Russia is financing the war through covert ruble issuance, according to the Foreign Intelligence Service
Russia is increasingly covering the costs of the war against Ukraine through covert issuance of rubles. Due to a shortage of funds in the financial market, the Kremlin is forcing state-owned banks to buy up federal loan bonds (OFZs), with the Central Bank of the Russian Federation providing the necessary liquidity for this.
According to the Security Service of Ukraine (SBU), this is formally presented as the placement of government bonds; however, in reality, the banking system is being used as a mechanism to create new money to finance military expenditures.
The scheme works as follows: The Russian Ministry of Finance issues OFZs, state-owned banks purchase them, and the Central Bank provides the banks with the necessary financial resources. As a result, the Russian budget receives additional funds, but this is accompanied by increased inflationary risks and a growing dependence of the economy on money issuance.
According to intelligence reports, the Russian Ministry of Finance has already registered two new issues of OFZ floaters: one worth $6.4 billion maturing in 2037 and another worth $12.8 billion maturing in 2042.
As of July 1, 2026, Russian banks held $248.1 billion in government bonds, accounting for about 9% of the total assets of the Russian banking sector. Since the beginning of the year, the size of their portfolio has grown by another $6.5 billion.
The Foreign Intelligence Service explains that the main reason for these actions was the sharp increase in Russia’s budget deficit. In the first half of 2026, the deficit reached nearly $77 billion, while additional military spending could exceed the initial plan by another $51.3–64.1 billion. At the same time, the Central Bank of the Russian Federation forecasts that by the end of the year, the budget deficit could rise to $105.1 billion.
The report also notes that the market is no longer willing to lend to the Russian budget on the government’s terms. Due to high interest rates and weak demand, the Russian Ministry of Finance is unable to place government bonds at an acceptable price. In June and July, the ministry was forced to cancel auctions for the placement of OFZs at least three times, as potential investors demanded higher yields.
Ukraine’s Foreign Intelligence Service emphasizes that the forced mobilization of state-owned banks’ resources does not solve the budget deficit problem but merely masks it temporarily. According to the agency’s assessment, this model increases the budget’s dependence on the Central Bank of the Russian Federation, concentrates public debt within the banking system, and increases inflationary pressure, effectively shifting the financing of the war to monetary issuance rather than market mechanisms.
This was reported by the Foreign Intelligence Service of Ukraine.
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