Russian war economy financial crisis

In early July 2026 a European intelligence report warned that Russia’s war‑driven economy was pushing its banking sector toward an “explosive” crisis. Deteriorating loan quality, a rise in non‑performing retail loans to as high as 15 % at some banks and a surge in bankruptcies—over 500,000 filings in 2025—raised systemic risk. The Ministry of Economy trimmed its GDP growth outlook to 0.4 % for 2026, while the EU prepared a new sanctions package targeting banks and crypto networks.

Two weeks later, market data showed the Moscow Exchange index slipping below 1,900 points, the steepest drop since 2022, reflecting the impact of sanctions, a fuel shortage and stalled Ukraine negotiations. Inflation and stagflation fears were compounded by a cash surge of roughly 1.56 trillion rubles after intermittent internet shutdowns, creating a significant tax gap. Ukrainian drone raids damaged Russian oil infrastructure, and domestic approval for President Putin fell to its lowest level since autumn 2022. Despite these pressures, Russia continued expanding its Arctic presence, completing about 100 voyages on the Northern Sea Route in 2025 with European financing of nearly €6 billion, while maintaining the world’s largest ice‑breaker fleet. In Crimea, an underground resistance backed by Ukrainian intelligence increased drone strikes against Russian targets, indicating growing local opposition.