Western Banks under fire: Russian Court freezes assets worth 700 million euros; Here's why

A St Petersburg court has recently made a big move by seizing assets worth over €700 million from three prominent Western banks: UniCredit, Deutsche Bank, and Commerzbank. This action is among the most substantial measures taken against Western financial institutions since the full-scale invasion of Ukraine by Russia, which led to the withdrawal or scaling down of operations by most international lenders in Russia. 

The seizure came after a claim filed by Ruskhimalliance, a subsidiary of Gazprom, regarding unpaid bank guarantees related to a contract with the German engineering company Linde. The dispute originated when Linde suspended work on a gas processing plant and liquefied natural gas production facilities near St. Petersburg due to EU sanctions.

Assets frozen by court

The court ordered the freezing of €463 million in assets belonging to UniCredit, €238.6 million in assets belonging to Deutsche Bank, and assets from Commerzbank, the details of which have yet to be disclosed. These assets include shares, stocks, funds, and property holdings in Russia.

🇪🇺🇷🇺PUTIN TO EU: I CAN TAKE YOUR ASSETS TOO - €700 MILLION WORTH

The Arbitration Court of St. Petersburg has seized over €238M in assets from Germany's Deutsche Bank, including real estate, securities, and accounts, at the request of RusHimAlliance, a Gazprom subsidiary.… https://t.co/TJLNNBOFh5 pic.twitter.com/w3jNXBXo6T

— Mario Nawfal (@MarioNawfal) May 18, 2024

What are challenges for banks?

Deutsche Bank has been prohibited from selling its Russian business without the approval of Russian President Vladimir Putin. Similarly, UniCredit and Commerzbank face legal hurdles as Ruskhimalliance accuses them of attempting to dispose of their assets in Russia.

The legal challenges over assets held by Western banks have complicated their efforts to exit the Russian market. The European Central Bank has urged Eurozone lenders with operations in Russia to expedite their exit strategies amid escalating tensions between Moscow and the West.

Uncertain future ahead

The seizures have prompted concerns among European officials, with Italy's foreign minister calling for a meeting to discuss the implications for UniCredit. Despite efforts to de-risk their Russian operations, full exits from the country pose ample challenges for these banks.

Ongoing legal battles

Legal disputes over assets held by Western banks in Russia continue, with a recent court order to seize funds from JPMorgan Chase following a challenge by Kremlin-run lender VTB. The situation remains fluid as banks navigate legal complexities amidst geopolitical tensions.

Germany freezes billions in Russian assets

On the other hand, Germany has recently implemented financial measures by freezing about €3.95 billion ($4.28 billion) worth of Russian assets. These assets encompass both personal and corporate holdings associated with sanctions, as well as foreign assets belonging to the Central Bank of Russia. This action is believed to be a component of the continual financial sanctions and anti-money laundering endeavors. Furthermore, it has been reported that numerous previously frozen Russian assets, situated in both the European Union (EU) and the United States (US), have been transferred to Ukraine.