Western Banks' Continued Russian Operations Generate €800 Million For Kremlin

Major Western banks backtracked on promises to exit Russia after the Ukraine invasion, contributing millions to the Kremlin’s coffers through taxes, according to a Financial Times analysis.

The report reveals that the seven largest European banks by assets in Russia — Raiffeisen Bank International, UniCredit, ING, Commerzbank, Deutsche Bank, Intesa Sanpaolo, and OTP — raked in a combined profit of over €3 billion in 2023. This figure is a staggering three times higher than their profits in 2021.

The windfall can be partly attributed to funds trapped within Russia due to sanctions, which the banks are unable to withdraw. Soaring interest rates set by the Russian central bank further inflated profits.

This financial boon translated to a significant tax windfall for the Kremlin. The European banks collectively paid €800 million in taxes to the Russian government in 2023, a fourfold increase compared to €200 million in 2021.

Raiffeisen Bank International, boasting the largest presence among these foreign lenders, shoulders over half the tax burden (€400 million+) paid by European banks in Russia. Despite facing criticism from the European Central Bank and the US Treasury for delaying its exit, Raiffeisen has yet to complete its promised downsizing and divestiture.

Western companies staying put in Russia provide a financial lifeline to the Kremlin, undermining the intended impact of Western sanctions. With the taxes paid by European banks amounting to roughly 0.4% of Russia’s projected non-energy budget revenue for 2024, the financial contribution is not insignificant.

The combined revenue, profit, and tax figures of these international banks have dipped since 2022, but they remain considerably higher than pre-war levels. This raises questions about Western banks profiting from war while significantly aiding the Russian government.