EDITORIAL: Russia on the Brink of an “Explosive” Banking Crisis, According to Brussels

A Reassuring but Controversial Statement

Filipp Gabunia, deputy governor of the Russian Central Bank, stated that vulnerabilities in the financial sector are not critical, noting that banks’ capital buffers are at their highest level in three years and that corporate non-performing loans have remained stable at 4% for eighteen months. This official line stands in sharp contrast to the warning in the European intelligence report.

Experts such as Chris Weafer of Macro Advisory also temper the doomsday scenario, arguing that the Russian economy is stagnating without facing an immediate financial crisis, due to state dominance and defense spending that artificially keep unemployment low.

Sberbank’s Unexpected Revelation

Sberbank’s chief financial officer, Taras Skvortsov, himself acknowledged that all major banks have been under sanctions since 2022, but that by 2026, everyone had become so accustomed to it that many customers of sanctioned banks are no longer even aware of it—a normalization that could mask a growing systemic risk rather than resolve it.

This apparent normalization worries me more than it reassures me. When a population gets used to living under permanent sanctions without feeling their daily impact, it’s often a sign that the real cost has simply been deferred, not eliminated.

Subsidized Loans That Mask the Risk

The report highlights that Russian financial institutions are forced to grant subsidized loans to defense companies, homebuyers, and other state-backed borrowers—a mechanism that artificially inflates the volume of outstanding loans while concealing the true quality of these loans.

This financial architecture rests on a fragile assumption: that economic growth will continue to justify these massive loans. However, Russia has revised its GDP growth forecast for 2026 downward, now estimating it at just 0.4% compared to the 1.3% previously announced.

The 2027 forecast has also been downgraded

The growth forecast for 2027 has also been revised downward, from 2.8% to 1.4%—a sign that even the most optimistic Russian institutions are beginning to acknowledge the depth of the economic slowdown caused by four years of war against Ukraine.

I see these downward revisions as the most honest—almost involuntary—proof that Russia’s war economy is running out of steam. Official figures, even when watered down, always end up telling part of the truth.

Nearly 90 More Banks in the Crosshairs

The new European sanctions package targets nearly 90 additional banks, which would bring the total to more than 100 sanctioned Russian banking institutions, representing more than half of Russia’s financial institutions connected to international markets, according to European diplomats cited by Reuters.

Beyond banks, discussions also include measures targeting cryptocurrency networks, drone production, and oil traders and refiners, in an effort to simultaneously cut off multiple sources of funding for Russia’s war effort.

Historically Difficult Enforcement

Europe has often struggled to enforce its sanctions due to the lack of a single central authority capable of ensuring uniform enforcement across the 27 member states. This reality calls for caution regarding the immediate effectiveness of this new package, despite its stated ambition.

I will remain skeptical until I see these 90 new banks actually cut off from international financial circuits. The value of a sanctions package lies in its concrete implementation, not in its announcement.

Washington has eased certain sanctions

While Europe is tightening its sanctions arsenal, the United States, under President Donald Trump, has eased certain sanctions, notably a temporary exemption allowing the sale of Russian oil, which expired in mid-June 2026. This transatlantic contrast illustrates a strategic divergence that complicates the overall coherence of Western pressure on Moscow.

This divergence is not insignificant: it gives the Kremlin occasional room to maneuver precisely at a time when Europe is seeking to tighten the noose—a discrepancy that could weaken the cumulative effect sought by European sanctions strategists.

A Military Front Where Trump Remains Credible

It must nevertheless be acknowledged that, on a strictly military level, the Trump administration continues to support arms deliveries to Ukraine—a crucial distinction that sets its sometimes lenient economic policy toward Moscow apart from its firmer stance on military support for Kyiv.

I reject the easy caricature on this issue: Trump is neither an unconditional ally of Putin nor an unwavering defender of Ukraine. On economic matters, I criticize him. On arms deliveries to Kyiv, I acknowledge a consistency on his part that deserves to be highlighted.

A Bank Bracing for the Worst

VTB, Russia’s second-largest bank, plans to increase its financial reserves to protect itself against rising fuel prices and potential loan losses—a move that partly contradicts the Central Bank’s reassuring rhetoric and reveals genuine concern within the Russian banking sector itself.

This type of defensive measure, taken by one of the country’s largest financial institutions, sometimes speaks louder than any official report about the true state of internal confidence in the Russian banking system’s medium-term stability.

A War Economy Hiding Its Cracks

The combination of downward revisions to growth forecasts, rising personal bankruptcies, and defensive measures taken by major banks paints a picture of an economy that is still holding up, but whose internal cracks are gradually widening under the cumulative pressure of sanctions and the cost of the war.

A war economy collapsing from within would be the quietest—and most decisive—victory of this conflict. It is perhaps there, in the banks’ balance sheets rather than on the battlefield, that part of the outcome of this war will be decided.

China, the Kremlin’s Discreet Safety Net

Chris Weafer points out that Asia is ignoring the sanctions, arguing that the idea that a new round of sanctions would push Russia into crisis is wishful thinking. This observation serves as a reminder that the effectiveness of Western sanctions depends in part on whether China and other Asian partners choose to continue trading freely with sanctioned Russian banks.

As long as these trade channels remain open, the impact of European banking sanctions will remain partially mitigated, even though every additional bank added to the list further reduces the Kremlin’s financial leeway in Western markets.

A Growing Dependence That Comes at a Strategic Cost

This increased dependence on China is gradually transforming Russia into a junior partner in an authoritarian axis dominated by Beijing—an asymmetrical relationship whose long-term geopolitical consequences extend far beyond the banking issue alone.

This may be the most enduring cost of this war for Moscow: not just sanctioned banks, but economic sovereignty that is gradually being subordinated to Beijing.

As I often say: China—not just Western sanctions—will determine Russia’s true economic resilience. This is a relationship of dependence whose long-term strategic cost Moscow does not yet seem to fully grasp.

A Strong Signal, but Not Yet a Collapse

The European intelligence report does not predict an imminent collapse of the Russian banking system, but it documents a growing structural vulnerability that upcoming sanctions could turn into a full-blown crisis. Caution remains warranted: the Russian economy has already surprised observers with its resilience on several occasions since 2022.

Pressure Must Remain Constant to Bear Fruit

Only sustained economic pressure, combined with continued military support for Ukraine, will make it possible to transform this documented fragility into real diplomatic leverage capable of influencing the Kremlin’s calculations regarding the continuation of its aggression.

I’ll conclude with a deliberate note of caution: I believe in the cumulative power of sanctions, but I refuse to promise an imminent collapse which, if recent history has taught us anything, could still take much longer than we’d like.

Signed, Maxime Marquette, columnist