Russia has been at war in Ukraine for four and a half years, and in that time it has been facing major sanctions from the U.S., the European Union, and other entities.
This has led to possible short-term trouble for the Russian economy, including a potential banking crisis, according to a new report.
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Reuters reported that it has seen a European state intelligence report from earlier this month stating that Russia is facing an “explosive” banking crisis. Lenders, the Reuters report said, are “shouldering much of the burden of the country’s war economy.”
The intelligence report from an unnamed country, which is titled “Note on the probability of a banking crisis in Russia in 2026,” also states that Russia is especially vulnerable to future sanctions from the West, some of which are reportedly on their way soon.
“The situation creates the illusion of a dynamic economy that, in reality, conceals an explosive situation which an economic shock, such as an ambitious package of sanctions against banks … could trigger,” the report itself said, per Reuters.
The authors of the report also stated that “lending to defense firms, regional state-backed projects and homeowners has increased the amount of loans that may never be repaid.”
The intelligence report also found that 500,000 Russians declared bankruptcy in 2025, an increase by a third from the previous year’s figure.
And a bigger problem has been seen than what has taken place so far in the years of the war with Ukraine.
“While Russia’s banks have mostly weathered the sanctions imposed since Moscow’s 2022 full-scale invasion of Ukraine, the June report says deteriorating loans and growing household indebtedness create an ‘explosive’ risk, just as the EU prepares a 21st package of sanctions it hopes to finalize in July, targeting banks and cryptocurrency networks,” Reuters reported, citing the intelligence report.
A U.S. Army M109A6 Paladin assigned to 3rd Battalion, 29th Field Artillery Regiment, 3rd Armored Brigade Combat Team, 4th Infantry Division fires during an artillery direct fire range at Fort Carson, Colorado, April 28, 2023. Direct fire ranges test gun crews’ abilities to engage threats at close range, one of the few times a gun crew can see their targets without a forward observer. (U.S. Army photo by Capt. Tobias Cukale)
Time to “Crush” the Russian Economy?
Earlier this week, four authors, Jeffrey Sonnenfeld, Robert Hormats, John Herbst and Alexander Browder, wrote for Time Magazine that, following the death of U.S. Senator and major Russia hawk Lindsey Graham, it is now time to “crush” Vladimir Putin’s war economy.
Graham, in the last year of his life, had been pushing new sanctions legislation called the Sanctioning Russia Act, which would “impose 500% secondary tariffs, property-blocking sanctions on any financial institution owned by Russia or by individuals within the Russian government, and further banking sanctions.”
The authors call for Congress to pass the sanctions measure, which they say “would deal a serious blow that could, at last, end Vladimir Putin’s bloody and imperialistic invasion of Ukraine,” and perhaps name it after Graham.
“The prescription is straightforward: deploy a far more complete and comprehensive set of economic sanctions against Russia; dismantle its shadow financing network—A7A5 chief among them—by cutting off the enablers operating within Kyrgyzstan and other intermediary countries; sanction the shadow fleet vessel by vessel to stop the illicit flow of Russian oil; impose meaningful secondary tariffs; and stop accommodating European companies—Total Energies, Airbus, and Raiffeisen among them—whose conduct has actively helped Russia rebuild its economic capabilities,” the authors propose.
No Crisis Yet?
Some experts quoted by Reuters indicated that Russia is not at the crisis point quite yet, citing the limits of sanctions to hurt them.
“Russia’s economy is stagnating but the dominance of the state and defense spending means there is no immediate financial crisis to hand,” Chris Weafer, a Russia expert at consultancy Macro Advisory, told Reuters. “Asia ignores sanctions. So the idea that a fresh round will tip Russia into crisis is wishful thinking.”
The story added that the United States temporarily dropped its sanctions on Russian oil, although that waiver has since expired.
No Deal Yet
Meanwhile, per a Politico report this week, the European Union has failed to reach a deal on a new round of sanctions. The lack of a deal forced the body to “temporarily freeze the bloc’s price cap on Russian crude for another week.”
The round would be the 21st of sanctions against Russia by the EU since 2022.
“Without another extension next week, the cap will automatically bounce higher because oil prices have risen due to the war in Iran — handing Russian President Vladimir Putin a windfall,” Politico said. “The European Commission is legally obliged to recalculate the price ceiling after July 15 but the new cap would become effective only on Aug. 1, giving the executive some leeway.”
About the Author: Stephen Silver
Stephen Silver is an award-winning journalist, essayist, and film critic, and contributor to the Philadelphia Inquirer, the Jewish Telegraphic Agency, Broad Street Review, and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. For over a decade, Stephen has authored thousands of articles that focus on politics, national security, technology, and the economy. Follow him on X (formerly Twitter) at @StephenSilver, and subscribe to his Substack newsletter.
