Russia says it will not let foreign banks exit the market easily — unless they unfreeze Russian assets

• Russia’s deputy finance minister said the country will not let foreign banks exit the market easily, per Reuters.
• Russia’s decision to allow the banks to leave will “depend on the decision to unfreeze Russian assets,” he said.
• Russia has been imposing punitive measures on companies exiting the Russian market.

Russia’s imposing increasing costs for corporate breakups by foreign banks — it’s now demanding that they unfreeze Russian assets if they want to exit the market.

“We have stated our position, and it stands — we will be tough in letting foreign banks go, it will depend on the decision to unfreeze Russian assets,” Alexei Moiseev, Russia’s deputy finance minister, said at a forum on Friday, Reuters reported. 

Western nations and their allies have frozen over $300 billion in Russian central bank assets abroad as part of their sanctions on Russia over its invasion of Ukraine in February 2022. It is not clear how many of these Russian assets were frozen by Western banks.

Moiseev’s comments came as President Vladimir Putin’s regime continues to impose increasing punitive measures on companies trying to exit the Russian market.

Despite 1,000 companies announcing they were voluntarily cutting back on operations merely two months after the Ukraine war started in February 2022, just 535 foreign companies have made a clean break with the country, according to an ongoing study from Yale University that was last updated on September 3.

But it’s not for lack of trying: Over 2,000 companies were seeking approval to exit the Russian market, but the progress has been slow due to logistical delays, among other reasons.

Moscow also charges exiting companies an exit fee of at least 10% of the sale value of the local business. In addition, the Russian government started requiring sellers from “unfriendly countries” to donate at least 10% of the sale proceeds to the Russian budget from March 2023.

Raiffeisen Bank — the largest Western bank still operating in Russia and working on a sale or spin-off of its local business — said in its half-year report released on August 1 that “the local and international laws and regulations governing the sale of businesses in Russia are subject to constant change.”

Moiseev said at the Friday forum that there’s one foreign bank applying to sell its assets in Russia, per Reuters. He did not name the bank but added Raiffeisen had not made such an application.

China’s Big Four banks are lending billions of dollars to Russia

While Western banks have reduced or are working on reducing their exposure to the Russian market, Chinese banks are trying to fill their shoes.

According to the Kyiv School of Economics, China’s Big Four banks — the Bank of China, Industrial & Commercial Bank of China, China Construction Bank, and Agricultural Bank of China have more than quadrupled their lending to Russia between February 2022 and March 2023, the Financial Times reported on Monday.

The big four Chinese banks had a combined exposure of $2.2 billion to Russia’s banking sector at the beginning of February 2022. That jumped to nearly $10 billion at the end of March 2023, per the FT.

Russia’s finance ministry, Kyiv School of Economics, Bank of China, Industrial & Commercial Bank of China, China Construction Bank, and Agricultural Bank of China did not immediately respond to requests from Insider for comment. The Chinese banks declined to comment to the FT.