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Since the Russian attack on Ukraine, German banks have consistently withdrawn from Russia. Recently, the financial institutions have found themselves caught between the millstones of big politics.
Thriving relationships, brisk trade and trusting exchange, as well as prestigious infrastructure projects with high capital requirements – this is what bankers want for their foreign business.
However, the Russian business of German financial institutions has moved miles away from this ideal image over the past ten years. As soon as the last major projects had to be written off with the Russian invasion of Ukraine, the banks found themselves in a sanctions race between the West and Russia, which led to increasingly drastic interventions by Moscow.
Seizures of assets of Western institutions in Russia have been increasing since the end of April. Now, after the Italian UniCredit and Commerzbank, Deutsche Bank has also been hit for the first time. The fact that a St. Petersburg court confiscated millions in assets from Deutsche Bank and Commerzbank because they wanted to help finance the construction of a gas terminal, which was then canceled due to Western sanctions, will probably be difficult to justify, even for Russian lawyers.
It is obvious to see the move as retaliation for the EU Commission’s recent plans to divert interest income from frozen Russian state assets and use them to benefit Ukraine. The EU states are also treading on thin legal ice.
USFinance Minister Yellen threatens sanctions
But it’s not enough that the Russian Federation is apparently arbitrarily intervening in the foreign assets of German banks. Another major power is also increasing its pressure. Today, during a visit to Frankfurt, US Treasury Secretary Janet Yellen explicitly called on German banks to close loopholes to circumvent sanctions against Russia. More work is needed here. “Necessary steps must also be taken” in its foreign activities in order to keep Moscow away from strategically important goods from the West.
If transactions are supported from which Russia benefits militarily, there could even be sanctions against the financial institutions, Yellen warned unequivocally.
Deutsche Bank did not want to comment on these allegations and referred to previous assurances that it supports the decisions of the federal government and its allies and that it will implement the sanctions and other measures imposed “immediately and fully.”
Farewell to the Russian market?
In fact, the German industry leader, like other European institutions – apart from the Austrian Raiffeisen Bank International – has significantly reduced its involvement in Russia since 2014. At the same time, international customers are being helped to reduce their business operations in the country. The risk positions fell from 3.5 billion euros in 2021 to 1.7 billion in 2022. The number of employees recently fell to 180, down from around 1,700 before the Russian invasion of Ukraine.
With its latest measures, Moscow is putting massive pressure on this remaining business. In any case, a complete departure from the Russian market has become much more likely for German banks.