RUSSIAS DOOM IS ACCELERATING

The speed the Russians are heading towards the brick wall of destiny in their automobile of fiscal doom seem to be accelerating. As the government is now looking out of the back window pointing to what might have been, while a distraction show runs to keep the back seat passengers happy, only the tiny figure of Elvira Niabulina the Governor of the Bank of Russia, is trying to stand on the brake even as the army has its boot on the accelerator spending its way to oblivion.

The passengers are fed up with the content, the endless repeats, the thin plot. They’re starting to moan. The Z-bloggers seem to understand it but their voices are not being heard in the wider population. National newspapers tread a thin line between criticism of the state and telling the truth either by anecdote or simile. One article about VPN’s and the governments efforts to ban them one way or another in Russia, was highly critical, but to do it they used Iran as an example.

By sharing that the Iranian governments war on VPN’s had and still is causing a huge amount of resentment, was the cause of a good deal of rioting, and yet they’re still trying to force the policy despite the risk of more trouble, was deliberately poignant and aimed directly at anyone who could put the two and two together to make the four: is it worth the potential trouble by duplicating the effort in Russia?

What the Russian Government is planning next has got everyone with any savings or bank deposits worried. Except the leadership who have accepted it already, everyone knows it’s inevitable. Elvira Niabulina has one last trick up her sleeve to try and put some pressure on the brake. If you have more than the equivalent of $32,000 (about 3 million roubles) the government needs the money and so it’s going to take it. It’s one of those policy ideas thats been heavily circulated but not yet acted on – largely because it will be immensely unpopular.

It’s bad enough that the banking regulations have been made impossibly difficult for day to day use. People are withdrawing cash at record rates but the government is stopping the payment into current accounts of money exceeding around $10,000 (about 1 million rubles) per month. Even as many payments have to be made in cash because mobile internet restrictions have made banking apps and payment services almost impossible. It’s all very well demanding digital accountability when you don’t provide the means to make it work. Its crippling SME’s and the rate of voluntary business closures is at record highs. Many of those businesses are going ‘dark’ and trading unofficially with nothing but cash and going nowhere near a bank.

The banks are just about holding their heads above water – but it’s a fine line all too easily broken.

Bad loans (90 days overdue or more) are now at $30 billion (as of October 2025, expected to have reached $35 billion by the end of March 2026). Russian economic forecaster CMASF (which is tied to the Kremlin) warned that by October 2026 this would be at crisis proportions, especially if cash withdrawals undermine the system even more. Bank liquidity was officially 9.5% but the total excess cash amounted to only $1.4 billion in April 2026. Much of it believed to be from printed cash the government minted last year. Banks have closed over 1,700 branches in the past year as a cost cutting measure.

The situation in the rest of the economy is even more dire. Key industries are struggling. Coal lost $5.4 billion last year and is on schedule to hit a loss of $7 billion this year as it cuts production and demand from China collapses as it starts closing down coal fired power stations and putting them into standby mode, as solar and wind booms. Add to that Chinese domestic demand is low, even while its export industries are still doing well.

Russian steel producer Severstal saw a drop in profits of 79% – even in the middle of a war. Down to just $124 million they had to cut their production to 38.9 million tons from 66.5 million. The construction industry has basically dried up and demand for ship building and steel for the war has collapsed. Exports again, mostly to China have all but stopped.

The irony of this is that even as many of these traditional civilian industries are laying people off and losing money, there’s a labour shortage Russia can’t even begin to address. The arms industry is critically short of workers with a sufficient educational background to produce the higher tech solutions the state needs to fight the war. Many new to the labour force want nothing to do with these weapons jobs because they know they will vanish when the war ends. They’re short term and many just baulk at being involved.

The arms industry itself is a problem. It’s unable to pay its contractors because the state is so tardy over making payments – people won’t work for nothing and the increasing unreliability of getting paid is having its own effect. Unpaid workers in one factory move to another where the pay is stable and possibly higher. One business owner described it as a state owned merry-go-round. He felt he no longer ran his own business and was just there to manage its ultimate bankruptcy.

What’s truly perplexing the Russians is Ukraine’s drone campaign on the export system and oil refineries. Oil is at high prices and yet Russia can’t even load a tanker in the Baltic or Black Sea. Domestically they’re virtually drowning in it as the government orders as much as possible to be refined for domestic use – there are no domestic shortages and Ukraine just can’t hit enough refineries to undo that fact. The scale of Russias oil pipeline network and refineries is staggering. There’s so much redundancy in the system that keeping it moving is easy. But it’s reaching peak. Shutting down another 400,000 barrels per day is minimal but just the start of a process. Yet ultimately the fact is income has crashed, exports other than via Murmansk and the Far east are small. How Russia covers that deficit – and it’s already twice what it was supposed to be for all of 2026, thats now key. There’s no money to replace it – hence the confiscation concept.

Russia is struggling to pay its way. It’s lying about its inflation rate. Its interest rates are little above meaningless at this point, the public know things are bad. They go to the shopping malls to find no open stores or people shopping. Nobody has spare money and if they do it’s more likely to be under the mattress than in a bank. Everyone knows the financial storm is coming. They know that the government will do what it can to head it off, but they all know the book of tricks is almost exhausted.

War economies rarely collapse. Until they do. Nazi Germany stretched itself to breaking point – and only at the end, during February-April 1945 did everything truly unravel, but then everything went with it and militarily the end was inevitable. Maybe the military end of Russia is closer than we think. The frontlines are not exactly good and military advances have ground to a stop, morale is low, deaths high, most know that the war cannot be won in the way the Kremlin would like. Indeed it’s fair to say that they fear that Ukraine may suddenly manage to break a sector of the front and that will send Russian troops running as it did in September 2022.

Recent studies of modern wars have noted that its the failure of logistics that brings down armies. The inability to be supplied consistently is the breaking point – men without ammunition, lack of medical evacuation, no water, no food – all things we hear about Russian troops on a regular basis – are ultimately the breaking point of armies. Ukraines long range anti-logistics and deep strike drone warfare can be no coincidence.

Will a breakdown at home crack the frontlines or will the frontlines fail and become the straw that breaks the proverbial camels back? Russia has lined itself up for so many disastrous potential outcomes almost anything could happen. I think they know it. They deal with each challenge as it comes up, but their freedom of maneuver is running out. The confines of the realty of the front and the economy are shrinking every day. Time is running out, despite the resilience, it simply cannot go on for ever. When the people know it – and many now do, you can be sure it’s going to end.

The Analyst

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