Russia’s economy is an ‘illusion’ built on debt, and a banking crisis is ready to explode, intel report says, while the Kremlin may seize pensions

An energy crisis is already ravaging Russia’s economy, and a banking crisis may soon erupt as a mountain of debt weighs on consumers and businesses.

According to a European intelligence report seen by Reuters, the Kremlin has relied on banks to pump up the economy with massive liquidity, as its own budget comes under growing strain from Vladimir Putin’s war on Ukraine.

State programs even encouraged millions of Russians to take out three or more loans simultaneously. But lenders are now vulnerable amid the soaring indebtedness and deteriorating loans, while consumers buckle under high inflation.

The June report, which was prepared as the European Union eyes another round of Russia sanctions, estimated that 10% of corporate ⁠loans may not be repaid, up sharply from 2024, while 15% of retail loans at some top banks may be non-performing.

In addition, the number of Russians who declared bankruptcy last year jumped by almost a third to more than 500,000. But state-backed credit programs, loan restructurings and government aid ‌are obscuring how bad conditions are.

“The situation creates the illusion of a dynamic economy ⁠that, in reality, conceals an explosive situation...