Russians Withdraw Record Cash Amid Fears Of Deposit Freeze To Fund Ukraine War

Russians are withdrawing record sums of cash from banks amid mounting fears that the Kremlin could raid deposits to bankroll the war in Ukraine.

In the first two weeks of August, the volume of cash in circulation rose by *286.4 billion roubles (£2.5 billion)*, marking a seventh consecutive month of outflows from the banking system, according to Central Bank data.

Analysts attribute the shift to growing instability from Ukrainian drone attacks, economic pessimism, and fears that the state could freeze deposits or impose sudden withdrawal caps.

“Drones are flying. Things are burning down. Nervousness is growing. And people’s everyday wisdom may be kicking in that they need to have cash under their pillow and not somewhere in banks where it may never be returned,” a former finance official told _The Washington Post_.

Every working day in August has seen banks haemorrhage cash. The highest single-day outflow of *56.8 billion roubles* was recorded on Aug 12.

It followed a record *620 billion roubles* withdrawn in July. The total withdrawn since the start of the year now stands at *2.4 trillion roubles* – exceeding the *2 trillion roubles* removed in the first year of the invasion in 2022.

The surge in cash demand has drained banks’ rouble liquidity, prompting the Central Bank of Russia to expand lending to the sector.

The rouble liquidity deficit has hit its highest level since March 2022, Russian outlet _RBC_ reported. The constraints have left many banks without enough cash to purchase government bonds.

Earlier this year, rumours spread on Russian Telegram channels about a forthcoming freeze on deposits. Finance Minister *Anton Siluanov* dismissed the posts as “fake news”. Analysts say such a move remains unlikely.

The Kremlin’s decision to shut down mobile internet across parts of the country, preventing card payments, has also increased demand for cash.

Tax increases, stubborn inflation and stricter scrutiny of financial transactions are other contributing factors.

“It took Russia less than a decade to become one of the world’s leaders in cashless payments,” _The Bell_, an independent Russian economic publication, said.

“Now, because of the actions of the Russian authorities, Russians are increasingly turning to cash.”

*Capital Flight and Elite Anxiety*

Large companies are also moving funds abroad to shield assets from potential seizure. In Q2 this year, some *800 billion roubles* were withdrawn from the country.

Billionaire elites are reportedly unnerved by the Kremlin’s sweeping nationalisation campaign and by Ukraine’s strikes targeting Russian enterprises.

However, Putin secured a windfall in March when he solicited “donations” from oligarchs to support the war economy. _Vedomosti_ reported on Monday that hundreds of billions of roubles had entered the federal budget by mid-August.

Public optimism has slumped. A June survey by a polling agency found *60 per cent* of Russians believed local economic conditions were worsening.

At the weekend, Putin sacked *Andrei Klepach*, chief economist of Russia’s second-largest bank. _The Bell_ reported Klepach, who had held the post since 2014, was fired on Kremlin orders after making critical comments in May about Russia’s economic condition and suggesting Moscow would lose a “war of attrition” against Ukraine.