More than four years into Russia’s full-scale invasion of Ukraine, Russians are turning to cash as the real impact of the war becomes more apparent back home.
As Ukrainian drones hit major oil refineries and queues outside petrol stations grow, Russia’s central bank has added the equivalent of £14.8bn in cash into circulation. That figure, since the start of 2026, is the biggest increase for that period in any year, outside the Covid-19 pandemic, according to the central bank’s figures.
It also points to a worrying situation for Vladimir Putin, who has tried to shield the country’s population from the impacts of his war.
Ukraine has ramped up its drone attacks on targets on Russian soil, causing authorities to regularly suspend mobile internet services in order to disrupt drone navigation. This has left many Russians unable to use digital payment apps, forcing them to go back to more traditional methods.
Small businesses have also reportedly been urging customers to use cash in order to keep more income and avoid paying higher taxes. The Kremlin increased VAT from 20 per cent to 22 per cent in January and lowered the threshold at which small and medium enterprises must pay the tax, as part of efforts to raise revenue.
Keir Giles, associate fellow of the Russia and Eurasia programme at Chatham House, says that although the underlying reasons for Russians returning to cash are unclear, “it would be nice to think that this is part of a general crisis of confidence in the economy and in the systems that make the economy work”.
“So Russians are falling back on things that they know they can trust instead of all of the modern, advanced, digitised systems that they had been using – at least in the urban economies up – until now.”
Russia’s economy had already been suffering, with Maxim Reshetnikov, the economy minister, warning it is teetering on the edge of a recession
A reported Ukrainian drone attack on two logistics centres in Russia killed eight people and injured 24, officials said (Photo: Tatyana Makeyeva/AFP)In May, the ministry sharply downgraded its GDP growth forecast for Russia for 2026, as weaker oil revenues, high inflation and heavy wartime spending put mounting pressure on the economy.
With fuel shortages and rationing across the country, Ukraine’s campaign of air strikes is doing both real and psychological damage to the Russian population.
Energy Intelligence, a US-based energy research firm, estimated in early July that nearly half of Russia’s 6.6 million barrels per day of refining capacity had been knocked off line since February.
“It is part of the success story that Ukraine has had in its long-term programme to degrade the things that make Russia work,” said Giles. “And to bring home to Russians the fact that the war that their leadership has launched actually has consequences for them instead of being something that happens to other people a long way away.”
He said this shows Ukraine’s goal of bringing the war home to Russians “is actually succeeding”.
But despite the increased economic strain, Giles said we’re a long way from Putin feeling genuine domestic pressure that would make him alter his approach to the war.
Cars queue for petrol in Sevastopol, Crimea, after authorities restricted fuel sales following Ukrainian strikes on Russia’s logistics routes (Photo: Stringer/Reuters)Putin “has already publicly rejected the warnings from bankers and economists that the war, if it continues in this way, is going to do permanent damage to the economy,” he said. “That’s less important to him than this drive to restore the [Russian] empire.”
In June, Putin dismissed claims the war in Ukraine was “killing” the Russian economy, and last week he tried to reassure Russians, saying Ukraine “is trying to harm” the economy and “create a climate of nervousness in society”, but that it will not succeed because “the safety margin of the Russian energy network is very high”.
Russian business leaders, however, have voiced concern about the slow economy and the squeezing of Russian oil and gas revenue.
The return to cash has also made it harder for the state to collect taxes that it needs to fund its war effort.
Even so, Giles says it would take something else entirely to convince Putin that “it is time to freeze Russia’s gains”, in order to stop further damage to Russia, “and nobody can tell exactly when that point will come”.
He added: “We’ve heard the occasional noises from Putin and [Kremlin spokesman Dmitry] Peskov about how it might be time to wind up the conflict, but no actual visible steps towards that.”
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