A Russian court has ruled to seize substantial assets of Deutsche Bank and UniCredit in Russia, as the fallout from the European banks’ exodus following Moscow’s military offensive in Ukraine continues.
Court documents dated May 16 reveal that the St. Petersburg court ordered the confiscation of assets amounting to 239 million euros ($260 million) from Deutsche Bank and 463 million euros ($504 million) from Italy’s UniCredit.
The court’s decision follows a lawsuit filed by RusKhimAlians, a Russian company that had planned to build a significant gas processing and liquefaction plant in collaboration with the German firm Linde.
The project was derailed when Linde withdrew following Russia’s invasion of Ukraine in February 2022, prompting RusKhimAlians to take legal action against the European banks that had guaranteed the project.
RusKhimAlians argued that the withdrawal of Linde and subsequent disruption of the project warranted financial compensation from the banks involved.
The St. Petersburg court agreed, leading to the unprecedented seizure of the banks’ assets. European banks have largely been retreating from Russia in the wake of the Ukraine conflict, aligning with Western sanctions imposed on Moscow.
Deutsche Bank and UniCredit, among the last major European banks with significant operations in Russia, have faced mounting pressure to divest and minimize their exposure to the Russian market.
UniCredit, in particular, has been one of the most exposed European banks in Russia, operating a large local subsidiary. The bank had entered preliminary discussions to sell its Russian unit last year, but these talks have made little progress.
Chief Executive Andrea Orcel has expressed a desire to exit the Russian market but highlighted the complexities involved, stating that simply gifting an operation worth 3 billion euros would not align with the spirit of Western sanctions.
Despite these challenges, UniCredit has gradually reduced its exposure to Russia. The bank has managed to improve its capital ratio, increasing the ratio of capital to risk-weighted assets to 16% from 15% last year.
Orcel’s strategy has focused on ensuring the bank’s stability while navigating the geopolitical complexities of the situation.
Deutsche Bank, although less exposed than UniCredit, has also been actively winding down its operations in Russia.
The bank has been scrutinizing its activities to ensure compliance with international sanctions and reduce potential risks associated with the volatile geopolitical environment.
The recent court ruling highlights the precarious position of European banks still entangled in the Russian market. As they navigate the legal and financial implications of their exit strategies, the broader ramifications of Russia’s isolation from the Western financial system continue to unfold.
The seizure of Deutsche Bank and UniCredit’s assets underscores the ongoing economic tug-of-war between Russia and the West, exacerbated by the conflict in Ukraine.
It also raises questions about the future of foreign investments and operations in Russia as the country’s financial landscape becomes increasingly insular.
With the legal battles and geopolitical tensions showing no signs of abating, European banks are likely to face further hurdles as they attempt to extricate themselves from the Russian market while adhering to international sanctions and safeguarding their financial interests.
This article was created using automation and was thoroughly edited and fact-checked by one of our staff editorial members