US Treasury warned Raiffeisen Bank International over its work in Russia

While many Western governments and corporations have radically reduced ties to Moscow since it invaded Ukraine over two years ago, Austria remains linked with Russia through critical gas pipelines, with Vienna, still serving as a hub for cash from Russia and its ex-Soviet neighbors.

Raiffeisen Bank International was warned by the US Treasury in writing that its access to the US financial system could be curbed because of its Russia dealings, according to a person who has seen the correspondence. Losing access to the US currency would be likely to plunge any bank into a crisis.

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On 6 May, Deputy Secretary of the Treasury Wally Adeyemo sent a letter to RBI, expressing concern about RBI’s presence in Russia as well as a $1.5 billion deal with a sanctioned Russian tycoon that the bank has since scrapped.

In the letter, Adeyemo, the US Treasury’s second-highest ranking official, said Raiffeisen’s extending activities would contradict assurances RBI had given to the Treasury that they were trying to wind down in Russia, according to the source. Adeyemo also made reference to US President Joe Biden’s Executive Order authorizing US secondary sanctions on foreign financial institutions that conduct significant transactions involving Russia’s military-industrial base.

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Adeyemo warned that RBI’s actions increased the risk of Treasury taking action to restrict its access to the US financial system given concerns that its behaviour put US national security at risk.

“The US is losing patience. Enough is enough,” said Richard Portes, a professor of economics at London Business School who has written about sanctions. He said there had been “too much” Russian money flowing through Raifeissen and other Western banks, frustrating the Americans. “That (money) has clearly blunted the effectiveness of US sanctions,” he added, “This is a big signal.”

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The spokesperson for Raiffeisen said RBI had “significantly reduced” activities in Russia and taken broad measures to mitigate the risks from sanctions. A spokesperson for Austria’s finance ministry noted the bank’s pledge to de-consolidate its business in Russia and said that it assumed all sanctions were being respected.

Meanwhile, Raiffeisen shares dropped 3% as trading opened, making it the top loser among European banks.

Western companies must realize that Russia has become toxic to their partners. Continuing to do business in Russia is unacceptable and will only mean financial and reputational losses.

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