In a significant turn of events, Raiffeisen Bank International (RBI), the largest Western bank still operating in Russia, has decided to suspend its efforts to sell its Russian subsidiary. This decision comes amid an evolving diplomatic landscape between Washington and Moscow, as reported by sources familiar with the situation.

Since the onset of President Vladimir Putins full-scale invasion of Ukraine in February 2022, RBI has faced increasing pressure from regulators and foreign governments, including those from the European Union and the United States, to divest its operations in Russia. The geopolitical landscape has greatly influenced these calls for divestment, especially with the ongoing conflict in Ukraine.

The complexity of the sale process has been exacerbated by recent legal troubles. In September, a Russian court imposed a freeze on the shares of RBIs Russian subsidiary. This was compounded in January with a ruling that could hold the bank liable for damages amounting to 2 billion. RBI acknowledged that the legal proceedings have effectively stalled any potential transfer of ownership for its Russian arm.

In February, as discussions between the US and Russia began to show signs of re-engagement, RBI's leadership opted to pause all sale efforts. Sources indicate that this pause is a strategic move to reassess the geopolitical situation and the potential shifts in US policy regarding Russia. One insider explained, It is in order to assess the situation and if the position of the US might change.

Another source confirmed that serious efforts to complete the sale have ceased for the time being, emphasizing that internal circumstances could shift again in the future. However, the specific reasons for this pause, whether linked to geopolitical events or the ongoing court case, remain undisclosed.

In an official statement, RBI maintained that its sale process is ongoing but clarified that the court case has obstructed any transaction execution at this time. The statement reiterated, At the moment, RBIs shares in Raiffeisen Bank Russia are blocked, and a transaction would therefore not be possible at this point in time. Nonetheless, the bank stated that it continues to work on winding down its operations in Russia, in line with the directives of the European Central Bank.

This pause in the sale efforts comes at a time when the US has expressed renewed interest in re-establishing economic cooperation with Moscow. Steve Witkoff, a special envoy during Trumps administration, mentioned that the US and Russia were discussing very compelling commercial opportunities following his recent meetings with Putin, marking the third such meeting this year.

The prolonged presence of RBI in Russia has led to growing impatience among European authorities and governments. Despite the conflict in Ukraine, RBI continued its operations in Russia three years post-invasion, prompting the European Central Bank to urge RBI and other European banks operating there to expedite their withdrawal or divestiture.

In response to these pressures, RBI has made concerted efforts to reduce its lending activities and cease onboarding new customers within the Russian market. However, it still maintains a more substantial presence there compared to its competitors, which have largely exited the market.

Despite these attempts to wind down operations, the ongoing court case has had severe repercussions on RBI's financial performance. The bank recently reported a net loss of $926 million in the fourth quarter of 2024, marking its first quarterly net loss in nearly a decade. This loss was attributed to a significant impairment charge stemming from the unfavorable ruling of the Russian court. RBIs appeal against this ruling is scheduled for April 24, and the outcome could further influence the bank's future operations in Russia.