Why have half a million Russians gone bankrupt amid Ukraine war?

What Happened

A European intelligence report, seen by Reuters, states that over 500,000 Russians declared bankruptcy in the past year — a year-on-year increase of nearly one-third — as the cost of living strains households. The report estimates that 10% of corporate loans are now doubtful, a sharp rise from two years ago, and that state-backed credit programmes have spurred more than 13 million Russians to hold three or more concurrent loans. Russia's Ministry of Economic Development has revised its 2026 GDP growth forecast downward from 1.3% to 0.4%. The intelligence assessment warns that a heavy reliance on government-supported lending masks a precarious buildup of risky loans; an economic shock — such as new EU sanctions targeting banks and cryptocurrency networks — could trigger an 'explosive' banking crisis. However, Vladislav Inozemtsev of Chatham House contends that a full-blown banking crisis is unlikely, citing Russian banks' record profits (forecast at 3.9 trillion rubles this year), the concentration of most overdue corporate debt in state-linked defence enterprises which will ultimately be covered by the government, and the structure of the banking system dominated by a few highly supervised institutions. Russian central bank Deputy Governor Filipp Gabunia has also played down vulnerabilities, saying they are 'not critical'.

Key Actors

Why It Matters

The report highlights growing economic fissures in Russia after three years of full-scale war, raising questions about the sustainability of the war effort if financial strain intensifies. The debate over a potential banking crisis is central to Western sanctions strategy: if Russia's banking system remains stable, it can continue financing the military and cushioning the population; if vulnerabilities are exploited, a new shock could undermine the Kremlin's capacity to sustain the conflict. The intelligence assessment informs upcoming EU sanctions decisions, while expert scepticism suggests that targeting Russian finance may require more than headline bankruptcy figures.

Watch For

Finalisation of the EU's 21st sanctions package, expected in July, which will target Russian banks and cryptocurrency networks. Monitor Russian central bank liquidity support measures and any official acknowledgement of stress. Track corporate and household default rates, GDP performance against the lowered 2026 forecast, and any new economic shocks — such as further energy price drops or sanctions enforcement — that could test the banking sector.