The European Central Bank is pressuring Austria’s Raiffeisen Bank International to divest its highly profitable business in Russia, five sources familiar with the situation told Reuters.

The push comes after a senior U.S. sanctions official raised concerns about Raiffeisen’s business in Russia during a visit to Vienna last month, said another person familiar with the matter, who spoke on condition of anonymity.

The stance by Washington and the ECB raises the stakes for Austria and its second-largest bank, which plays a key role in Russia’s economy, a role that has come under increasing criticism as Moscow’s war in Ukraine drags on. Many Western companies, including the French bank Societe Generale, have already left Russia.

While the ECB is not asking Raiffeisen to leave the country immediately, it wants an action plan to liquidate the business, two of the people said. One of the sources said that such a plan could include selling or closing its bank in Russia.

“We have asked the banks to continue to closely monitor their business in Russia and ideally to reduce and liquidate it as much as possible,” an ECB spokesman said, adding that it had done the same for all affected financial institutions.

However, Raiffeisen has no plans yet to present such a plan, the people said, and some Austrian government officials see the moves as unwarranted foreign interference.

The most important western bank in Russia

A Raiffeisen spokesman said options were being considered for the bank’s Russian business, “including a carefully managed exit,” and that it was “accelerating” its valuation, adding that it had also cut lending in the country.

The Austrian lender is currently the largest western bank in Russia, providing a lifeline for payments and accounting for around a quarter of euro transfers into the country, although other banks such as Italy’s UniCredit are also present.

ECB officials are reluctant to pressure Raiffeisen into an immediate sale, fearing the financial fallout it could cause, a source told Reuters, the announcement came after a week of global banking turmoil.

A representative of Austria’s finance ministry said that while there is no return to the status quo in relations with Russia, “most” international companies, including banks, remain there.

“There is significant trade between Russia and the rest of the world in commodities such as grain, fertilizers, oil, gas, nickel and other metals that … require payments,” the spokesman said.

The US is also eyeing the bank

In January, the US sanctions authority opened an investigation into Raiffeisen over its dealings with Russia. Two people with direct knowledge of the case told Reuters that the probe involved possible violations of Western sanctions.

Raiffeisen said the investigation was general in nature.

The investigation, which has strained relations between Vienna and Washington, could prove dangerous for Austria, which has become a bridge between East and West, turning Vienna into a real magnet for Russian money.

James O’Brien, the US State Department’s top sanctions official, explained US concerns about Raiffeisen and its relationship with Russia during talks in Vienna in February, one of the sources said.

“Ambassador O’Brien and the Austrians discussed our close cooperation on sanctions in response to Russia’s continued illegal invasion of Ukraine,” a State Department spokesman said when asked about the visit.

A Raiffeisen representative said the bank is in the “early stages” of gathering information to respond to a letter of inquiry from the US Treasury Department’s Office of Foreign Assets Control (OFAC).

During Austrian President Alexander Van der Bellen’s visit to Kyiv last month, Ukrainian President Volodymyr Zelenskyi criticized Austrian companies still operating in Russia, including Raiffeisen.

The bank also came under fire from investors after it participated in a Russian loan waiver scheme for soldiers fighting in Ukraine.

Why are the Austrians in no hurry?

Although the stakes are high, some Austrian officials hope they can hold out long enough for a negotiated settlement of the war that would allow normal business to resume with Russia, three people familiar with the situation said.

Austrian Foreign Minister Alexander Schallenberg said that while it was “legitimate” for the US authorities to contact Raiffeisen, Austria bears the primary responsibility for enforcing the sanctions. Russia will always remain important to Europe, Shallenberg said on Wednesday

US authorities could go so far as to ban the bank from processing transactions in dollars, a move that would deal a major blow to Raiffeisen and which eurozone regulators fear could destabilize the bank.

Latvian bank ABLV quickly collapsed after falling under US sanctions in 2018 over suspected illegal activities, mostly linked to Russia.

Some Austrian MPs are also critical of the government’s position. “Supervisors must analyze the risks posed by Raiffeisen’s activities, and this should have been done from day one of the war,” Stephanie Crisper, an MP from the liberal opposition Neos party, told Reuters last week.

“For many years, ties with Moscow permeated our political system – now the economic and political dependence on Russia has finally become noticeable,” she added.

Read also “The Red Bird Project”: how Raiffeisen is trying to withdraw 400 million euros from Russia / “The financial equivalent of the exchange of prisoners during the Cold War”

(Photo article: © Volodymyr Zhupanenko|Dreamstime.com)