Austrian lender Raiffeisen Bank International's hopes of  exiting Russia have suffered another setback after a Russian court in Kaliningrad banned the sale of its shares following a lawsuit brought by oligarch Oleg Deripaska.

RBI, which has the biggest Western-owned banking operation still left in Russia, has so far defied US pressure  to leave swiftly,  as its Russian subsidiary is so profitable, accounting for half the bank’s income last year, though RBI has not been able to take its profits out of Russia since the invasion. According to some news reports, it is even  still actively hiring staff and growing its business.

Any sale of its operations is also almost certain to be at a cheap price, with the Central Bank of Russia (CBR) demanding any sale cannot value the bank at more than 50% of its book value.

The court decision makes any change in the ownership of RBI impossible for the time being, with preliminary hearings not scheduled until mid-October, The Financial Times reported. It could also  make the bank's eventual departure even more costly, given the outstanding legal claim.

RBI confirmed that it is unable to proceed with the sale of its Russian unit. "This complicates the process of selling the controlling stake in JSC Raiffeisenbank and will inevitably lead to further delays," the bank said in a statement, adding that it will "seek to overturn the court’s decision by all legal means."

The Kaliningrad court case was connected to RBI's potential  acquisition of a 28% stake in Austrian construction company Strabag,  where Deripaska was reportedly the final owner.

This deal was linked to RBI's efforts to exit Russia, as the acquisition would be paid for with some €1.6bn worth of trapped RBI profits in Russia. If the deal had gone through, it would have meant that even if RBI subsequently sold its Russian operations at a cut-down price, it would have at least been able to enjoy some of the profits those operations had made.

However, RBI was forced to give up on the deal in May under huge US pressure after the US flagged it as a potential violation of sanctions, and Austrian authorities insisterd RBI to abandon the transaction. 

The decision to abandon the deal subsequently led to a legal challenge by Rasperia Trading Ltd, a company formerly owned by Deripaska. 

The lawsuit brought by Rasperia stems from alleged financial obligations related to corporate control issues at Strabag, the Austrian construction conglomerate in which Rasperia holds a 27.8% stake.

According to reports from RBC, Rasperia accuses RBI and others of removing its representatives from shareholder meetings, diluting its stake and withholding dividends. The total damages claimed amount to nearly €2bn.

The timing of the court ruling has raised questions over whether the lawsuit is being used strategically to lower the price of a RBI sale, The Bell reports. The FT also suggests that, similar to previous cases, such as the sale of Volkswagen’s Russian assets, the legal challenges could be part of a broader tactic to devalue the asset.

In Volkswagen's case, lawsuits filed by Deripaska’s GAZ Group resulted in the carmaker’s assets being sold for a fraction of their value to a local buyer, Alexander Varshavsky, owner of Avilon, which has taken over the VW plant. The latter is back in production.

 

Under pressure from the US and the European Central Bank, RBI has been cutting its loanbook and has also cut its share in Russia’s payment market by half.  However, both the ECB and the US have continued to increase pressure on the bank to abandon Russia.

Pressure intensified after the ECB instructed the bank to halt cross-border transfers from Russia in foreign currency, which had been a critical service for both corporate and individual clients. RBI was one of the last remaining channels for Russians to send money abroad after the imposition of SWIFT sanctions only days after Russia’s invasion of Ukraine in February 2022.

It remains unclear who might ultimately purchase RBI Russian operations. The bank has said it is in talks with multiple potential buyers but has not been able to agree on acceptable terms. Any potential buyer would likely face sanctions-related complications and needs to get permission to sell and withdraw the profits from the central bank.

RBI was an early entrant to the Russian market and pioneered trade finance for the newly capitalist Russia, before it set up an extremely successful retail business. It is now one of the leading foreign owned banks in Russia and listed as strategically important by the regulator.

In all, thousands of foreign companies with operations in Russia promised to quit the country after the war in Ukraine began over two years ago, but as bne IntelliNews reported, less than 9% of companies have actually exited. And many of those that did close their Russian franchises continue to supply the Russian market via traders in third countries such as Turkey and Kyrgyzstan.