Raiffeisen’s Russia Trap: How Investigations Linked the European Bank to Moscow’s War Economy

RBI shares fell 10 per cent following the Grizzly report. The immediate market reaction, however, is only part of the problem. More than four years after Russia invaded Ukraine, Raiffeisen remains the largest Western bank operating in the country, despite repeated commitments to withdraw. Its Russian business is now constrained by court orders, capital controls and financial claims that have already cost the group billions.

The investigations add another dimension to that predicament. They indicate that a subsidiary RBI says it cannot legally sell has continued handling payments connected to the Russian military economy.

The transactions behind the allegations

Grizzly Research examined more than 25,000 Russian customs records covering transactions between 2022 and early 2025. Contracts worth approximately $1.75 billion contained the registration details of JSC Raiffeisenbank, RBI’s Russian subsidiary.

Of those records, roughly 20,000 transactions, valued at $1.191 billion, involved goods subject to restrictions imposed by the EU, US, UK, or Switzerland at the time of trade.

The researchers identified $106.75 million in trade involving equipment and components considered important to military production. These included computer numerical control machine tools, ball bearings, integrated circuits, communications equipment, optical sights and tank components.

Another $49 million involved more than 30 entities already subject to sanctions.

Customs documentation alone does not establish that a bank knowingly violated sanctions in every transaction. Trade restrictions differ by jurisdiction, product classification, and the parties involved. Nevertheless, the volume of records raises questions about how effectively the subsidiary identified potentially prohibited commercial activity.

Grizzly also reported that undercover approaches to bank managers produced advice on navigating sanctions restrictions, including altering product classifications and structuring transactions through alternative trade arrangements. Its investigation additionally alleged that accounts could be opened for military drone procurement.

RBI rejected the report, describing its findings as factually inaccurate and misleading. The Vienna-based group maintained that its compliance systems were reliable.

The separate investigation by Schemes presents a narrower but potentially more difficult issue for the bank to explain.

Journalists traced at least 26 payments worth more than 15 million roubles during 2024 and 2025 involving suppliers associated with Kvalitet, a company providing specialised lubricants to Russia’s military and defence industry.

The payments originated from accounts at Promsvyazbank, the Russian institution designated to service the defence sector. They were transferred to Raiffeisenbank accounts belonging to subcontractors, including steel drum manufacturer Dramtara and the Roshal Plant of Plasticizers.

Crucially, the payment instructions carried identifiers marking them as transactions under Russia’s State Defence Order system.

That distinction matters. Unlike commercial transfers whose ultimate purpose may be difficult to establish, these payments arrived with an explicit indication of their connection to government defence procurement.

RBI acknowledged that its subsidiary processes domestic transactions connected to Russia’s defence industry. It argued that Russian banking legislation prohibits the rejection or blocking of domestic rouble payments.

The bank's defence therefore rests not simply on whether it could identify the transactions, but whether it had any legal authority to stop them.

A business Moscow would not let go

Raiffeisen’s difficulties did not begin with the latest investigations.

Following the February 2022 invasion, the Austrian group announced plans to sell or separate its Russian subsidiary. Negotiations with prospective buyers continued under former chief executive Johann Strobl, but a sale required approvals from multiple jurisdictions, including Russia.

The bank faced an unusual commercial dilemma. Leaving could mean surrendering substantial assets, while remaining exposed it to increasingly severe Western regulatory and reputational risks.

Russia had reasons to preserve the subsidiary.

As sanctions isolated major Russian state-owned banks from Western financial networks, Raiffeisenbank retained an important role in cross-border settlements, including payments associated with energy trade.

For Moscow, a functioning Western-owned bank offered something outright nationalisation could not necessarily provide: continued access to international financial infrastructure through an institution that had not been subjected to the same restrictions as Russia’s principal state banks.

Other foreign businesses faced temporary state management or expropriation. Raiffeisen's subsidiary instead remained operational, even as its Austrian parent struggled to extract capital or arrange a sale.

The distinction became decisive in September 2024, when a Russian court froze all shares in JSC Raiffeisenbank, preventing RBI from transferring its ownership. An appeal failed that December.

The order arose from litigation involving Rasperia Trading Limited, a company linked to sanctioned oligarch Oleg Deripaska, and a disputed 24.1 per cent stake in Austrian construction group Strabag.

An earlier attempt to use the Strabag holding in an asset-swap arrangement had collapsed following US Treasury objections over the potential release of sanctioned assets.

In January 2025, a Kaliningrad court ordered the recovery of €2.044 billion in the dispute. Approximately €1.9 billion was subsequently seized from Raiffeisenbank’s Russian accounts.

Rasperia pursued a further €326 million, plus interest, in a follow-up claim concerning dividends.

The consequences appeared in RBI's financial results. Its Russian operations moved from a net profit of €873 million in 2024 to a net loss of €86 million in 2025.

A subsidiary that once generated considerable earnings had become a source of financial damage, with its owner unable to dispose of it.

When compliance meets compulsory payments

The central difficulty for RBI is that Russian law and Western sanctions policy now place competing demands on the same institution.

Russia's defence procurement framework obliges domestic banks to process qualifying rouble payments. Western sanctions, meanwhile, seek to restrict financial support for designated entities and military-related supply chains.

Austrian ownership does not exempt the Russian subsidiary from local legislation. Nor does compliance with Russian law automatically remove the parent group's exposure to Western restrictions.

The Schemes findings make that conflict particularly visible. The State Defence Order identifiers meant that the military connection was not necessarily concealed within an ordinary commercial payment.

Yet recognising a transaction and possessing the legal authority to reject it are different matters.

That is where RBI's position becomes more complicated than a conventional compliance dispute. Its explanation implies that even a functioning screening system cannot prevent certain defence-related payments if Russian legislation requires their execution.

The European Central Bank has already instructed RBI to reduce its Russian loan portfolio by 55 per cent by 2026. But the ECB cannot simply exercise political authority to compel the sale of a foreign subsidiary, particularly when Russian courts have prohibited the transfer.

Michael Hellerer, who became RBI chief executive in July 2026, has said he would leave Russia immediately if doing so were legally and practically possible.

The question for Western regulators is whether an institution can remain within acceptable compliance boundaries when its local operations are compelled to undertake activities that conflict with the objectives of sanctions policy.

The cost of keeping financial channels open

Raiffeisen is not the only European bank still exposed to Russia. Italy’s UniCredit has been reducing its operations, while Germany’s Commerzbank and the Netherlands’ ING have been restricting activity and winding down exposure.

Their circumstances differ, but the wider financial implications extend beyond individual balance sheets.

Western banks remaining in Russia collectively paid approximately €800 million in Russian taxes during 2025, four times the pre-war level. Those payments provide revenue to a government financing a continuing war.

For RBI, the financial relationship has become particularly asymmetric. More than €10 billion in private Russian customer deposits remain held through accounts at Russia’s central bank, while capital controls prevent the Austrian group from freely repatriating local earnings.

Russia retains the domestic banking services and international connections that the subsidiary provides. RBI retains the legal obligations and financial exposure attached to ownership.

The latest allegations could intensify pressure on European and American enforcement authorities to consider further restrictions, potentially including measures affecting the subsidiary's management or access to international clearing arrangements.

Such decisions would carry consequences beyond Raiffeisen. A major European banking group facing additional sanctions-related restrictions could encounter fresh financial and operational pressures, even as it remains unable to complete its withdrawal.

For the Kremlin, the arrangement creates a different set of incentives. Keeping the bank operational preserves useful payment channels, while Russian courts and capital controls limit the foreign owner's ability to recover its investment.

This is the institutional problem at the centre of the Raiffeisen affair. International banking has traditionally relied on the assumption that a multinational group can reconcile local legal obligations with centralised compliance standards. That assumption becomes fragile when a host government deliberately uses domestic law to protect financial activity that foreign regulators are trying to restrict.

RBI's experience also exposes the limits of gradual withdrawal as a risk-management strategy. Reducing lending and negotiating a sale may lower commercial exposure, but neither necessarily prevents a government from freezing ownership or compelling the processing of particular payments.

The longer a foreign bank remains embedded in such a system, the more opportunities the host state has to determine the conditions under which it operates.