Moscow’s secret war-financing scheme is on the verge of collapse as planned spending doubles.

According to former Morgan Stanley and Bank of America financier Craig Kennedy, the Kremlin is using an additional war-financing scheme in the shadows through the use of preferential lending to defense enterprises. Since mid-2022, Russia has seen a sharp increase in corporate borrowing – by 71%. By the fall of last year, it had grown by $415B, equivalent to 19.4% of Russia’s GDP.

Soon, the Russian government will have to take on the repayment of loans taken by key enterprises. This will reveal that up to half the Russian budget will be required to repay these loans.

Thus, Russia is on the verge of a “systemic credit crisis,” which could become Ukraine’s trump card in future peace talks. The Kremlin will demand the lifting of sanctions as a condition for ending the war in Ukraine. But Kennedy believes that lifting some of the sanctions would be acceptable to Kyiv only if it becomes a condition for a complete end to the war and the payment of reparations.