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Russia. Western banks paid 800 million euros in taxes to the Kremlin. Big growth

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The largest Western banks paid more than EUR 800 million in taxes in Russia in 2023, writes the British daily Financial Times. This is a fourfold increase from levels before the attack on Ukraine. Revenues to the Russian coffers are growing, despite declarations of a greater or lesser withdrawal from the Russian market.

The seven largest European banks by assets in Russia – Raiffeisen Bank International, UniCredit, ING, Commerzbank, Deutsche Bank, Intesa Sanpaolo and OTP – recorded a combined profit of over EUR 3 billion in the country in 2023.

Growth by leaps and bounds

These profits were three times higher than in 2021. However, the Financial Times notes that they were partly generated by funds that banks could not withdraw from the country.

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However, this resulted in a sharp increase in taxes paid – from EUR 200 million in 2021 to as much as EUR 800 million in 2023. This corresponds to 0.4 percent of revenues to the Russian budget from outside the energy sector.

“This is an example of how foreign companies remaining in Russia help the Kremlin maintain financial stability despite Western sanctions,” writes “FT.”

The daily explains that higher profits and the resulting higher taxes result, among other things, from the level of interest rates. Foreign banks paradoxically also benefited from Western sanctions, which deprived their Russian rivals of access to international payment systems and increased the attractiveness of Western banks.

More than half of the EUR 800 million in tax liabilities was paid by the Austrian Raiffeisen Bank International. RBI's Russian profits more than tripled to 1.8 billion euros in 2021-2023, accounting for half of the Austrian group's total profit, up from about a third before the war.

Read more: The “scrap” trade is flourishing. Russian and Chinese companies have found a way >>>

Not only the interests of banks

After launching a full-scale invasion of Ukraine in February 2022, the RBI repeatedly announced restrictions on its activities in Russia. The delay in implementing these announcements was criticized by the European Central Bank and the US Treasury Department.

– Remaining in Russia is not only in the interest of the RBI. The Russian central bank will do everything in its power not to let them go. There are only a few non-sanctioned banks operating in Russia through which Russia can receive and send Swift payments, said one Russian banking executive.

However, using money earned in Russia outside this country is not that easy. In 2022, the Russian authorities banned the payment of dividends from Russian subsidiaries to companies from “unfriendly” Western countries.

– We can't do anything with Russian deposits except keep them in the central bank. As interest rates rise, so do our profits, said an executive at a European bank with a Russian subsidiary.

Blocked funds constitute a significant obstacle to leaving Russia. From the beginning of 2022, President Vladimir Putin's official consent to the sale of Russian assets by banks is also required.

Main photo source: YuryKara/Shutterstock

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