In the face of sanctions that have frozen international lending to Russia, a small group of European banks are trying to refinance existing loans to big companies there in order to protect their business.

They have their work cut out.

Washington and Brussels have excluded Russia’s state banks and top energy firms from capital markets as punishment for the country’s support for separatist rebels in Ukraine and their action – unprecedented in the post-Cold war era – means even companies not on the blacklist will struggle to raise large loans outside their domestic market.

Nonetheless, banks such as Raiffeisen and Unicredit are attempting to refinance existing debt to preserve relations with clients and with that, their sizeable business in the country.

Bank Austria, the central and eastern Europe arm of Italian bank UniCredit, said this week it expected to keep making solid profits in Russia.

“It is a compliance complexity for sure, a very significant effort, but I think it is our approach and culture that any requirement from the sanctions we respect to the extreme detail,” chief financial officer Francesco Giordano said.

Bankers were working on a syndicated loan of up to $900 million (R10 billion) for Russian steel company Evraz – led by Dutch bank ING and Germany’s Deutsche Bank – and were hoping it would be signed last week, though they would have jumped through many hoops to get it over the line.

“I think the deal will get done, but it is more difficult at the moment. People are asking a lot of questions around the new sanctions,” one banker told Thomson Reuters Loan Pricing Corporation (LPC).

The loan, a refinancing for Evraz’s export business, was first launched in May, after economic sanctions were initially imposed on Russia, but before last month’s escalation of the prohibitions.

Deutsche and ING declined to comment. Evraz did not respond to requests for comment.

British, US and Japanese banks do not want the legal hassle of getting involved in syndicated loans for companies in Russia: The economic warfare between Russia and the West has created a bureaucratic nightmare, forcing banks to scrutinise every single payment made through their Russian subsidiaries to ensure they are in compliance.

Nonetheless some European bankers are persevering, trying to convince their banks’ credit committees to give them the green light for loans to help customers refinance debts.

“We would potentially look at doing deals with unsanctioned companies,” a second banker at one European lender told Thomson Reuters LPC.

“But uncertainty around further sanctions is a big problem.”

Demonstrating this uncertainty, Russia’s syndicated debt market, worth $47.2bn last year, has dried up since hostilities broke out over the Ukraine.

Just two corporate loans have been signed since March – a $1.15bn pre-export loan for Russian iron ore company Metalloinvest and a $450m unsecured loan for potash producer Uralkali.

In both cases, European banks dominated the group of banks that made the deals.

More recently, Russian oil and gas company Slavneft mandated Austria’s Raiffeisen Bank International (RBI) to co-ordinate a $500m unsecured syndicated loan in July, which has yet to be signed.

Raiffeisen, estimated to be the bank most exposed to Russia with revenues there making up 8 percent of its group assets, said it was committed to its Russian businesses.

“RBI is happy to support its good clients in difficult times, of course being fully in line with all compliance rules.“

Put off not only by the prospect of a bureaucratic headache, banks have also been spooked by US authorities’ recent record fine against BNP Paribas – $8.9bn for breaching sanctions against Iran.

US and UK banks with less of a presence in Russia and tougher sanction laws back home are more reticent. – Sandrine Bradley for Reuters