Daily Reports
Rising Legal and Operational Threats for Western Banks in Russia
Western banks operating in Russia are facing increasing legal and operational challenges, particularly from the Russian government. Deutsche Bank is one of the institutions significantly impacted. On May 29, 2024, a Russian court ordered Deutsche Bank to pay part of a 239 million euro compensation claim to Gazprom, the Russian state energy giant. This judgment stems from the collapse of a gas processing plant project due to Western sanctions, in which Deutsche Bank was a guarantor lender along with industrial gas maker Linde. The decision isn’t final yet, and Deutsche Bank has set aside around 260 million euros for the case as they explore further legal options.
The complications for Western banks in Russia extend beyond individual lawsuits. An earlier ruling by an arbitration court in St. Petersburg froze assets of several Western banks, including Deutsche Bank and Commerzbank. This action relates to the collapse of a gas terminal construction project in Russia, largely attributed to sanctions imposed by Western countries. The assets, which include securities and real estate, were frozen at the behest of RusKhimAlyans, a Gazprom subsidiary with significant claims against these banks.
Eric Dor from IESEG business school in Lille highlights that banks from Austria, Germany, and Italy maintain substantial business interests in Russia. However, Western sanctions complicate their ability to manage or exit these investments. These banks are now considering various scenarios, including insolvency, as they face the so-called 'Russia trap.' This term describes the dilemma wherein sanctions impair their ability to sell their assets, potentially leading to undervalued sales to Russian entities.
In contrast, geopolitical tensions continue to escalate as Russian President Vladimir Putin warned against the use of Western weapons on Russian soil. He emphasized that such actions could lead to serious consequences, considering the dense population and small territories of some European states. This warning comes amid Ukraine’s persistent calls for Western allies to lift restrictions on their military support, facing mixed reactions from various NATO countries.
- Russian President Vladimir Putin alleged that Western military instructors are already present in Ukraine under the guise of mercenaries. This statement was made while discussions about sending more instructors from France are ongoing. The French Ministry of the Armed Forces acknowledged the potential for such support, but didn't officially confirm any deployments. This development reflects the escalating tensions and the indirect involvement of Western nations in the Ukraine crisis.
