Prolonged Conflict & Shifting Policies

The Russia–Ukraine conflict, now entering its fourth year, shows no prospect of resolution. Recent shifts in U.S. foreign policy — notably during the Trump administration — have signalled a softer posture toward Moscow, inadvertently reinforcing Putin’s strategic position. Analysts assess that the war is at risk of becoming a prolonged, low-intensity confrontation, unlikely to conclude before a major global realignment anticipated between 2035 and 2040 or even later.

NEW SIGNS OF DISTRESS IN RUSSIA’S FINANCIAL SECTOR

Emergency state support has now been extended to four of Russia’s largest banks: VTB, Sberbank, Gazprombank, and Sovkombank. Financial analysts confirm these interventions follow escalating systemic risks. Alarm is mounting around VTB Bank, Russia’s second-largest lender, amid credible indications of acute financial stress — notwithstanding the absence of official acknowledgment from Russian authorities.

DEEPENING VULNERABILITIES: VTB BANK DEPENDENCY GROWS

Evidence suggests VTB is increasingly dependent on undisclosed liquidity injections from the Central Bank of Russia, disguised as routine operations. Independent assessments reveal covert bailout measures, including:

• Issuance of an “irrevocable credit line” totalling trillions of rubles.
• Directed capital infusions masked within state infrastructure initiatives, notably the Moscow–St Petersburg high-speed rail project — viewed primarily as a liquidity vehicle rather than a commercially viable endeavour.

KEY DATA: SYSTEMIC IMPORTANCE OF VTB

• 60.9% directly state-owned; effective government control exceeds 92%.
• Serves 25 million retail customers and 858,000 SMEs.
• Maintains subsidiary networks across the CIS, Germany, the United Kingdom, and Cyprus.

OUTLOOK: GROWING SYSTEMIC RISK

There is intensifying concern that Russia’s broader financial system is more fragile than publicly admitted. Analysts warn that the risk of cascading institutional failures could materialise.

ASSESSMENT

Material asset deterioration at VTB is evident, driven by:

• Rising volumes of non-performing loans,
• Politically motivated lending practices,
• Weakening domestic macroeconomic conditions.

While the Kremlin is assessed to have sufficient capacity to sustain VTB individually due to its critical systemic role, there is mounting doubt about its ability to stabilise the wider sector should a broader crisis emerge. Current state interventions strongly indicate underlying solvency challenges, obscured through strategic communications and the framing of national development initiatives.

IMPLICATIONS

The Russian banking sector faces a significantly elevated risk of systemic crisis. Should public and investor confidence degrade further, a domino effect of bank collapses could precipitate a financial shock of greater magnitude than the post-Soviet crises of the 1990s.

Recommendation: Continuous monitoring of VTB, Sberbank, Gazprombank, Sovkombank, and secondary institutions is advised.