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"Everything's burning, Putin doesn't care"; politically explosive and social crisis in Russia

Duration: 3:55 549 transcript words EN summary

Video summary

Recent reports from The Washington Post highlight a severe crisis within the Russian banking system as citizens withdraw money at record speeds due to fears that the Kremlin may confiscate deposits or restrict cash access to fund the ongoing war. Since the beginning of the year, the amount of physical cash in circulation has surged dramatically, with increases in August alone exceeding the total growth seen throughout all of 2022. Anonymous sources within the Russian financial sector attribute this panic to the escalating reality that drones are flying and infrastructure is burning, leading ordinary people to adopt a survivalist logic where keeping cash at home feels safer than leaving it in a bank that might be nationalized if the government needs funds for military operations. The scale of this capital flight has become so significant that it is now causing operational problems for some banks, which did not anticipate clients withdrawing half a trillion rubles monthly and shifting their assets elsewhere. Former Central Bank employee Alexandra Prokopenko notes that this exodus stems from deep-seated anxiety about the government seizing control of the banking system, while connectivity issues are further complicating card payments and pushing more transactions toward cash. Companies are also less likely to deposit revenue into banks, instead using cash for wages and contractor payments, a trend that exacerbates liquidity issues. Meanwhile, major institutions like Sberbank project that cash volume could grow by approximately 3.8 trillion rubles by the end of 2026, reflecting a long-term structural shift away from digital banking reliance. Beyond individual savings fears, the war has devastated the broader Russian economy, forcing Vladimir Putin to choose between funding military operations and supporting civilian business, with small enterprises drowning in debt while defense contractors enjoy subsidized loans. Ordinary commercial borrowers face interest rates of 24% or higher, leading to record levels of personal bankruptcy and creating a politically explosive social crisis that financial experts are already warning about. The Times points out that Ukrainian drone strikes on critical logistics hubs like Wildberries warehouses have exposed vulnerabilities in the supply chain, threatening to collapse small businesses en masse if they lose access to goods and credit, which would subsequently cripple Russian banks. Ultimately, the dream of a glorious victory for Russia is increasingly viewed as an illusion by all but Putin's most devoted supporters, as the nation grapples with a dual threat of economic strangulation and social unrest. The financial community warns that if small businesses begin to fail in large numbers due to these compounded pressures, the consequences will ripple through the entire banking sector, potentially destabilizing the country further. As connectivity issues make digital payments difficult and capital flight becomes increasingly hard to execute, even with some Russians seeking refuge in brokerage accounts in neighboring countries like Kazakhstan and Armenia, the situation points toward a future where the state prioritizes war financing over economic stability, leaving ordinary citizens with little choice but to hoard cash or flee.

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The Washington Post reports that Russians have begun withdrawing money from the banking system at a record pace amid growing fears that the Kremlin is prepared to confiscate deposits or restrict access to cash to finance the war. Since the beginning of the year, the increase in cash in circulation has already exceeded the total for the entire year 2022. According to the newspaper, the volume of cash in Russia increased by 286.4 billion rubles in the first 2 weeks of August alone. In July, the increase was 643.4 billion rubles, and in June, approximately 450 billion. Overall, cash has increased by approximately 2.45 trillion rubles since the beginning of the year. WP sources offer a more alarming explanation. An anonymous former official at the Russian financial agency said people are becoming increasingly nervous because drones are flying and everything is burning. According to him, this outflow is already becoming a problem for some banks. They didn't expect clients to withdraw around half a trillion rubles monthly and have placed their funds in other assets. Perhaps people are starting to adopt a simple everyday logic. It's better to keep cash under your pillow than in a bank where you might not get it back at some point, he said. If the government needs money, Putin will simply seize the assets. He doesn't care, said a person close to the Russian billionaire, adding that in his view, this is exactly where things are heading. This is all a consequence of the fear that the government will do something to the banking system, that it might nationalize deposits, said former Central Bank employee Alexandra Prokopenko. The July cash outflow hit a historic high. Sber expects the cash volume to grow by approximately 3.8 trillion rubles by the end of 2026. Companies have been less likely to return revenue to banks through cash collection and more frequently use cash for payments to employees and contractors. Another factor cited was connectivity issues, >> [music] >> which make card payments more difficult. A Moscow businessman told WP that everyone who can is trying to get money out of the country, but it's becoming increasingly difficult. Opening brokerage accounts in Kazakhstan, Kyrgyzstan, and Armenia is cited as one possible avenue. The Times reports that Vladimir Putin's devastating war against Ukraine is increasingly alarming Russian financiers. According to the publication's editorial board, the Russian economy has been devastated by the nearly 5-year war. And representatives of the financial community are already warning not only of long-term damage to the country's prosperity, but also of the risk of a politically explosive social crisis. Putin is increasingly forced to choose between funding war and supporting business. Small businesses are drowning in debt. Defense contractors receive loans at subsidized rates, while ordinary commercial borrowers pay interest rates of 24% [music] or higher. Personal bankruptcies have reached record levels. The Times specifically notes Ukrainian drone strikes on Wildberries warehouses. According to the publication, Kyiv has identified critical vulnerability in the Russian economy. If small businesses begin to collapse en masse after losing goods and credit debt, problems could follow for Russian banks. The dream that the war could still end with great glory for Russia, The Times writes, now looks like an illusion to all but Putin's most blinded supporters.