Kremlin Drains the Last of the National Welfare Fund to Bail Out the Banks
The Russian government has begun offloading what remains of the country’s National Welfare Fund (NWF) to prop up its sanctioned financial sector, confirming this week that Sovcombank received a subordinated deposit of 29.6 billion rubles. The funds are part of a broader government scheme allocating 300 billion rubles from the NWF to four of Russia’s largest banks under the guise of financing the Moscow–St. Petersburg high-speed rail project.
According to the official decree, signed in late April, Sberbank, VTB, Gazprombank, and Sovcombank will each receive massive long-term deposits from the state’s sovereign fund—funds originally intended to safeguard Russia’s pension system and future economic stability.
- Sberbank – 94.2 billion rubles
- VTB – 93.2 billion rubles
- Gazprombank – 83.1 billion rubles
- Sovcombank – 29.6 billion rubles
The NWF, once touted as a buffer against global shocks, is now being quietly repurposed as a bailout mechanism for regime-linked financial institutions, many of which are under international sanctions and cut off from Western capital markets. The stated purpose of the deposits is to finance a major infrastructure project—but the structure of the funding tells a different story.
The funds are being issued as subordinated deposits, maturing in 2049, with a symbolic interest rate of 1% on money actually used for project financing. Money not deployed can still earn higher interest via the Central Bank, giving recipient banks incentive to sit on the funds rather than spend them. The terms strictly prohibit early repayment or withdrawal, locking the government into long-term obligations with minimal oversight or flexibility.
The move follows a legislative change passed in December 2024, which amended the Budget Code to allow NWF money to be placed in commercial banks via subordinated deposits. Previously, such operations were restricted to VEB.RF, Russia’s state development bank. The sudden expansion of access was swiftly followed by a wave of agreements benefiting the country’s largest banks.
These latest transfers come amid what the Kremlin calls “financial closure” of the rail project—a 1.788 trillion ruble infrastructure venture set to link Russia’s two largest cities. While authorities insist the initiative is economically self-sustaining, key details remain undisclosed, including the exact terms of syndicated loans and the private interests involved in the “Dve Stolitsy” (Two Capitals) consortium overseeing the project.
Critics argue the project is a smokescreen for deeper financial troubles.
“This isn’t about transport—it’s about survival,” said a Moscow-based economist who asked to remain anonymous. “The banks are under strain, foreign investment has vanished, and the regime is cannibalizing sovereign reserves to hold things together.”
As inflation climbs, regional budgets tighten, and the cost of war continues to mount, the Kremlin’s decision to drain the NWF for long-term bank support highlights a growing desperation inside Russia’s economic leadership. What was once a strategic reserve is now a lifeline for institutions too politically important to fail.
The cost, as always, will be borne by ordinary Russians.
