Russians withdraw $28.32 billion from banks amid war fears

• Major Russian banks suffer heavy deposit outflows.
• Cash circulation surges as deposit fears grow.
• Russia fires economist after war warning.

Millions of Russians are pulling cash out of the domestic banking system at a rate unseen since the initial months of the 2022 war, driven by fears that the Kremlin could freeze or nationalize private savings to fund its war in Ukraine.

Data from the Central Bank of Russia and financial marketplace Banks.ru show that approximately $26.8 billion exited the banking system during the first seven months of the year, with roughly $3.35 billion leaving individual accounts each month.

The cash flight has been amplified by escalating Ukrainian drone strikes targeting Russian oil refineries and critical logistics infrastructure.

Liquidity pressure

The exodus has swept through five of Russia's seven largest banking institutions.

Gazprombank was hit hardest, losing $3.34 billion—amounting to 10.8% of its total deposits—over a four-month span. Rosselkhozbank shed $2.97 billion, reflecting a drop of more than 15%.

Alfa-Bank, the country's largest private lender, saw $2.0 billion or 5.6% of deposits leave its vaults. Sovcombank and VTB recorded further net outflows of $912 million and $227 million respectively.

Even Sberbank faced sudden withdrawals: depositors withdrew $2.36 billion in June and another $355 million in July.

T-Bank remained the sole major exception, expanding its deposit volume by $2.15 billion.

The Central Bank reported that total cash in circulation jumped by $7.18 billion in July, with an additional $3.35 billion withdrawn in the first half of August alone.

Rising war costs 

Public anxiety is grounded in recent government actions. Russian prosecutors transferred roughly $51.5 billion ($48.7 billion) in private assets to state control last year, followed by the June seizure of $7.6 billion ($7.15 billion) in assets linked to Rusagro founder Vadim Moshkovich.

Concurrently, President Vladimir Putin has extracted billions in voluntary "donations" from oligarchs into the federal budget, while large corporations transferred over $9.4 billion out of the domestic financial system in the second quarter alone.

The current run on deposits is longer in duration and larger in scale than the initial panic of 2022, when the central bank temporarily raised interest rates to 20% and imposed capital controls.

The rush into cash comes amid deteriorating economic conditions, with official GDP growth slowing to 0.3% in the first half of the year compared to 1.2% in the same period last year.

Illustrating the Kremlin's intolerance for internal criticism, Andrei Klepach, chief economist at state development bank VEB, was dismissed over the weekend. His firing followed public scrutiny over remarks he delivered at a Moscow Exchange forum, where he stated:

"We will not win the competition in this war of attrition. We're under the illusion that everything will collapse. It hasn't, and it won't. Our costs are mounting."