Economic sanctions against Russia would not only affect Russia itself, but also the EU and Austria. Depending on the degree of severity, the economic cuts could also be felt correspondingly hard in this country. “Should war actually come and the gas be turned off, that would plunge the EU and Austria into a deep recession,” said the head of the economic research institute (Wifo), Gabriel Felbermayr, on Tuesday in the economic journalists’ club. “Then the 5 percent growth forecast for Austria is unlikely to be sustained.”

Neither the Ukraine nor Russia are among Austria’s most important trading partners. The economic ties are nevertheless considerable, especially with Russia. The country is Austria’s largest foreign investor after Germany. According to the Chamber of Commerce (WKÖ), 500 Russian companies have their headquarters in Germany with an investment volume of 21.4 billion euros. These include the state-owned Gazprom and Sberbank, which controls its European business from Vienna.

Conversely, around 650 domestic companies with investments of 4.6 billion euros are active in Russia. These include the partially state-owned OMV, which is also involved in the Nord Stream 2 gas pipeline as a co-financer, and Raiffeisen Bank International (RBI). Both companies would be affected by severe sanctions.

Gas as an uncertainty factor

With 200 branches and direct investments of 1.7 billion US dollars, Austria is even the sixth largest foreign investor in Ukraine. Numerous companies in the textile, construction and insulation sectors, for example, operate production facilities there. “All means for a peaceful settlement of the conflict are being used,” WKÖ Secretary General Karlheinz Kopf (ÖVP) is quoted as saying in a press release.

Meanwhile, Germany’s Chancellor Olaf Scholz has put the commissioning of the completed Nord Stream 2 pipeline on hold. However, the German Federal Network Agency had already suspended the certification process for the pipeline in November because documents were missing. As part of a consortium, OMV is involved in financing the pipeline with EUR 729 million and can expect a return of 9 percent once the first gas flows.

In addition, the group, in which the Republic holds a 31.5 percent stake via Öbag, must today make an investment decision for the Siberian Urengoy gas field. Not an easy decision, given the uncertain situation and possible further escalation levels.

RBI affected

As things stand at present, the banking sector would probably be hit hardest by sanctions. In the room is a conclusion of Russia from the international payment system Swift. It is not the only, but the world’s largest financial transaction network. It is currently the “hardest weapon we have,” says Felbermayr. “What would be even more effective would be the targeted boycott of the largest Russian banks.” Russia is already working with China on its own payment system.

Domestic banks, which are strongly represented in Eastern Europe, would also be particularly affected. According to data from the Bank for International Settlements (BIS), the total exposure of domestic banks to Russia (as of the end of September 2021) was US$17.5 billion. That is significantly higher than the exposure of German banks, which is only half as high at $8.1 billion. According to the BIS, Austrian banks’ exposure to Ukraine was USD 4.1 billion.

There is a lot at stake in Russia, especially for RBI. Of the 1.37 billion euros in profit in 2021, the Russian business accounted for 474 million euros and Ukraine 122 million (each after taxes). “The situation of banks – both in Russia and in Ukraine – is calm on both sides and business is normal. In the event of an escalation, the crisis that the bank has faced in recent weeks will come into force,” RBI said in a statement on Tuesday tried to appease.

the bank saved around 115 million euros as a precaution. In Russia, where RBI has a market share of around 2 percent, the credit volume is around EUR 11.6 billion. In Ukraine it is 2.2 billion euros. It is still unclear how and whether the alleged conflict will affect the loan default rate. The question of whether a bank bailout package WILL be needed is also not yet answered by anyone. The situation in eastern Ukraine is too uncertain and dynamic.

Sanctions since 2014

A sanctions regime against Russia was actually implemented in 2014 as part of the annexation of Crimea. At that time, among other things, an export stop for agricultural goods to Russia was imposed. According to Wifo boss Felbermayr, this has cost Austria 400 million euros in added value every year since then.