Raiffeisen Bank Implicated in Funding Russian Military, Documents Reveal

According to documents obtained by Bloomberg, Vienna-based Raiffeisen Bank International AG has been profiting from transactions with companies supplying Vladimir Putin's military as the Russian army advances in Ukraine.

Key Findings:

* Raiffeisen's Russian unit received over 62 million rubles ($620,000) in fees from a Russian chemical company last year, which supplied ingredients used in military systems to a sanctioned entity.
* European government officials believe it is likely that Raiffeisen has additional clients in Russia's defense industry.
* Despite a surge in profits from its Russian unit, accounting for nearly half of the group's total profit last year, Raiffeisen is unable to transfer assets out of Russia due to capital controls.
* Raiffeisen is facing pressure from US regulators and the European Central Bank to accelerate its exit from Russia but finds it difficult to disengage due to regulatory complexities and the need for Putin's approval.
* Bank statements reveal that Raiffeisen processed transactions for Unichim, a chemical company that supplied acids to Rawenstvo, a sanctioned firm involved in developing and modernizing platforms and ammunition for Russian missile systems.
* Raiffeisen also handled transactions for other sanctioned entities, including Proletarsky Zavod and JSC Smolensk Aviation Plant, both involved in supplying the Russian military.

Regulatory and Compliance Challenges:

* Raiffeisen claims to comply with all relevant sanctions on Russian entities but is under scrutiny for its involvement in the war economy.
* The bank's Russian unit is considered "systemically important" by Russia and requires Putin's approval for departure.
* Raiffeisen faces regulatory hurdles from the ECB, Austrian financial regulators, and the US sanctions authority OFAC.

Financial Implications:

* If Raiffeisen were to find an unsanctioned buyer for its Russian unit, it would face a significant discount and a 35% tax, potentially leaving it with a fraction of its perceived value.
* The alternative is to retain the unit in hopes of recovering more value in the future, but this option carries risks and uncertainties.

Conclusion:

Documents obtained by Bloomberg suggest that Raiffeisen Bank has been profiting from companies supplying the Russian military despite the bank's claims of compliance with sanctions. The bank faces significant regulatory and financial challenges as it attempts to navigate its exit from Russia amid the ongoing conflict in Ukraine.