By Tom Balmforth and John O'Donnell
KYIV/FRANKFURT (Reuters) - Ukraine has refused to remove Raiffeisen Bank International from a "sponsors of war" blacklist, challenging the biggest Western bank in Russia to sever its ties to Moscow.
In a letter sent to Raiffeisen earlier this month, which was seen by Reuters, Ukrainian officials questioned what the bank was doing to leave Russia, saying much of its plans were vague and incomplete.
The correspondence ratchets up pressure on one of Austria's largest banks and adds to tensions between Kyiv and Austria, whose political leaders are also lobbying to have Raiffeisen taken off the list, having earlier secured a temporary suspension.
"A number of blind spots still remain," the Ukraine officials wrote in the letter, saying this prevented the bank's removal from the list.
"The sale timeline is missing ... it remains unclear when, if at all, a spin-off scenario might come into action," the Ukraine officials said in the letter.
Raiffeisen had intended to spin off its Russian business last year but this has yet to happen.
A Raiffeisen spokesperson said the bank could not give a timeframe for leaving Russia because this depended on the approval of regulators.
The blacklist has no legal standing, but it is symbolically important and has embarrassed Raiffeisen and angered Austrian politicians and officials.
The Ukrainian officials also flagged their concern in the letter over Raiffeisen's loan relief schemes for Russian soldiers, support the bank has said is legally mandatory in Russia.
SUSPENDED
In December, Austrian politicians succeeded in getting the bank suspended from the blacklist, temporarily withholding support for new European Union sanctions on Russia to win this concession.
Austria publicly supports Ukraine, but several sources familiar with government thinking have said they are reluctant to completely sever decades-old ties with Russia, hoping it may be possible to restore relations at some stage.
Austrian government officials believe Raiffeisen has been unfairly singled out. Other banks, such as Italy's UniCredit, which remains active in Russia, does not appear on the list.
Last October, Austria's foreign minister, Alexander Schallenberg, openly criticised the blacklist as arbitrary at a meeting of European ministers in Kyiv, one person briefed on those discussions said at the time.
Raiffeisen is the only Austrian company on the list.
Some companies have been taken off the list, including Hungary's OTP Bank.
Although Raiffeisen was suspended from the blacklist in December, its name still appears alongside 49 companies designated "international sponsors of war" drawn up by Ukraine's National Agency of Corruption Prevention.
A Ukrainian government source, who requested anonymity in order to discuss sensitive matters, told Reuters that the letter was sent after the Austrian bank signalled its intention to quit Russia by the third quarter of 2024.
The letter said the timeline for a sale of the bank's Russia business remained unclear.
The letter also said that Raiffeisen had indicated in correspondence that a "sale/divestment" was the bank's "preferred option", but that no specifics had been provided.
The Ukrainian officials also asked in the letter for insight into how long regulatory approvals from the European Union and Austria would take to get through.
"Our request for the specific benchmark(s) of business reduction remains largely unanswered too," it said, referring to the bank's commitment to reduce its Russian business.
The letter concluded by saying that the bank's "suspended" status would remain in force, but that Ukraine could remove the bank from its blacklist if it got "positive news".
Raiffeisen on Wednesday said it was in advanced talks to sell its Belarusian subsidiary to a buyer from the United Arab Emirates.