E.U. Sanctions

From Austria with Love

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Austrian Chancellor Werner Faymann (R) receives Russia's President Vladimir Putin in Vienna June 24, 2014. Source: REUTERS
  • Why it matters

    Why it matters

    The decision to shield two Austrian banks from E.U. sanctions against Russia will likely help preserve stability in central Europe and avoid problems in the region’s banking sector.

  • Facts

    Facts

    • Economic punishment against Russia for its role in the Ukrainian conflict isn’t supposed to harm the countries issuing sanctions.
    • If the Russian banks were on the sanctions list, it would have sparked long lines of nervous depositors at branches and possibly a dangerous domino effect in central and eastern Europe.
    • Austria is deeply linked to Russia’s economy.
  • Audio

    Audio

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Oh, Vienna! Austria has convinced Brussels to temper its economic punishment against Russia for supporting separatists in the bloody Ukrainian conflict. The Russian banks VTB and Sberbank, which conduct their European business from Vienna, have been excluded from E.U. sanctions.

The special deal that Austria has negotiated for itself will not only please the Moscow bankers – several countries in central and eastern Europe also depend on the two Russian financial giants.

Specializing in traditional savers and borrowers, VTB and Sberbank have amassed deposits worth billions of euros in Austria, Germany, Hungary and across the Balkans. If the banks had been put on the sanctions list, it would have led to long lines of nervous depositors at office branches and possibly a dangerous domino effect. In light of the troubled financial sector in Austria and southeastern Europe, that would be sheer poison.

Austria's chancellor, Werner Faymann, has little motivation to grab hold of the sanctions cudgel.

The sanctions against Russia aren’t supposed to punish the countries issuing them. The Austrian proposal agreed to in Brussels is correct and the sensible thing to do. Vienna’s Russia-friendly attitude isn’t a matter of happenstance. The Alpine republic traditionally puts the brakes on economic sanctions against Moscow. For good reasons: Austria’s economy is tightly linked with Russia’s. Numerous key enterprises such as oil and gas giant OMV, construction company Strabag, oil-technology firm Catoil and, above all, banks such as Raiffeisen and Bank Austria are deeply involved in Russia. Austria’s chancellor, Werner Faymann, has little motivation to grab hold of the sanctions cudgel.

Economic and political signals exist in the fact OMV chose to emphasize its close partnership with Gazprom, Russia’s state-controlled national gas titan, just when President Vladimir Putin was visiting Austria. Despite the European Commission’s reservations, it was during Mr. Putin’s Vienna visit that OMV boss Gerhard Roiss and Gazprom colleague Alexei Miller signed a contract for building the Austrian segment of South Stream. The pipeline is intended to bring Russian gas to southeastern and southern Europe.

Russia has influential friends in Austria. For example, Siegfried Wolf, head of the supervisory board of powerful Austrian industry-holding stock corporation ÖIAG, is a personal friend of Mr. Putin’s. Mr. Wolf also runs Sberbank Europe.

In June, Austria rolled out the red carpet for Mr. Putin as the Ukrainian conflict raged. The neutral country was inundated with sharp criticism from its E.U. partners.

To a large extent, the Austrians couldn’t have cared less. But the Russians felt honored.

Hans-Peter Siebenhaar is correspondent in Vienna. He can be reached at:  siebenhaar@handelsblatt.com

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