"Quiet joy". What is behind seizure of assets of European banks in Russia

The seizure of part of the assets of Western financial institutions in the Russian Federation in mid-May showed the ability of the Kremlin to "take it out" on stranded Western businesses.

Recently, the Arbitration Court of St. Petersburg and Leningrad Oblast of the Russian Federation seized part of the assets of three European banks.

Shares and funds of the Italian UniCredit Bank AG and JSC UniCredit Bank were seized for 462.67 million euros. Any operations with shares in UniCredit Leasing LLC and UniCredit Garant LLC are also blocked.

238.6 million euros have been blocked from the German Deutsche Bank. And restrictions on the activities of Deutsche Bank and the company Deutsche Bank Technological Center were introduced.

93.69 million euros, 100% of Commerzbank JSC and Dom na naberezhnoi 2 LLC were seized from the German Commerzbank AG. The latter owns the premises of the bank in Moscow.

This decision of the court is, in the official interpretation of the Russian side, the consequence of the lawsuit of the subsidiary of the Russian Gazprom, RusChemAlliance LLC. The lawsuit was filed ten months ago.

In 2021, RusChemAlliance, Germany's Linde and Türkiye's Renaissance Heavy Industries signed an EPC contract for the construction of a gas processing plant in Leningrad Oblast of the Russian Federation. The total value of the contract is 5.9 billion euros.

Previously, Linde received an advance of 1.02 billion euros from RusChemAlliance. In May 2022, Linde withdrew from the contract. The reason was the war that the Russian Federation started against Ukraine.

The guarantor banks – German Deutsche Bank, Commerzbank AG, Bayerische Landesbank, Landesbank Baden-Wurttemberg and Italian UniCredit Bank AG – also withdrew their obligations as a payment to RusChemAlliance would be deemed a violation of the introduced European sanctions against Russia.

In February 2024, the Russian court decided to recover in favor of RusChemAlliance 692.93 million euros of debt, 44.48 billion rubles (458.75 million euros) of losses and interest from the companies Linde GmbH, Linde PLC, Linde UK Holdings No.2 Limited and Commercium Immobilien-Und Beteiligungs GmbH. The Russian assets of the companies were seized.

"Property worth 795 million euros was seized from three banks. Together with previously seized assets of Linde, the total amount already amounted to 1.1 billion euros. The advance payment transferred by RusChemAlliance has practically been returned," Maksym Oryshchak, an analyst at the Center for Exchange Technologies, said in a comment to LIGA.net. 

At the same time, Oryshchak calls the current seizure of the assets of UniCredit, Deutsche Bank and Commerzbank as part of the RusChemAlliance lawsuit a political decision that was made during the consideration of the business deal.

Asked "Why now, even though they could have done this earlier?" he notes that there are several possible answers.

"It can be said that this is just a coincidence, but the court's decision appeared at a time when the work on extracting income from the frozen assets of the Russian Federation intensified. And foreign banks, which have not yet closed down their activities in Russia, accelerated their exit from Russian assets," says Oryshchak.

The decision of the Russian court effectively stops the exit of Deutsche Bank, Commerzbank and UniCredit from Russia. They cannot sell their businesses now. But if you look at it from the other side, such a "trap" can be beneficial for these banks themselves.

The amount of taxes transferred by them to the budget of the Russian Federation shows how profitable the activities of European banks are in Russia. For the last year, it is more than 800 million euros. Before the war, in 2021, European banks collectively transferred 200 million euros in taxes.

In addition to the mentioned UniCredit, Commerzbank and Deutsche Bank, the following European banking groups operate in the Russian Federation today: Austrian Raiffeisen Bank International, Dutch ING, Italian Intesa Sanpaolo and Hungarian OTP.

Against the background of the profits of European banks in the Russian Federation and their total assets in this country, the assets of the banks seized in May look meager.

For example, the assets of the Russian division of the Italian group UniCredit Bank AG, according to the bank itself, reached 8.67 billion euros as of the end of 2023. That is, the seizure of assets worth 462.67 million euros is approximately 4.5% of the bank's Russian assets. At Deutsche Bank and Commerzbank, the ratio is roughly the same.

Therefore, as one of the European bankers noted in a comment to LIGA.net on the condition of anonymity, the decision of the Russian court is a "quiet joy" for these banks themselves.

But in the current situation there is another side of the coin.

"What the banks can do in this situation is unclear. It is pointless to appeal the decision to the Russian courts. If they try to 'foment' this case, they may lose even more. In the case of continued withdrawal of revenues from the frozen reserves of the Russian Federation, the Russian authorities will continue to 'take it out' on the stranded Western businesses. Therefore, it is better for the Russian units of UniCredit, Deutsche Bank and Commerzbank to keep silence. Otherwise, their assets may be seized in pieces until the war in Ukraine ends," says Oryshchak.

Under the EPC contract of RusChemAlliance for the construction of a gas processing plant in Leningrad Oblast of the Russian Federation, in addition to UniCredit, Deutsche Bank and Commerzbank, the German banks Bayerische Landesbank and Landesbank Baden-Wurttemberg are also mentioned as guarantors. Decisions regarding these two land banks have not yet been adopted.

Bayerische Landesbank has nothing in particular to lose. Its representative office in the Russian Federation was closed two years ago. But the representative office of Landesbank Baden-Wurttemberg is still active.

Moscow can also start to "pinch off" assets from other European banks in Russia. Recently, in response to information about a plan agreed by the European Union regarding frozen Russian assets (for the current year, the scheme should allow receiving up to 3 billion euros, which will potentially be directed to support the Ukrainian army), the speaker of the Federation Council of the Russian Federation, Valentina Matvienko, said that Moscow has a prepared response to this plan.