Russia Faces Bank Run and War Funding Crisis
The Kremlin plans to seize citizens' funds to finance the war.
1Bank Run Begins in Russia
Russian citizens are withdrawing their deposits from banks amid fears that their money will be seized by the state. In the first half of August, $3.4 billion was withdrawn. In July, this figure was $7.3 billion, and in June, it was $4.5 billion. This situation is seen as a result of Russia's search for resources to fund the war.
2The Cost of War Escalates
Russia's invasion of Ukraine has lasted longer than expected, straining the Kremlin's finances. The budget deficit is growing, and the sovereign wealth fund is nearly depleted. Consumers struggling with high inflation are further burdened by tax hikes. Loans directed to the defense industry have also turned into bad debt.
3Banks Face Liquidity Crisis
The withdrawal of deposits has caused a severe liquidity crisis in banks. A senior executive at Sberbank stated that many banks do not have cash on hand to buy government bonds. The Finance Ministry halted bond auctions due to high borrowing costs and weak investor demand.
4Pension Funds May Be Seized
The Russian Finance Ministry is preparing legislation to access $40 billion in pension savings held in privately managed funds. This follows the seizure of $51.5 billion in oligarch assets by the state last year. As the government's need for cash grows, fears of citizens' funds being seized are increasing.
5Debt Crisis Warnings
Debt crisis warnings are mounting in Russia. High interest rates are making it difficult for borrowers to repay loans. The head of the Russian Union of Industrialists and Entrepreneurs stated that many companies are in a 'pre-default situation.' A state-backed think tank warned of a potential banking crisis by October.
6War Funding Sources Drying Up
Russia's sources of war funding are dwindling. The budget deficit reached $76 billion at the end of July. The suspension of bond auctions has narrowed the government's domestic borrowing options. This situation is making it harder to sustain the war and pushing the Kremlin to seek new resources.
7Plans for Conscription
The Russian military is preparing plans to increase the number of conscripts. Sources indicate that a broader mobilization could be announced after parliamentary elections. A mobilization in September 2022 led to hundreds of thousands of men fleeing to neighboring countries. Rumors of a new mobilization have already increased border traffic.
8Economic and Military Crisis Deepens
Russia's financial crisis parallels its battlefield performance. Ukraine's new tactics and drone attacks have halted Russia's advance and devastated its oil infrastructure. Both the economic and military crises are intensifying the Kremlin's search for money and manpower. This poses a serious threat to Russia's future.
Original article: Fortune — Rusya'da Banka Kaçışı ve Savaş Finansmanı Krizi