By John O'Donnell and Alexandra Schwarz-Goerlich
FRANKFURT/VIENNA (Reuters) -Raiffeisen Bank International (RBI) expects to be told by European regulators to slash lending and payments involving Russia, the Austrian bank said on Thursday, ratcheting up pressure on the biggest Western bank in Russia.
According to the latest draft of proposals from the European Central Bank (ECB), RBI will be told to cut loans to customers in Russia by up to 65% compared with the third quarter of last year and pare back international payments from Russia by 2026, the Austrian bank said.
The move, which RBI expects to be announced in the "near term", would be a blow for the bank, which has resisted pressure from international regulators to cut its ties with Moscow.
The ECB declined to comment.
Two years after Russia's invasion of Ukraine, RBI remains a critical financial lifeline for millions of Russians who want to send euros or dollars abroad.
RBI has said it intends to spin off its Russian business, but more than two years since Moscow launched its full-scale invasion of Ukraine, little has changed. The bank said the ECB's demands could make it harder to sell up.
RBI's presence underlines the depth of relations between Austria and Russia, which maintain close ties through Russian gas pipelines and finance, with Vienna a hub for cash from Russia and its former Soviet neighbours.
Conversations between RBI and the ECB are taking place against a backdrop of continued scrutiny by regulators of the Austrian bank and its Russian connections, which started more than a year ago when U.S. sanctions enforcer OFAC started to look into the bank's Russian business.
So far, key Austrian officials, irked by what they see as U.S. bullying of a small, neutral country, have fought the bank's corner because it is part of an influential industrial group that underpins the economy.
Recently, Austria pressured Ukraine to remove RBI from a Ukrainian blacklist, holding out on backing fresh European Union sanctions on Russia until it did, people familiar with the situation have told Reuters.
Russian authorities have made it clear to RBI, which has around 2,600 corporate customers, four million account holders and 10,000 staff in Russia, that they want it to stay because it enables international payments.
Separately, the United States is pressing RBI to drop plans to buy a 1.5 billion euro ($1.6 billion) industrial stake from a Russian tycoon, people with direct knowledge of the talks have said.
RBI is buying the stake in Vienna-based Strabag from a company the construction group identified as controlled by Oleg Deripaska.