The Kremlin's Financial Vacuum Is Coming for Pensioners

The Question Is No Longer "Where to Find Money for the War," but "Whom to Take It From"

While Vladimir Putin continues to trace imaginary "new realities on the ground" with his finger across military maps—claiming that "Tukhachevsky Street has already been liberated" and that "Sumy is only another ten kilometers away"—a far more dramatic battle is unfolding for the Kremlin, far from the front lines. It is taking place within Russia's own budget.

And on this financial front, the Kremlin is suffering losses that even the thickest cloak of propaganda can no longer conceal.

War Communism 2.0

Exactly one month ago, State Duma deputy Valery Gartung publicly—and in characteristically blunt, profanity-laced language—described the state of Russia's budget deficit, which, according to his estimates, has approached 11 trillion rubles over the past two years. At the time, his remarks were largely dismissed as routine pre-election populism ahead of September's State Duma "elections."

Gartung's central complaint was straightforward: " The government has provided no credible explanation of how of how it intends to finance this shortfall."

Then Communist Party leader Gennady Zyuganov went even further. Speaking from the State Duma podium, he argued that "if the state were to take control of the 67 trillion rubles held by citizens and the 63 trillion rubles held by businesses—money sitting in banks instead of working for the Russian economy—it could eliminate every hole in the budget."

Initially, his proposal was dismissed as little more than classic Bolshevik campaign rhetoric calling for expropriation.

The public backlash, however, was so intense that Zyuganov almost immediately walked back his own remarks.

"Citizens' bank deposits are sacred. The only people getting richer are the oligarchs and corrupt officials. We need to invest money in victory. Then we won't be bombarded, and gasoline prices won't rise."

But when the Kremlin's chief television propagandist, Vladimir Solovyov, echoed Zyuganov almost word for word by insisting that "banks' money should be taken for the sake of Crimea," it no longer sounded like one of his customary on-air tirades. Instead, it looked like a coordinated effort to psychologically prepare the so-called "deep people" for yet another round of "difficult decisions."

The public appears to sense exactly where this is heading. According to the pro-Kremlin newspaper Izvestia, household bank deposits in Russia shrank by more than half a trillion rubles in May, while the amount of cash in circulation increased by 400 billion rubles over the same period. Officially, the shift is attributed to lower deposit interest rates and persistent internet outages. In reality, however, depositors seem to be voting not with their feet, but with their wallets.

In effect, the Kremlin has become a giant vacuum cleaner operating under the Soviet-era slogan, "Everything for the front, everything for victory." The figures for the first quarter of 2026 are staggering: military spending reached 65 billion rubles a day—or 2.7 billion rubles every hour. Today, nearly every second ruble in the federal budget—46 percent of total expenditures—is devoted to the war.

The true scale of the crisis is concealed behind the label of "state secret." Classified spending has risen to 4.9 trillion rubles, accounting for almost 40 percent of total budget expenditures. When nearly half of a country's budget is hidden from public scrutiny, it is a clear sign that the losses on the financial front have become too severe to reveal.

The Kremlin has therefore entered a phase of financial mobilization. The State Duma has amended legislation to give the government virtually unlimited authority to expand domestic borrowing. The Finance Ministry is squeezing the last remaining liquidity out of the economy, competing with private businesses for every available ruble. Russia's regions, meanwhile, have effectively been turned into financial pawnshops, kept afloat through a system of short-term borrowing.

Local self-government has all but ceased to exist as an independent institution, functioning instead as little more than a network of cash-transfer offices processing payments for defense contracts. During the first five months of 2026 alone, Russia's budget deficit had already exceeded the government's target for the entire year by a factor of two. For the Russian economy, the war in Ukraine has become a financial black hole.

Pensioners Become "Investors"

That black hole is now drawing ever closer to the Kremlin's last major political stronghold—Russia's pensioners.

According to the pro-Kremlin business daily RBC, the authorities are preparing what they portray as a "brilliant" solution: automatically transferring the pension savings of 37 million so-called silent participants—citizens who never chose a private pension fund—from the state-run Vnesheconombank (VEB) into a new Long-Term Savings Program.

"VEB will gain access to additional financial instruments, allowing it to manage, among other things, citizens' long-term savings and pension assets," VEB Chairman Igor Shuvalov explained, adding that these funds would be invested in "modern technological projects."

VEB's New Partner

VEB's partner in the scheme will be another state-owned lender, VTB, which already manages pension assets worth 1.3 trillion rubles. VTB Chairman Andrey Kostin offered a remarkably candid explanation of the partnership: VEB has the pensioners' money, while we have the banking network—so it makes sense to join forces. The authorities are expected to finalize the arrangement immediately after the September "elections."

How pensioners in Russia end up becoming "investors" has been painfully familiar ever since the days of the MMM pyramid scheme. The ruling United Russia party has even coined a campaign slogan for its core electorate: "Being Za Putin is the basic minimum." What the "maximum" contribution expected from pensioners might ultimately be is difficult to imagine.

The "Engine of Growth" Breaks Down on Tukhachevsky Street

The greatest paradox is that Russia still has money—but it continues to flow out of the country despite every attempt to erect a new "Iron Curtain." Capital flight has remained remarkably steady at around 4 percent of GDP for the past two years. The difference is that today, those 4 percent amount to $80–85 billion leaving Russia annually.

On June 28, Nezavisimaya Gazeta published a forecast by the pro-Kremlin Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF). According to the report, Russia needs annual GDP growth of 3–3.3 percent merely to maintain economic stability—not to achieve prosperity. At the same time, the Center's policy recommendations are increasingly predicated on ending the war in Ukraine. As the newspaper notes, this is viewed as "an event within the short-term planning horizon—one to two years." Without bringing the war to an end, achieving even that modest rate of growth is virtually impossible. In other words, while capital equivalent to 4 percent of GDP continues to leave the country each year, Russia needs at least 3 percent annual growth simply to keep its economy stable.

Even the recent surge in global oil prices has failed to throw the Kremlin a lifeline. Despite higher crude prices, the Russian budget still came up roughly one trillion rubles short of its projected revenues. There are at least three reasons for this.

First, part of Russia's oil-refining infrastructure remains offline following Ukrainian strikes.

Second, the unexpectedly strong ruble has eroded the export earnings of Russian oil companies.

Third, Moscow has been forced both to compensate oil companies for their losses and to maintain the illusion that fuel prices at the pump have barely risen.

The greatest irony is that the Putin regime has spent the past three years insisting that war had become "the engine of Russia's development." It is now being forced to confront an increasingly obvious reality: the engine has broken down. And its driver appears to have gone off the rails somewhere around Tukhachevsky Street.

The central question facing the Kremlin today is therefore no longer "Where can we find money to finance the war?" It is "Whom can we take it from?"

And that question is no longer being raised by opposition politicians or Western analysts. It is now being asked by the very architects of Putin's system—people like Valery Gartung, Vladimir Solovyov, and Gennady Zyuganov—who spent years helping to build, defend, and reinforce it.

Max Meltzer