European banks continue to support the Russian treasury. An analysis by the Financial Times shows that last year the seven major European banks collectively earned over 3 billion euros in Russia. Of this, just over 800 million euros went to the Kremlin in taxes, four times what the banks paid in taxes before the Ukraine invasion.
The largest contributor is the Austrian Raiffeisen Bank International (RBI). From 2021 to 2023, the bank increased its earnings from 600 million to 1.8 billion euros, while the tax went from 117 to 464 million euros.
In addition, the RBI paid 47 million euros in a “super profit tax” the Kremlin imposed on certain companies last year.
The interest is doubled
The RBI has repeatedly stated that the bank will scale back its Russian operations, but the Financial Times wrote earlier this month that the RBI has posted over 2,400 job advertisements in Russia since December.
– It is not only in RBI’s interest to stay in Russia. The Russian central bank will do everything it can to prevent them from leaving the country as there are few non-sanctioned banks Russia can receive and send Swift payments through, a top executive in the Russian banking sector told the newspaper.
Profitability in the western banks has risen in line with the fact that the central bank has raised the key interest rate to 16 per cent, almost doubling from the level just before the invasion. According to the Financial Times, help has also come from the sanctions that have deprived Russian banks of their access to international payment systems.
The money is locked
At the same time, the banks do not have access to the money earned in Russia, due to the restrictions from 2022 that prohibit dividend payments from Russian subsidiaries to companies from “unfriendly” Western countries.
– We cannot do anything with Russian deposits, apart from keeping them with the central bank. So when the interest rate increased, so did our profit, says a senior manager of a European bank with a Russian subsidiary.
Other major European banks with operations in Russia are Italian UniCredit and Hungarian OTP. The two contributed 154 and 90 million euros respectively in tax in 2023, and a spokesperson for the latter informs the newspaper that around 20 percent of the amount was tax on dividends.
According to the Financial Times, cash locked up in Russian deposit accounts represents a significant obstacle to exit, and since the invasion, banks have also had to have a personal blessing from President Vladimir Putin to sell their operations in the country.
