Court ruling soon

Dispute with Russia: RBI threatens to pay billions

(Bild: APA/AFP/Alexander Nemenov)

Raiffeisen Bank International (RBI) is facing a financial blow in Russia with the upcoming verdict in a legal dispute worth billions. The next court hearing in the dispute is scheduled for December 25 - not a public holiday in Orthodox Russia - in Kaliningrad. The Russian investment holding Rasperia is demanding compensation of 1.9 billion euros. 

The Viennese construction group Strabag, its Austrian core shareholders and the Russian RBI subsidiary are affected.

If the lawsuit is successful, this is likely to have a significant impact on the balance sheet of the Russian RBI subsidiary. This is also likely to have an impact on RBI's consolidated balance sheet, as corresponding provisions would be required.

RBI: Amount of damage difficult to estimate 
It remains to be seen whether the court will actually pass judgment on this day or only later. In the third quarter report, RBI stated that if the lawsuit is successful, this would have a "significant negative impact on the balance sheet". Nevertheless, no provisions were made in the reporting period, as the amount of damages is difficult to estimate, it said. The bank plans to take legal action against an adverse judgment, which would delay payment.

Rasperia was long attributed to the sanctioned oligarch Oleg Deripaska.

(Bild: Associated Press)

RBI is very well capitalized and prepared for all eventualities, RBI Supervisory Board member Michael Höllerer, head of RBI's core shareholder Raiffeisenlandesbank Wien-Niederösterreich, recently said on Ö1 radio. He hoped that doors would open again after some had been closed for geopolitical reasons.

ECB and US sanctions authority exert pressure
RBI is under pressure from the European Central Bank (ECB) and the US sanctions authority to reduce its activities in Russia. Since the start of the war in Ukraine, withdrawal options have been examined, so far without success. Most recently, RBI CEO Johann Strobl held out the prospect of a majority sale. However, the bank's hands are currently tied because the Russian court has prohibited the sale of the subsidiary.

According to its own statements, RBI is not directly involved in the process and is not accused of any misconduct. However, the Russian subsidiary is likely to play a role in the proceedings as a means of exerting pressure. The core of the dispute: Rasperia, which has long been associated with the sanctioned oligarch Oleg Deripaska, accuses Strabag and its core shareholders of rendering their shares in the construction group worthless as a result of the sanctions. Rasperia holds 24.1 percent of Strabag after it was diluted below the blocking minority by a capital increase. The Russian RBI subsidiary is mentioned in the lawsuit as being affiliated with the other defendants, although the bank itself does not hold any shares in Strabag. These are held by one of RBI's core shareholders, Raiffeisenlandesbank Niederösterreich-Wien.

In addition to RBI, the ECB recently urged Bank Austria's parent company Unicredit to hold additional capital as a buffer against potential risks from its Russian business. RBI's capital requirements would increase from 2025, a spokesperson said in November. The business there has already been shrinking recently.

Profits in Russia frozen
RBI has been active in Russia for more than 30 years and is the largest Western bank in the country alongside Italy's UniCredit. In spring, the financial institution had to abandon a plan to transfer money out of Russia via a complex transaction. In the first nine months of 2024, RBI generated more than half of its consolidated profit of 2.1 billion euros in Russia. Due to the sanctions, RBI cannot access these funds. According to an insider, almost six billion euros of equity is now tied up in Russia.

Specifically, RBI wanted to take over the frozen Strabag stake in Russia for around 1.1 billion euros. It remains unclear what role Deripaska would have played in this deal. The ownership structure remains unclear to this day. According to RBI CEO Strobl, the bank had found a sanctions-compliant solution, but had to abandon the project under pressure from the US Treasury Department. Some of the companies involved were then sanctioned for allegedly circumventing sanctions.