. Financial institutions of Russia’s partners, such as China and the UAE, are also in a difficult situation. For example, China’s largest state-owned banks are reducing their business in Russia due to problems with payments, and UAE banks started refusing to make payments to Russian companies back in August this year.
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Despite the reduction of operations in Russia, UniCredit and Raiffeisen still continue to process some payments, including foreign exchange transactions for those transactions that are not subject to sanctions. This makes them valuable to the Russian economy, especially given the restrictions on international transfers via the SWIFT system.
Russian officials require asset sales to be approved at the highest level, including by President Putin, adding another obstacle to a possible bank exit. At the same time, Western regulators are also imposing restrictions that make it difficult to sell to Russian buyers.
These restrictions have already led to legal conflicts between Western companies and Russian courts. In May, a Russian court froze more than €460 million of UniCredit’s assets as part of a lawsuit related to a sanctioned natural gas project.
The banks remain at risk of nationalisation of their assets in Russia. UniCredit has already made provisions to cover possible losses in the event of a complete takeover of its Russian subsidiary. At the same time, Raiffeisen said it plans to significantly reduce its payment business in Russia, serving only selected customers.
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