Unique-Washington pressures Austria’s Raiffeisen to drop Russian tycoon deal, sources say By Reuters

By John O’Donnell and Alexandra Schwarz-Goerlich

VIENNA (Reuters) -The US is urgent Austria’s Raiffeisen Financial institution Worldwide, the most important Western financial institution in Russia, to drop plans to purchase a 1.5 billion euro ($1.6 billion) industrial stake of a Russian tycoon, a number of folks with direct information of the talks mentioned.

Washington’s intervention is prone to derail one of many largest Western offers in Russia because the begin of the Ukraine struggle and piles extra stress on the Austrian group that handles billions of euros of worldwide funds for Russians, two of the folks mentioned.

Raiffeisen is shopping for the stake in Vienna-based Strabag from an organization the development group recognized as managed by Oleg Deripaska.

The financial institution billed the deal, which is routed by way of Russia, as a way of unlocking among the billions of euros stranded in Russia and doubtlessly loosening its ties. The information in December prompted a rally within the financial institution’s inventory, which has been hit laborious as a result of its Russia hyperlinks.

In current weeks, senior U.S. Treasury officers have underscored their considerations in regards to the transaction in conferences with the financial institution and Austrian authorities, the folks mentioned. They identified that Deripaska is sanctioned.

U.S. authorities officers, who consider that Deripaska will profit from the sale, have demanded the financial institution give particulars in regards to the people and corporations concerned within the association, the folks mentioned.

Ought to Raiffeisen press forward regardless and the deal is confirmed to fall foul of U.S. sanctions, Washington might impose penalties on the financial institution, two of the folks mentioned.

In gentle of the U.S. place, one individual mentioned Austrian authorities would maintain off on giving the inexperienced gentle, whereas one other mentioned the financial institution itself was making ready to drop the deal.

A spokesperson for the financial institution mentioned it had “diligently verified the compliance of the Strabag transaction with all relevant sanctions, previous to signing” and had in current weeks “briefed all related authorities, together with the U.S. Treasury and OFAC (Workplace of International Belongings Management)”.

“It goes with out saying that RBI is not going to proceed with any deal which might be in breach of sanctions, or expose RBI to the danger of sanctions,” mentioned the spokesperson.

A spokesperson for Deripaska pointed to earlier remarks, the place she mentioned he had no management over the corporate holding the Strabag stake, describing the Western sanctions as misguided and based mostly on false accusations.

CLOSE TIES

Two years after the outbreak of struggle, Raiffeisen’s continued presence underlines the depth of relations between Austria and Russia, linked with Russian gasoline pipelines, and with Vienna serving as a hub for money from Russia and former Soviet states.

The financial institution is a essential monetary lifeline for hundreds of thousands of Russian clients who need to ship euros or {dollars} overseas.

The conversations are going down in opposition to a backdrop of continued scrutiny by regulators of Raiffeisen and its Russian connections, which began greater than a yr in the past when U.S. sanctions enforcer OFAC began to look into the financial institution’s Russia enterprise.

The U.S. Division of Justice’s Financial institution Integrity Unit, which is a part of the prison division, has additionally been wanting into Raiffeisen over its Russia enterprise, mentioned one individual acquainted with the matter, who described the scrutiny as ongoing.

One other individual mentioned {that a} senior DOJ official had been in common contact with the Austrian financial institution regarding Russia and had usually visited Vienna on this regard. The Division of Justice declined to remark.

Raiffeisen shares tumbled after the Reuters report, at one level buying and selling down roughly 16%.

Raiffeisen additionally scrapped the sale of a 650 million euro bond, in keeping with one of many banks organising that course of, which circulated a memo seen by Reuters blaming “antagonistic market response to the newest headlines”.

To date, key Austrian officers, irked by what they see as U.S. bullying of a small, impartial nation, have fought the financial institution’s nook as a result of it’s a part of an influential industrial group that underpins the economic system.

However two folks acquainted with authorities pondering mentioned officers weren’t set on defending its newest deal over the stake in Strabag, which constructed the Olympic stadium for the Sochi winter video games and luxurious flats in Moscow.

A spokesperson for the European Fee, which oversees EU sanctions on oligarchs together with Deripaska, mentioned it was conscious of the transaction and “has requested for clarifications from the Austrian authorities, whose replies are pending”.

The Fee was “in shut contact with the U.S. authorities”, the spokesperson mentioned, including: “Generally, beneath EU sanctions the belongings of people and entities topic to asset freeze should be frozen, i.e. it’s primarily prohibited to cope with these belongings”.

Lately, Austria pressured Ukraine to take away RBI from a Ukrainian blacklist, holding out on backing contemporary EU sanctions on Russia till it did, folks acquainted with the scenario have advised Reuters.

Austria and RBI needed it to be taken off Kyiv’s “worldwide sponsors of struggle” record, which units out to disgrace firms doing enterprise in Russia.

Though Italy’s UniCredit additionally has a enterprise in Russia and is equally reluctant to depart, RBI is way bigger and has turn out to be a check of Western resolve to finish ties with Russia.

Russian authorities have made it clear to RBI, which has round 2,600 company clients, 4 million native account holders and 10,000 employees, that they want it to remain as a result of it permits worldwide funds.

RBI had mentioned it supposed to spin off its Russian enterprise, however two years into struggle, little has modified.

($1 = 0.9226 euros)

(Further reporting Karen Freifeld in New York, Polina Devitt in London and Yoruk Bahceli in Amsterdam; Enhancing by Elisa Martinuzzi and Tomasz Janowski)