A Russian court has frozen the shares of Raiffeisen Bank International's (RBI) local unit, the largest Western bank operating in Russia. This action blocks RBI's plans to sell its Russian business, intensifying tensions between Moscow and the West. Austria-based RBI had pledged to spin off its Russian operations, following pressure from international regulators. However, more than two years into the Russia-Ukraine conflict, progress has stalled.

A spokesperson for Raiffeisen confirmed that while the court's decision prevents a sale, it does not affect the bank’s operations or its ability to manage its Russian unit. The European Central Bank (ECB) has been pushing for a reduction of RBI's activities in Russia, but the court ruling complicates these efforts. Following the court's decision, RBI's stock dropped by over 3% at the start of trading on Friday.

RBI intends to challenge the ruling, which is the largest such freeze impacting a Western bank in Russia. Unlike Italy’s UniCredit, another Western bank under pressure to exit Russia, RBI’s presence is significantly larger and has become a key test for Western efforts to sever ties with Russia. Russian authorities have reportedly expressed a desire for RBI to remain, as it facilitates international payments for over 2,600 corporate clients, 4 million local account holders, and employs around 10,000 staff.

RBI serves as a crucial financial link for millions of Russian customers wishing to transfer euros or dollars abroad, a situation Western regulators are keen to change. The ECB has urged the bank to scale back its operations in Russia. Despite sanctions and international scrutiny, Russia has become an even more profitable market for RBI since the conflict began, contributing to nearly half of the group's profits in the first quarter of this year, driven by increased fees for international payments.

The asset freeze stems from a legal claim by Russian investment firm Rasperia against Strabag, an Austrian construction group, and its shareholders, although RBI is not implicated in any misconduct. The case is linked to a failed attempt by RBI to acquire shares in Strabag from a company tied to Russian oligarch Oleg Deripaska, who has denied any ongoing connections with Strabag and criticized Western sanctions as baseless.

In May, the U.S. Treasury reported that a Russian company, Iliadis, was established to acquire Rasperia, which holds Deripaska's frozen shares. The U.S. Treasury's Office of Foreign Assets Control began investigating Raiffeisen's activities in Russia in early 2023. Pressure from the U.S. led RBI to abandon its plan to purchase the Strabag stake, a move initially aimed at releasing bank assets now frozen in Russia.