- Lead. Russians withdrew $3.4 billion from their banks in the first two weeks of August, following $7.3 billion in July and $4.5 billion in June, a pace that Fortune reports is on track to nearly double the $24.7 billion exodus recorded during the 2022 invasion panic.
- Fact. Russia’s Finance Ministry suspended government bond auctions indefinitely last month after yields spiked and demand collapsed—banks, which buy most Russian sovereign debt, told the government they no longer have the cash to do so.
- Stake. With the federal budget deficit reaching $76 billion by late July, the Kremlin’s domestic borrowing channel has effectively closed. Officials have acknowledged the government may increasingly resort to asset seizures to fund continued military operations.
A slow-motion financial squeeze is tightening around Russia’s ability to sustain its war in Ukraine. The structural liquidity deficit in the country’s banking sector has reached a record 2.5 trillion rubles—the highest level since the spring of 2022—driven by accelerating deposit withdrawals and a collapse in demand for sovereign debt.
The Deposit Drain
Cash is leaving Russian banks at an unusual rate. Depositors pulled $4.5 billion in June, $7.3 billion in July, and $3.4 billion in just the first half of August, according to reporting by Fortune published August 23. The cumulative figure since January—roughly $25 billion—is approaching the total that leaked out during the shock of the full-scale invasion in 2022, and the annualised pace is running well above it. The triggers are a mix of economic anxiety, high consumer spending fuelled by wartime wages, and concern about the banking system’s exposure to sovereign debt losses.
A senior Sberbank executive stated publicly that “many banks don’t have cash on hand to buy government bonds,” a frank admission that the financial system’s core function as a buyer of last resort for Russian sovereign debt has broken down. Banks have recorded roughly 200 billion rubles ($2.52 billion) in mark-to-market losses on existing bond holdings as yields have risen, compounding the balance-sheet pressure.
Bond Market Freeze
The Finance Ministry halted its regular OFZ (federal loan bond) auctions in July after prices fell and investor appetite evaporated. The suspension is significant: Russia has relied heavily on domestic bond issuance to finance defence spending above its oil-revenue projections. With that channel closed, the government faces a widening gap between outgoings—driven by military contracts, soldier pay, and weapons procurement—and available revenues.
The federal budget deficit reached approximately $76 billion by late July, reflecting spending that has run well above projections since the beginning of the year. The Central Bank of Russia has injected an additional 2.3 trillion rubles ($28.98 billion) into the banking system since January, bringing banks’ total borrowing from the central bank to 6 trillion rubles ($75.6 billion). In effect, the central bank has been plugging a structural hole that the bond market can no longer fill.
War Funding at Risk
Russia’s military operations—including the sustained drone and missile campaign against Ukrainian cities that has repeatedly targeted civilian infrastructure—consume resources at a pace that is visibly straining the government’s financial architecture. Approximately 25% of Russia’s corporate bond market is at risk of default as businesses that borrowed at low pre-war rates must refinance at much higher ones; the volume of debt requiring rollover this year is roughly double last year’s.
Officials have raised the prospect of mandatory asset transfers from private companies to the state as an alternative funding mechanism. Whether that can fill the gap left by a frozen bond market and accelerating deposit flight remains an open question—but the trajectory over the summer months suggests the Kremlin’s war economy is under measurable stress heading into the conflict’s fifth year.