For over four months, U.S. envoys issued increasingly urgent warnings to Austria’s Raiffeisen Bank International (RBIV.VI) to terminate a deal linked to a prominent Russian oligarch. By May, Washington’s patience ran out.
On May 8, a written ultimatum was sent to Raiffeisen, the European Central Bank (ECB), and the Austrian government. The U.S. threatened to restrict Raiffeisen’s access to the dollar, a potential death sentence for the largest Western lender in Russia, according to a source familiar with the letter. Within hours, Raiffeisen canceled the deal announced in December, but the damage was already done. Washington’s near ultimatum had sown seeds of mistrust, a source close to U.S. thinking said.
Nearly two months later, pressure on Raiffeisen to sever ties with Russia continues to intensify from both Washington and the ECB, according to three knowledgeable sources.
Raiffeisen and Austria find themselves at the forefront of a global U.S.-led effort to isolate Russia by tightening banking sanctions and restricting access to Western goods more than two years after the Ukraine invasion. Interviews with over a dozen people, including senior officials and insiders familiar with Raiffeisen’s strategy, reveal that the bank remains under intense international pressure to retreat from Russia. This pressure persists despite the bank terminating its plan to buy a stake in Austrian construction firm Strabag (STRV.VI), which the U.S. Treasury linked to sanctioned Russian businessman Oleg Deripaska.
Deripaska dismissed the U.S. response to the deal as “balderdash,” stating he had no current interest in Strabag. Raiffeisen failed to heed warnings from European regulators over a year ago about the risks of its Russian operations, the interviews show.
Washington’s threat to penalize Raiffeisen remains active, with continued monitoring of the bank’s relations with Russia and potential sanctions violations, sources said. A Raiffeisen spokesperson described interactions with the U.S. Treasury as “generally friendly,” noting ongoing efforts to reduce exposure in Russia. The U.S. Treasury declined to comment.
The U.S. has the authority to fine banks for sanctions breaches or cut off their dollar access. For instance, French bank BNP Paribas faced a $9 billion penalty in 2014 for violating U.S. sanctions on Sudan, Iran, and Cuba. “Raiffeisen, and Austria, are playing with fire,” warned Nina Tomaselli, an Austrian lawmaker from the Greens, part of the ruling coalition. “America holds the power.”
Despite many Western governments shunning Russia, some Austrian politicians are hesitant to cut ties with a nation they credit for post-WWII rehabilitation. Austria remains heavily dependent on Russian gas, with Vienna serving as a financial hub for Russian and ex-Soviet cash.
Raiffeisen’s European supervisors demand immediate action. ECB officials attended a June supervisory board meeting urging the bank to act swiftly. The ECB has asked for a detailed plan of steps Raiffeisen will take, a knowledgeable source said.
A senior international regulator said the failed Strabag deal strained relations with the ECB, viewing Raiffeisen as dishonest. Regulators worry they lack sufficient information about Raiffeisen’s Russian operations. Raiffeisen stated it had reduced loans, payments, and deposits in Russia, which total €14 billion ($15 billion). The ECB declined to comment.
With extensive industrial holdings, over 18 million customers, and 44,000 staff, Raiffeisen is a financial cornerstone for Austria and much of Eastern Europe. Russia has become increasingly profitable for Raiffeisen since the Ukraine war began in 2022, accounting for half of the group’s profits in early 2023 as fees on foreign payments surged.
The U.S. Treasury’s threat deeply resonates with Raiffeisen’s management, a source said, noting that losing dollar access would be “fatal” due to the likely departure of major corporate clients. U.S. authorities are aware of the potential widespread impact on Raiffeisen and the broader financial system, a source said.
Washington prefers European regulators to compel Raiffeisen to reduce its Russian ties, according to two sources. However, Europe’s efforts to rein in Raiffeisen as part of sanctions on Russia have been inconsistent.
In early 2023, the ECB and the Single Resolution Board discussed scenarios for Raiffeisen should it face difficulties. These discussions, not previously reported, involved contingency plans for a crisis triggered by U.S. penalties. The Office of Foreign Assets Control (OFAC) began investigating Raiffeisen’s Russian activities in early 2023. Regulators considered a potential bank breakup but abandoned the idea in March 2023 when two U.S. banks and Credit Suisse collapsed, diverting their attention.
Raiffeisen stated it terminated the Strabag deal due to unmet regulatory conditions, with no money exchanged, and does not consider its U.S. financial system access at risk. The Single Resolution Board and Austria’s finance ministry declined to comment.
While the EU imposes sanctions on Russia, enforcement is left to individual countries. Austrian officials advised Raiffeisen against the Strabag deal, but the bank proceeded, three sources said. Speaking against Raiffeisen is challenging in Austria, where it holds significant influence.
Austria’s central bank said banks must ensure compliance with sanctions. European lawmaker Sophia in’t Veld criticized Austria’s weak enforcement of sanctions. Russia has signaled it wants Western banks like Raiffeisen to remain, complicating their exit.
Raiffeisen has about €5 billion of capital trapped in Russia, and the Strabag deal aimed to free up $1.5 billion. The bank insists it intends to leave Russia but cannot specify when. Tomaselli accused Raiffeisen of seeking loopholes to extract its money from Russia instead of withdrawing.
In summary, Raiffeisen faces mounting pressure from the U.S. and European regulators to cut its Russian ties, amid concerns about the broader financial implications of its actions.
