A growing flight of cash from Russian banks is exposing the strain that four years of war and mounting military expenditure are placing on the country’s financial system, as households and businesses increasingly fear that private wealth could be commandeered to keep the war effort funded.
More than 286bn roubles (£2.5bn) was withdrawn from Russian banks during the first two weeks of August, according to figures cited from the Central Bank. That follows withdrawals of about £5.3bn in July and £3.3bn in June.
The scale of the outflow has revived memories of the financial turmoil that followed Russia’s full-scale invasion of Ukraine in 2022.
Taras Skvortsov, an executive at Sberbank, has warned that capital flight this year could ultimately reach twice the level recorded during the opening months of the war.
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The immediate problem for banks is liquidity. Financial institutions have been encouraged by the Kremlin to extend credit to defence-linked companies, leaving them increasingly exposed to bad loans as the economy becomes more heavily geared towards military production.
“Drones are flying. Things are burning down. Nervousness is growing,” Skvortsov told the Washington Post.
“Everyday wisdom is kicking in. People feel they need cash under their pillow, not in banks where it may never be returned.”
He argued that households increasingly prefer physical cash to deposits they fear could become inaccessible.
Corporate Russia is also attempting to move wealth beyond the reach of domestic regulators, with businesses reportedly routing funds through financial centres in Kazakhstan, Kyrgyzstan and Armenia.
The pressure is spilling into government financing. A shortage of liquidity has contributed to the cancellation of bond auctions as
Moscow confronts a budget deficit that has already exceeded $76bn.
The problem is compounded by Ukraine’s sustained attacks on Russian energy infrastructure, which have damaged refining capacity and contributed to domestic fuel shortages.
Meanwhile, state seizures of private assets have intensified concerns among wealthy Russians. The confiscation of assets belonging to agricultural tycoon Vadim Moshkovich, reportedly worth £5.6bn, has reinforced fears that private wealth could increasingly become a source of emergency funding for the state.
He warned: “If the government needs cash, Putin will just do a grab for assets.
“He doesn’t care. And that’s where I think it’s heading.”
The political warning signs are becoming harder to ignore. Andrei Klepach, chief economist at state bank VEB, was dismissed after publicly questioning Russia’s ability to sustain a prolonged war.
Even Sergei Sobyanin, Moscow’s mayor, has warned against extracting too much from the civilian economy, arguing that destroying it would ultimately damage the state itself.
He warned: “To kill the civilian economy, is to kill the country itself.”
For the Kremlin, the danger is no longer simply the cost of financing the war. It is the possibility that the war is beginning to undermine the financial confidence on which the Russian state depends.
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