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By John O'Donnell and Alexandra Schwarz-Goerlich
FRANKFURT/VIENNA (Reuters) -Raiffeisen Bank International was warned by the U.S. Treasury in writing that its access to the U.S. financial system could be curbed because of its Russia dealings, according to a person who has seen the correspondence.
On May 6, Deputy Secretary of the Treasury Wally Adeyemo sent a letter to RBI, expressing concern about RBI's presence in Russia as well as a $1.5 billion deal with a sanctioned Russian tycoon that the bank has since scrapped, according to the person, who requested anonymity because the matter is private.
While the deal linked to Oleg Deripaska was ditched by Raiffeisen days after the letter arrived, the source said that the U.S. Treasury's concerns over the Austrian bank's business in Russia remain.
The warning is the strongest yet to the biggest Western bank in Russia and follows months of pressure from Washington, which has been looking into RBI's business in the nation for more than a year.
It underscores the deep frustration in Washington with the lender despite its recent decision to abandon a deal that had exacerbated those tensions.
While many Western governments and corporations have radically reduced ties to Moscow since it invaded Ukraine over two years ago, Austria remains linked with Russia through critical gas pipelines, with Vienna still serving as a hub for cash from Russia and its ex-Soviet neighbours.
Reuters reported in March about strong U.S. opposition to the Deripaska transaction, which Raiffeisen had billed as a means of unlocking some of its funds stranded in Russia.
Raiffeisen shares dropped 3% as trading opened, making it the top loser among European banks.
A spokesperson for Raiffeisen said that it had walked away from the deal and had not entered into any such transactions.
The spokesperson said RBI had "significantly reduced" activities in Russia and taken broad measures to mitigate the risks from sanctions.
"RBI will continue to work towards the de-consolidation of its Russian subsidiary," the spokesperson told Reuters.
In the letter, Adeyemo, the U.S. Treasury's second-highest ranking official, said Raiffeisen's extending activities would contradict assurances RBI had given to the Treasury that they were trying to wind down in Russia, according to the source.
Adeyemo warned that RBI's actions increased the risk of Treasury taking action to restrict its access to the U.S. financial system given concerns that its behaviour put U.S. national security at risk.