The country led by Vladimir Putin could soon plunge into a serious economic and financial crisis derived from the hidden financing scheme that has been applied since the beginning of the conflict, as reflected in an analysis shared in the bulletin of Craig Kennedy Navigating Russiacollaborator of the International Working Group on Sanctions against Russia.
This is because the plan, initiated one day after the start of the war between both powers, forced banks to provide high-risk loans to defense companies. In total, the banks paid about 210,000 and 250,000 million dollars in loanswhich almost equals the official defense budget in Russia.
One of the reasons why Putin’s country has been forced to carry out this plan, which according to the Finacial Times could face the territory with a “financial time bomb”, it is due to the international sanctions imposed, that have reduced the financing avenues that Russia previously had.
“Unlike federal defense budget spending, which remains at sustainable levels, Russia’s off-budget financing scheme is proving much more problematic to sustain,” said Kennedy, an expert on Russian economics at Harvard’s Davis Center.
One of the factors that worries experts is that part of these loans have been delivered to companies with low credit ratings. In addition, the plan has led to a boost in corporate loans, which have reached 71% since mid-2022 (about $415 billion). This has also resulted in a rising inflation (currently around 8.9%), which in turn has caused interest rates to increase above 21% in regular companies.
Now, the possible default of defense companies along with possible bank failures It could give a slight advantage to Zelensky’s country, as well as become a major weakness for Russia, which could be plunged into a major credit crisis.
“Moscow now faces a dilemma: the longer it delays the ceasefire, the greater the risk that events will emerge wildly and weaken Moscow’s negotiating influence,” Kennedy finally defended.
