Raiffeisen wants to exchange 400 million euros with Sberbank in a “financial prisoner exchange”

Raiffeisen Bank is seeking to swap 400 million euros worth of profits stuck in Russia for Sberbank’s cash frozen in Europe, in a plan that underlines the Austrian lender’s efforts to reduce exposure to the Russian market.

In the exchange deal presented at last week’s Raiffeisen board meeting, Sberbank will receive rubles from Raiffeisen’s Russian subsidiary, which cannot leave the country due to capital controls introduced by the Kremlin, according to three people directly involved in the discussions.

As part of the so-called “Red Bird” project, Raiffeisen would take over the sanctioned legacy cash pile held at the European branch of Sberbank.

“Think of it as the financial equivalent of a Cold War prisoner swap,” said one of the people involved in structuring the deal.

The creative solution is likely to raise eyebrows among Western politicians and policymakers because it would mean Kremlin-owned Sberbank, Russia’s biggest lender, could effectively get back some of its frozen European cash. Any deal is subject to regulatory approval in Washington, Brussels and Moscow.

A person close to Sberbank warned that finalizing the deal would be difficult due to the complexities of obtaining approvals from US and EU authorities.

“They transfer cash. . . sanctioned organization,” he said.

The exchange is a “theoretical consideration,” said a Raiffeisen spokesman. The Austrian bank “explored several options” to reduce Russia’s exposure, stressing that all measures are designed to meet sanctions requirements.

Raiffeisen epitomized the dilemma that many foreign groups with Russian operations have faced since Vladimir Putin’s full-scale invasion of Ukraine last year. The Vienna-based institution a largest Western lender in Russia by assets, it made record profits there last year.

According to the plan, the rubles would be transferred from Raiffeisen’s Russian subsidiary to Sberbank in Moscow. In exchange, they would transfer the appropriate amount of euros in the deposit accounts belonging to the European division of Sberbank, which is now in liquidation, to Raiffeisen in Vienna.

No money would cross the borders, no foreign currency would be sent to Russia, so the sanctions rules would not be violated, the people said, despite the fact that it is forbidden to do business with Sberbank in Europe.

The Austrian magazine Falter first reported on the Raiffeisen exchange proposal.

Consultants working on the plan developed by the Viennese consulting firm Ithuba Capital, founded by Willi Hemetsberger, the former market leader of UniCredit, believe that it could be a model for other Western companies trying to exit Russia. Ithuba declined to comment.

Late last year, the Kremlin imposed strict rules on Western businesses still operating on its territory, making it impossible to sell their subsidiaries without permission and banning the repatriation of profits from some critical sectors.

Raiffeisen managers expressed their discomfort with their position. Other Western business leaders, however, were less ambivalent. The chief executive of Philip Morris told the Financial Times last month that he would “prefer to keep” his business in Russia out of duty to shareholders rather than sell it cheaply to moral pressure from politicians.

Sberbank did not comment on the deal.

The Russian bank’s European business has been in liquidation for the past few months and has now sold most of its loans to European rivals.

Cash and other assets from such sales and liquidation of other businesses have been trapped in a Vienna-based legacy holding company, which could be worth up to €400 million.