Bank / Credit Union

Western banks hit pitfalls while leaving Russia

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January 17, 2023

Western banks have been attempting to sell off assets in Russia following the country's invasion of Ukraine in February 2022. However, Vladimir Putin has introduced a law that is making that process more challenging, according to a report by Financial Times.

The law states that businesses from unfriendly countries cannot complete business exit deals without his approval. Banks expect this will lead to sale prices to fall by half and for deals to be snatched up by pro Kremlin actors.

"There are some very powerful Russians with close links to the Kremlin who are trying to use their influence to grab these entities from fleeing foreigners," an anonymous source told the Financial Times.

In particular Austria's Raiffeisen Bank International has been unable to exit the country, with 4.2 million customers and 9,400 staff within Russia. Other banks have been able to exit completely such as SocGen which sold its assets to an individual with close ties to the Kremlin.

"The fact of initially not being able to sell to sanctioned entities and now keeping all these banks hostage plays into what the Russian government wants. There is no incentive to make it easy for banks to leave," an executive of a bank with a Russian subsidiary said in the report. "We're in limbo, but it's not for lack of desire to resolve it. It's just very hard to see what the path out of this is."