FRANKFURT, Sept 5 (Reuters) - A Russian court froze the

shares in Raiffeisen Bank International's local arm,

the biggest Western bank in Russia said on Thursday, ruling out

any sale of the business for now.

Austria-based RBI had vowed to spin off its Russian

business, which provides a payment lifeline to hundreds of

companies there, after coming under pressure from international

regulators. But more than two years into the war between Russia

and Ukraine, little has changed.

The move, the biggest such freeze involving a Western bank

in Russia, marks an escalation in the standoff between Moscow

and the West.

A spokesperson for the bank said that the Russian court move

ruled out a sale of the bank, although they said it would have

no impact on the Russian bank's operations or on the efforts

demanded by the European Central Bank to reduce it.

"We can still appoint management and give instructions to

the Russians but we cannot sell the bank," they said.

RBI will attempt to reverse the court decision, it said in

the statement.

Russian authorities had made it clear to RBI, which has

around 2,600 corporate customers, 4 million local account

holders and 10,000 staff, that they wish it to stay because it

enables international payments, one source has told Reuters.

RBI is a critical financial lifeline for millions of Russian

customers who want to send euros or dollars abroad. Western

regulators want this to change. The European Central Bank is

demanding the bank pare back its Russia business.

With sprawling industrial holdings, more than 18 million

customers from Vienna to Moscow and 44,000 staff, Raiffeisen is

a financial linchpin for Austria and much of eastern Europe.

Russia has become an even bigger money spinner for the bank

since the Ukraine war started in 2022. Russia accounted for

about half of the group's profits in the first three months of

this year as fees on payments abroad spiked.