VZCZCXYZ0000
RR RUEHWEB

DE RUEHVI #3394 3280747
ZNY CCCCC ZZH
R 240747Z NOV 06
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC 5617
INFO RUEHKV/AMEMBASSY KYIV 0011
RUEHSK/AMEMBASSY MINSK 0748
RUEHMO/AMEMBASSY MOSCOW 2127

C O N F I D E N T I A L VIENNA 003394 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR EUR DAS KRAMER, EUR/AGS, EUR/UMB 
 
E.O. 12958: DECL: 11/24/2016 
TAGS: EFIN EPET ENGR BO UKR AU
SUBJECT: RAIFFEISEN ON BELARUS, UKRAINE, THE SALE OF BAWAG, 
AND THE PARLIAMENTARY BANK HEARINGS 
 
REF: A) VIENNA 1089 B) 06/12/06 PURCELL/NELSON EMAIL 
     C) VIENNA 789 
 
Classified By: Charge d'Affaires a.i. Gregory E. Phillips for reasons 
1.5 (b) and (d). 
 
¶1.  (C) Summary:  Friedrich Sommer, Raiffeisen Zentralbank's 
General Counsel, confirmed to us on November 17 that no 
senior Belarus officials have accounts with Raiffeisen's 
Belarus subsidiary, Priorbank.  Raiffeisen International 
Bank-Holding has definitively ended its controversial 
trusteeship with RosUkrEnergo, the Russian-Ukrainian gas 
joint venture.  Sommer also offered comments on domestic 
banking issues, noting that the U.S. investment fund Cerberus 
appears to have the inside track to buy BAWAG, Austria's 
troubled, fourth largest bank.  Sommer opined that the 
on-going parliamentary bank hearings would soon fizzle out, 
as a wide swath of Austria's political spectrum recognizes 
the hearings would damage the reputation of Austria's 
financial sector.  End Summary. 
 
 
Raiffeisen Confirms: No Business with Belarus Leadership 
--------------------------------------------- ----------- 
 
¶2.  (C) In ref A meeting with EUR DAS Kramer, Raiffeisen 
International Bank-Holding AG (RIAG) Chairman Herbert Stepic 
promised to share with the USG, on an informal and 
confidential basis, the names of any Belarus regime officials 
 
SIPDIS 
who have accounts with RIAG's Belarus subsidiary, Priorbank. 
Post followed up on November 17 with Friedrich Sommer, 
Raiffeisen Zentralbank's General Counsel.  Sommer confirmed 
that none of the Belarus officials of concern to the USG (ref 
B) have accounts with Priorbank.  Sommer added that Priorbank 
would not allow any Belarus official subject to the EU's 
financial sanctions to open an account with Priorbank. 
 
 
Raiffeisen No Longer Trustee For RosUkrEnergo Joint Venture 
--------------------------------------------- -------------- 
 
¶3.  (C) Sommer said that RIAG had completely pulled out of 
its trustee function with the controversial RosUkrEnergo 
(RUE) gas joint venture (ref C).  According to Sommer, RUE's 
owners ultimately decided not to make an initial public 
offering (IPO) on the London Stock Exchange.  Sommer said 
RIAG had at one point considered buying a small minority 
position in RUE in the event of an IPO, but had not done so. 
Sommer confirmed that, when RIAG ended its trusteeship with 
RUE, RIAG received a lump sum remuneration of Euro 10 million 
from RUE in accordance with its contract. 
 
 
Sale of BAWAG: Cerberus Has the Inside Track 
-------------------------------------------- 
 
¶4.  (C) Regarding the sale of BAWAG, Austria's troubled, 
fourth largest bank, Sommer acknowledged that Cerberus, the 
U.S. investment fund, appeared to have the inside track. 
Cerberus, U.S. investment fund Lone Star, the Bayerische 
Landesbank, and an unknown fourth party have all submitted 
binding bids to purchase BAWAG.  Sommer estimated that BAWAG, 
which Austria's Trade Union Federation (OGB) owns, is worth 
Euro 2.3-2.5 billion. 
 
 
Parliamentary Banking Investigation 
----------------------------------- 
 
¶5.  (C) In Sommer's view, the on-going parliamentary banking 
investigation would slowly, but surely, fizzle out.  The 
Social Democrats (SPO) had agreed to press forward with the 
hearings as a sop to the Greens.  However, following 
overwhelming criticism of the hearings from across the 
political spectrum, the SPO is trying to backpedal somewhat. 
According to Sommer, the hearings would be useless, given 
Austria's bank secrecy laws, which protect the identity of 
bank customers, except in criminal investigations.  Sommer 
admitted that critical references to Austrian banks' "eastern 
business" most likely refers to RIAG's experience with RUE. 
Phillips