By Mauro Orru and Nina Kienle


Raiffeisen Bank International pulled out of a deal linked to a sanctioned Russian industrial tycoon to buy a stake in Austrian construction company Strabag, saying it didn't feel comfortable with the transaction after recent exchanges with authorities.

The Austrian bank said Wednesday that it made the decision out of an abundance of caution despite reassuring the market in March that a December deal to buy a 27.78% stake in Strabag from a firm controlled by Oleg Deripaska complied with Western sanctions.

After Russia's invasion of Ukraine in February 2022, the U.K. sanctioned Deripaska, imposing an asset freeze, a prohibition on transactions with U.K. individuals and businesses and a travel ban. The European Union imposed similar sanctions. The U.S. also sanctioned the oligarch and the Justice Department charged him and some of his associates with sanctions evasion and other crimes.

Raiffeisen said in March that it had briefed all relevant authorities, including the U.S. Treasury and the Office of Foreign Assets Control, on the details of the transaction.

The bank had hoped to buy the stake in Strabag for 1.51 billion euros ($1.62 billion) in cash from Deripaska's Rasperia Trading through its Russian subsidiary, AO Raiffeisenbank, as a first step, and then transfer it to the wider group by issuing a dividend in kind.

Strabag said in a statement after Raiffeisen dropped the deal that Rasperia Trading would retain a 24.1% stake in the group. A capital increase in March reduced Rasperia's 27.78% shareholding, which Strabag said it believes remains frozen in accordance with EU sanctions.

Raiffeisen and Strabag previously said Rasperia Trading had been sold to Iliadis, another company registered in Russia. However, its ownership remains unclear. Raiffeisen last month called Iliadis an unsanctioned investor and said Rasperia's new ownership structure under Iliadis should provide comfort that no sanctioned individuals or entities would benefit from Raiffeisen's purchase of Rasperia's stake in Strabag.

On Wednesday, Raiffeisen said it had been "unable to obtain the required comfort in order to proceed with the proposed transaction."

Rasperia Trading, Deripaska and Iliadis couldn't be reached for comment.

Raiffeisen didn't specify what hurdles, if any, it would encounter if it decided to go ahead with the deal. Unlike many Western businesses, Raiffeisen maintained operations in Russia after the war in Ukraine broke out.

The bank entered the Russian market in 1996 and didn't shrink its business after Russia's annexation of Crimea in 2014. It has long been one of the European banks with the largest exposure to Russia.

The bank had 9,942 employees in Russia at the end of 2023, according to its annual report, 405 more than in 2022. However, the lender said it scaled back operations considerably and was working on a spinoff or sale of AO Raiffeisenbank throughout 2023, adding that both options require approvals from Russian and European authorities.

The bank said it would continue to work toward the deconsolidation of its Russian subsidiary despite dropping the Strabag deal.


Write to Mauro Orru at mauro.orru@wsj.com and Nina Kienle at nina.kienle@wsj.com


(END) Dow Jones Newswires

05-08-24 1308ET