Russia’s full-scale war against Ukraine led to a significant reduction in the financial reserves of the Russian Federation accumulated during the pre-war period.
Bloomberg writes about this on January 16.
Analysts say Russia is burning through its financial reserves at a breakneck pace to support its war economy.
As the authors of the article note, the Kremlin does not stop burning its reserves accumulated during the pre-war period to support the war economy. In addition, part of the Russian Federation’s reserves was absorbed by measures to support the Russian economy in the context of large-scale Western sanctions.
For example, in 2024 alone, Russia spent almost a quarter of its National Welfare Fund reserves to finance the martial law economy and also cover the costs of its invasion of Ukraine. As the publication recalls, at the beginning of 2022, this fund contained 8.9 trillion rubles.
Despite the fact that, according to official data from the Russian Ministry of Finance, in 2024 the National Welfare Fund contained 12 trillion rubles, or $117 billion in equivalent terms, reserves of cash and liquid investments decreased as of January 1, 2025 by 24 percent to 3.8 trillion . compared to the beginning of last year. Also last year, despite oil and gas export revenues exceeding Russian government forecasts, the Russian Ministry of Finance spent 1.3 trillion rubles from the National Welfare Fund to cover the budget deficit.
In addition, a report by the Central Bank of Russia on possible developments in monetary policy, released in October 2024, pointed to the risks of a complete depletion of the National Welfare Fund in 2025 in the event of a “significant deterioration in external conditions” and a collapse in oil prices.
Recently, Craig Kennedy, a researcher at the Center for Russian and Eurasian Studies at Harvard University, published a study exposing the real scale of Russia’s hidden military debt.
According to his calculations, the Kremlin, starting in 2022, initiated a policy of massive preferential bank lending to enterprises of the Russian military-industrial complex, despite the fact that not all of them demonstrated the appropriate level of profitability and creditworthiness.
As a result, since mid-2022, Russia has experienced an abnormally high increase in corporate debt – by 71 percent or US$415 billion in terms of value. According to the calculations given in the study, from 210 to 250 billion dollars of this amount are actually granted preferential bank loans to military-industrial complex enterprises under state coercion, many of which have unsatisfactory creditworthiness.
Thus, it becomes obvious that the Russian Federation finances its military-industrial complex not only directly from the federal budget, but also “hiddenly” in the form of, in fact, preferential lending from banks. However, all this is fraught with significant risks for the stability of the Russian banking system.
Source: Racurs
I am David Wyatt, a professional writer and journalist for Buna Times. I specialize in the world section of news coverage, where I bring to light stories and issues that affect us globally. As a graduate of Journalism, I have always had the passion to spread knowledge through writing.