Alexandra Schwartz-Gerlich and John O’Donnell
VIENNA (Reuters) – A top U.S. sanctions official will this week warn Austria and Raiffeisen Bank International about the dangers of doing business in Russia, putting pressure on the largest Western bank there.
As part of Washington’s renewed efforts to enforce sanctions, Anna Morris, a US Treasury official focused on illicit money flows, will urge Austrian banks to examine their exposure to Russia and “take mitigation measures.”
Morris will talk about a new US sanctions body that “increases risks for banks” and will encourage them to “protect themselves from trade linked to the Russian military industrial base or risk being cut off from the US financial system”, the US Embassy in Vienna said . on Wednesday.
The United States is the world’s most powerful regulator largely because it can cut off banks’ access to the dollar, the cornerstone of international finance. Losing access to the dollar would likely plunge any bank into crisis.
Morris is the latest American official to visit Austria, one of the European countries with the closest ties to Russia. Her sharp warning represents another attempt to put pressure on the RBI, which processes large volumes of payments to and from Russia.
RESISTANCE
The visit follows an executive order by US President Joe Biden last December threatening fines for financial institutions that help Russia evade sanctions.
An Austrian finance ministry spokesman said Morris would visit government agencies and companies to talk generally about money laundering and sanctions.
The RBI, part of the industry body that supports Austria’s economy, said it frequently discussed the sanctions with regulators and always complied with such rules.
Washington faces stiff opposition from Austrian politicians and officials, some of whom defend the RBI.
Although Austria publicly supports Ukraine, several officials who spoke to Reuters said they were reluctant to completely sever long-standing ties with Russia, believing it was still possible to restore ties.
Austria recently pressured Ukraine to remove RBI from the Ukrainian blacklist, insisting on supporting new European Union sanctions on Russia until they did so, people familiar with the situation told Reuters.
Austria and the bank wanted it removed from Ukraine’s list, dubbed “international war sponsors,” which is designed to shame companies doing business in Russia and supporting the war effort by, for example, paying taxes.
Vienna remains a hub for cash flows from Russia and its former Soviet neighbors, and Austria maintains close ties to Russia through crucial gas pipelines and finance.
While Italy’s UniCredit also has business in Russia and is also reluctant to leave, RBI is much larger and has become a test of the West’s resolve to cut ties with Russia.
The RBI was looking to spin off its Russian business, which provides a payments system to hundreds of companies there, after coming under pressure from international regulators. But in two years of war, little has changed.
Russian authorities have made it clear to the RBI, which has about 2,600 corporate clients, 4 million local account holders and 10,000 employees, that they want the bank to stay because it enables international payments, one source told Reuters.
The RBI’s presence in Russia has caused controversy among its leadership as well as among the regional land banks that control it, with some advocating exit from the bank.