Oil-Rich Russia's Banks Face Liquidity Crisis as War Costs Soar

Russian banks are facing a serious liquidity crisis, raising doubts about Moscow’s ability to cover soaring wartime spending through domestic borrowing. The banking sector lacks the spare ruble liquidity needed to purchase government bonds, just as the finance ministry confronts a widening budget deficit that may require trillions of rubles in additional borrowing this year.

Taras Skvortsov, Vice President and Chief Financial Officer of Sberbank, revealed that cash withdrawals from the banking system have reached approximately 2 trillion rubles since the start of the year, creating a severe liquidity shortage. He noted that banks currently only have enough funds to serve their core customers and lack the surplus liquidity required to buy OFZ bonds without a significant premium.

The federal budget deficit swelled to 5.7 trillion rubles in the first half of 2026, driven by defence and military spending far exceeding initial plans. Reports suggest war-related expenditures could overshoot the budget by 4 trillion to 5 trillion rubles, forcing the finance ministry to urgently seek an additional 2 trillion to 3 trillion rubles in emergency funding.