Raiffeisen seeks to swap €400mn with Sberbank in ‘financial prisoner exchange’, 15 March 2023

Raiffeisen Bank is seeking to exchange €400mn worth of profits trapped in Russia against Sberbank’s frozen cash in Europe, in a plan underlining the Austrian lender’s efforts to reduce its exposure to the Russian market.

The swap deal, presented at a Raiffeisen board meeting last week, involves Sberbank receiving roubles from Raiffeisen’s Russian subsidiary, which are barred from exiting the country because of capital controls imposed by the Kremlin, according to three people directly involved in the discussions.

As part of the so-called “project Red Bird”, Raiffeisen would in turn take over a sanctioned legacy cash pile held by Sberbank’s European arm...

The creative solution is likely to raise eyebrows among western politicians and policymakers because it would mean allowing Kremlin-owned Sberbank, Russia’s largest lender, to effectively get some of its frozen European cash back. Any deal would require the approval of regulators in Washington, Brussels and Moscow. A person close to Sberbank cautioned that finalising the deal would be difficult because of the complexities in obtaining permission from the US and EU authorities. “They are transferring cash . . . to a sanctioned entity,” he said.

The swap is a “theoretical consideration”, a spokesperson for Raiffeisen said. The Austrian bank was “investigating several options” about how to reduce its Russia exposure, stressing that any measures would be crafted to comply with sanctions requirements...

Under the plan, the roubles would be transferred from Raiffeisen’s Russian subsidiary to Sberbank in Moscow. In return, euros of an equivalent amount sitting in escrow accounts belonging to Sberbank’s former European arm — which is in the process of being wound up — would be transferred to Raiffeisen in Vienna...