Russian Bank CEO Informs Putin of “Shrinking Portfolios” As War Against Ukraine Continues

Latest Developments

• Lending Declines: The head of Russia’s largest bank told Russian President Vladimir Putin during a meeting on November 10 that some of its portfolios are shrinking as a result of “challenging macroeconomic conditions.” Sberbank CEO German Gref said that the consumer loan segment contracted slightly and that mortgage lending is expected to decline by 5 to 7 percent compared with last year. Despite delivering an overall positive outlook of the bank’s performance — telling Putin that the bank expects to make a less-than-expected 6 percent profit over the previous year — the statements were a rare acknowledgement that international sanctions punishing Russia for its nearly four-year-long invasion of Ukraine are taking their toll.
• GDP Impacted by Sanctions: In March, the Central Bank of Russia stated that GDP growth decreased from 4.5 percent in the fourth quarter of 2024 to 1.4 percent in the first quarter of 2025. It added in its biannual report that lending slowed, and there were signs of disinflation. “External conditions remained challenging: unfriendly countries enacted additional sanctions, amid the extensive tariffs announced by the [United States] in early April, the volatility in global markets spilled over into the Russian stock market as well,” the bank stated. Loan defaults have also risen significantly, leading Russia’s second-largest lender, VTB Bank, to see profits from loans collapse by 49 percent.
• Oil Shipments Decline: On October 22, the Trump administration issued the most significant set of sanctions against Russia to date, targeting the oil companies Rosneft and Lukoil. The move caused Russia’s seaborne oil trade to fall to a two-month low as of November 11, with buyers in Asia reportedly scaling back their purchases of sanctioned Russian oil. In response to economic pressure from sanctions, the Russian Finance Ministry announced on November 12 that it would issue its first Chinese yuan-denominated government bonds as early as December to boost trade with Asia.

FDD Expert Response

“Western sanctions are delivering measurable damage to Russia’s economy. The financial cracks are public and widening. Moscow’s technocrats cling to the hope that China will ride to the rescue with yuan bonds. Those notes will be worth less than the paper they’re printed on if the war drags on and Russia’s economy continues to crater. Chinese lenders could get more economic utility from their money by shoveling their cash straight into a furnace.” — Peter Doran, Adjunct Senior Fellow

“Russia’s announcement of yuan-denominated government bonds reveals just how dependent Moscow has become on Beijing as both an energy buyer and a financial lifeline. With more than half of Russia’s National Wealth Fund now held in yuan, the Kremlin is turning to Chinese currency markets to finance its budget deficit and attract Asian investors as its access to dollars becomes increasingly constrained. U.S. policymakers need to respond with more aggressive measures — including secondary sanctions on Chinese financial institutions — to disrupt this deepening economic partnership that allows Putin to sustain his war in Ukraine.” — Max Meizlish, Senior Research Analyst

“Putin is surrounded by ‘yes-men’ who never dare to tell him the truth about Russian economic vulnerability. Given the latest U.S. sanctions, it is now past time to double down and impose secondary sanctions. The United States should also pressure the European Union to join in this effort by seizing Russia’s frozen assets and completely divorcing itself from dependence on Russia’s energy blackmail.” — Ivana Stradner, Research Fellow

FDD Background and Analysis

“Russian PM’s Visit to China Highlights Need for Firm U.S. Sanctions Enforcement,” Keti Korkiya and John Hardie

“The Effectiveness of Trump’s New Russia Oil Sanctions Depends on Stringent Enforcement,” by Max Meizlish

“U.S. and EU Include Key Oil Companies in New Sanctions Targeting Russia,” FDD Flash Brief

“Donald Trump’s Tariffs Can Cripple Russia—If Done Right,” by Max Meizlish and Angela Howard