Russia faces slow-motion bank run as Kremlin scrambles for war funding
This digest was compiled by AI from multiple sources — links to the originals are below.
Russian depositors withdrew $3.4 billion in the first half of August, accelerating a bank run that has drained $15.2 billion since June. The liquidity crunch is threatening the Kremlin's ability to fund its war in Ukraine. The finance ministry halted bond auctions indefinitely last month amid weak demand.
Key Facts
- Russians withdrew $3.4 billion in the first half of August, following $7.3 billion in July and $4.5 billion in June.
- Russia's budget deficit reached $76 billion at the end of July.
- The finance ministry halted bond auctions indefinitely last month amid higher borrowing costs and weak investor demand.
- Sberbank senior executive Taras Skvortsov said many banks lack cash on hand to buy government bonds.
- The leader of Russia's Communist Party proposed mobilizing 130 trillion rubles held in bank accounts to address economic and budget woes.
Deposit Flight
Russian depositors withdrew $3.4 billion in the first half of August, according to central bank data cited by the Washington Post. That followed withdrawals of $7.3 billion in July and $4.5 billion in June, bringing the three-month total to $15.2 billion. The pace of withdrawals this year is on track to nearly double the $24.7 billion outflow recorded in 2022, when Russia launched its invasion of Ukraine. A former finance official told the Post that people's 'everyday wisdom may be kicking in that they need to have cash under their pillow and not somewhere in banks where it may never be returned.'
War Funding Strain
The loss of deposits has created a liquidity crunch so severe that it threatens Russia's ability to fund its war in Ukraine. Sberbank senior executive Taras Skvortsov told Russian radio that many banks don't have cash on hand to buy government bonds. The finance ministry halted bond auctions indefinitely last month amid higher borrowing costs and weak investor demand. The auctions are the Kremlin's main source of domestic borrowing to fill a budget deficit that hit $76 billion at the end of July. Moscow has directed banks to offer capital to the defense industry, but many of those loans turned into bad debts.
Political Response
The leader of Russia's Communist Party told parliament recently that 130 trillion rubles held in bank accounts should be 'mobilized' to address the country's economic and budget woes. The proposal reflects growing fears among ordinary Russians that their money may be seized as government funding sources dry up. The sovereign wealth fund has been nearly depleted, and tax hikes are straining consumers already struggling with high inflation.
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Russia faces slow-motion bank run as Kremlin scrambles for war funding
