Russia
Russia enters systemic banking crisis as recession signals flash red
Signs of recession and a systemic banking crisis are intensifying across the Russian economy, according to a report by the Center for Macroeconomic Analysis and Short-term Forecasting (TsMAKP). Based on data as of January 2026, the center warns that risks to financial stability have transitioned from theoretical threats to established realities.
“The systemic banking crisis previously predicted by our system has now been officially registered according to formal criteria,” the experts noted, adding that a “crisis of bad debts” had already been documented recently.
Data within the report characterizes the current scale of the crisis as “moderate” for the time being. While slightly more than 10% of the banking system’s total assets and credit portfolios are considered problematic, the situation is significantly more dire in specific sectors.
“The depth of the damage may be greater in certain areas; for instance, the ratio of problematic loans among SMEs stands at an average of 19%,” TsMAKP experts stated.
Economic recession signals strengthening for five months
Beyond the financial crisis, severe pressure is mounting on the real economy. TsMAKP’s early warning system strongly indicates that the Russian economy is entering a recession, defined as negative growth in physical GDP volume.
“For the last five months, and with increasing urgency each month, the system has been predicting that an economic recession will occur,” the report stated.
However, the center emphasizes that these signals should not be viewed as an absolute inevitability.
“It should be remembered that a high recession probability signal from the system does not mean the event is fated. The relevant models allow for both technical and structural forecasting errors,” the report cautioned.
The experts explained that structural errors could arise from models being calibrated against historical international data, which may not fully account for unique local and temporal conditions currently in play.
Overvalued ruble and the high-interest rate squeeze
Analysts highlighted a shift in the primary factors triggering these risks.
“An analysis of the leading indicators reveals that the destabilizing factor of interest rate dynamics has been replaced by the dynamics of the ruble exchange rate,” the report found.
Specifically, the extreme real appreciation of the national currency is exerting destructive pressure on domestic producers and exporters. The report detailed the situation:
“The extreme strengthening of the ruble—reaching 25% annually in real terms—combined with interest rates that remain high (despite a gradual decline) is creating exceptionally harsh monetary conditions for domestic business.”
Against this backdrop, the report noted a sharp deterioration in credit portfolio quality within the corporate segment, particularly regarding loans granted to oil-and-gas and mining-and-metallurgical companies.
High risk of “bank runs” persists
The early warning system also flagged “depositor flight” as a risk factor that could destabilize liquidity balances within the banking system.
“The early warning system is recording high risks regarding the emergence of a bank run effect,” the report warned.
Experts attributed the lack of a mass movement thus far to the “covert” nature of the crisis. “Due to the hidden nature of the banking crisis, this effect has not yet manifested. However, if crisis processes deepen, these risks could surface,” the assessment noted.
TsMAKP added that the concentration of deposits in large state-owned banks is a key factor currently preventing bank failures and widespread panic.
Systemic credit risks and the role of state support
The deterioration in credit markets is viewed as a consequence of rapid debt accumulation in 2023 and 2024, followed by aggressive interest rate hikes in late 2024.
“The rapid increase in debt volume within the non-financial sector, followed by the surge in interest rates, predetermined the further degradation of the banking system’s overall asset and credit portfolio quality,” the report stated.
The share of problematic loans (categories IV-V) in the total portfolio reached 6.9% in June 2025, a one-percentage-point increase over the previous year.
However, the situation appears more serious when restructurings are included. “Based on Central Bank data, the share of problematic loans—including risky restructurings and category IV-V loans—is estimated at 9.9% by the end of the third quarter,” the report revealed.
The Central Bank of Russia’s decision to extend support measures for SMEs in December 2025 and its recommendation that banks restructure debts are seen as factors tempering further rises in this ratio.
“Statistics in the coming months will likely show this share stabilizing. The Central Bank’s policy of encouraging restructurings will contribute to this,” the report noted.
Recession duration and exit scenarios
The slowdown in economic activity, compounded by global influences and internal imbalances, is fueling concerns that a recession could be prolonged.
“The Signal of Onset Index (SOI) remained above the critical threshold of 0.18 in November, reaching 0.44. Thus, the system continues to signal a high probability that the Russian economy will enter a recession by July 2026,” the report stated.
Exit indicators paint a similarly bleak picture. The “Signal of Outset” indicator remained at 0.05, far below the critical threshold of 0.35.
“For the third consecutive month, the indicator signals that the approaching recession could take on a prolonged character, potentially lasting more than a year,” the TsMAKP report concluded.
External factors supporting this pessimistic outlook include the expected slowdown in the US economy and the decline in Russia’s current account balance.
Pressure on the ruble reverses in the currency market
In the currency market, pressure on the ruble is trending toward appreciation, contrary to historical crisis periods.
The Exchange Market Pressure (EMP) index remained in negative territory at -0.44 in early December.
“This indicates that market pressure continues to push for a strengthening of the ruble. The systemic currency risk indicator remains at zero, at its maximum distance from the critical level,” the report noted.
As a result, TsMAKP considers the probability of a traditional currency crisis—characterized by a sharp devaluation of the ruble—to be very low over the next year.
Russia
Valdai Forum debates superpower survival amid global anarchy
The survival strategies of superpowers were addressed at a meeting of the Valdai Discussion Club held in Russia.
Speaking at a session titled “Geopolitical Re-division: Power as a Guarantee of Peace or a Pledge of War”, John Mearsheimer, Professor of Political Science at the University of Chicago, argued that the best way for superpowers such as Russia, China, and the US to sustain their existence under conditions of international anarchy is to increase their military and economic power.
During the session, Mearsheimer drew attention to the fact that the fundamental priority for every state is survival.
Stating that there is no higher authority in the international system, Mearsheimer made the following assessment:
“Every state wants to survive, because survival is the number one goal. Let me conclude by returning to my main point: never forget that you operate under conditions of international anarchy, meaning there is no ultimate authority. The moment you recognise this reality, you realise that the best way to survive is to maximise your relative power. The concept of relative power is synonymous with the balance of power. If there is a great power in the system, the balance of power assumes immense importance; because power is the key to survival.”
Expressing that only three true great powers exist in the world, Mearsheimer listed these countries as the US, China, and Russia.
Stating that India is not included in this category because it lacks sufficient economic wealth despite its massive population, the professor noted that a large population and substantial economic resources form the foundation of military power.
Stating that the competition between the US and China continues not only in the military sphere but also in the field of technology, Mearsheimer emphasized that the race in artificial intelligence and other advanced technologies determines both wealth and military capacity in today’s world.
Dmitriy Trenin, Research Supervisor at the Institute of World Military Economics and Strategy at the Higher School of Economics (HSE) and President of the Russian International Affairs Council (RIAC), also stated during the discussion that Russia must preserve its great power identity, otherwise it will not be able to survive.
Pointing to the question of whether the US can maintain its global leadership, Trenin said that the future of all humanity could depend on this balance.
Expressing that the concepts of power and survival carry a distinctive relationship, Trenin conveyed that theories in Western political science do not fully align with the reality in Russia. Touching upon his country’s past, Trenin said, “Russia faced an existential survival risk twice in less than 100 years. The state collapsed first in 1917, and then in 1991. There is no guarantee that it will not collapse once more.”
Trenin recalled that although the Soviet military was at the peak of its power in 1991, this military might failed to save the USSR from dissolving.
Emphasizing that might does not consist solely of military force, Trenin brought up lines by the poet Aleksandr Pushkin depicting the struggle between gold and steel.
Trenin also cited the saying, “A donkey laden with gold can conquer any fortress.” The Russian analyst concluded that the country’s survival depends on Russia’s own internal dynamics and domestic condition, rather than on relations established with other states.
Alastair Crooke, a British diplomat and founding director of the non-governmental organisation Conflicts Forum, argued at the session that military force constitutes only one dimension of influence.
Citing the Palestinians as an example, Crooke expressed that the people sacrifice their lives for the sake of their own civilisational idea, way of life, and worldview.
The diplomat stated that even without substantial military power, Palestinians rally support in their struggles for sovereignty by relying on different elements of power, rather than merely on the number of tanks, money, or fighter jets.
Stating that a system of a “concert of powers” reflecting a compromise between civilisations could emerge in the future, Crooke expressed that in this order, states would preserve their sovereignty and would not abandon their own native civilisations.
The British diplomat said that old international structures, including the existing United Nations mechanism, must definitely be transformed.
Earlier, an analysis in Politico reported that US President Donald Trump sought to develop relations with Russia in order to prevent the construction of a Beijing-led global order.
Trump, for his part, expressed that Washington and Beijing could achieve great things together, and described President Xi Jinping as a “great leader” following his official visit to China.
Zheng Yongnian, Dean of the School of Public Policy at the Chinese University of Hong Kong, emphasized that despite its relative decline, the US maintains its global hegemony, and that underestimating Washington would produce a fatal mistake.
US Secretary of State Marco Rubio also characterised China as the greatest geopolitical challenge for his country, but noted that relations with Beijing constitute one of the most critical portfolios for Washington.
Russia
Mearsheimer says Trump seeks Ukraine peace but lacks diplomacy skills
Simultaneously with contacts conducted by US President Donald Trump’s representatives Steven Witkoff and Jared Kushner, a delegation of prominent American political scientists visited Moscow.
Professor John Mearsheimer, a faculty member at the University of Chicago who took part in the delegation, answered questions from the Russian daily Kommersant on the sidelines of a round-table meeting jointly organised by the Russian Council on Foreign and Defence Policy and the Higher School of Economics.
Mearsheimer said that while the Washington administration possesses the potential to play a constructive role in ending the war in Ukraine, it has not yet translated this capacity into action.
Stating that an American effort to encourage the Kyiv administration to reach a compromise with Russia and halt the war would make a positive contribution, the political scientist said: “Having potential is one thing, realising it is another matter. In this sense, the US has not yet used its potential and has not taken noteworthy steps that would contribute to ending the war in Ukraine.”
Evaluating Trump’s dispatch of negotiators Witkoff and Kushner to Moscow and Kyiv over the weekend, Mearsheimer emphasised that the American president is maintaining his efforts.
Recalling that the representatives had previously travelled to the Russian capital, the professor offered the following assessment:
“Trump is striving to achieve progress. The fact that he sent Witkoff and Kushner back to both capitals, despite having failed in the past, shows that he has not abandoned this objective. Yet at this stage, I see no concrete reason to believe these initiatives will succeed. There is no ground to think that Witkoff and Kushner have developed a magic formula that will end the war in Ukraine.”
Mearsheimer also addressed the motivation underlying Trump’s desire to end the conflict. Stating that the US president definitely wants to stop the war, the political scientist noted that Trump wants to be recognised as a peacemaker and receive the Nobel Peace Prize.
Arguing that Trump, who regards ending the war as serving American interests, is inexperienced in diplomacy, Mearsheimer remarked: “He does not know how to resolve this extremely complex problem. When his novice diplomacy combines with an issue of such intricacy, it is not surprising that he cannot make progress.”
Stating that although Trump previously described the conflict frequently as “Biden’s war”, the present picture shares out responsibility, Mearsheimer said that the conflict has now become Trump’s war.
Pointing out that the US administration continues weapons supplies via Europe, intelligence sharing including for strikes targeting Russian territory, and satellite internet support, the political scientist said:
“Before Trump returned to the White House in January 2025, this was Biden’s war. But when he became US president and could not end the war, this conflict turned into his own war. It is clear that the US continues its support by providing direct intelligence and indirectly giving the Europeans weapons to be transferred to Ukraine. Therefore, the US, and President Trump in particular, continue to provide support to Ukraine and contribute to the continuation of the war.”
Russia
Russia aids Iran in covert supersonic cruise missile project, FT says
According to a report by the Financial Times (FT), Russia is assisting Iran in developing advanced supersonic cruise missiles through a covert programme.
The multi-year secret collaboration, described as one of the most comprehensive strategic military technology transfers between Moscow and Tehran, reportedly bears the codename “C430L”.
Based on an examination of leaked correspondence, travel records, and military patents, the report stated that the programme, which began in 2023, continued during the war waged against Iran by the US and Israel.
Under the programme, experienced Russian missile specialists were reported to have supported Iran in developing a new class of weapons capable of threatening US aircraft carriers and warships in the Middle East.
Ramjet technology aimed at breaching air defence systems
According to the report, the primary objective of the C430L programme is to assist Iran in developing a ramjet propulsion system that enables a cruise missile to fly at several times the speed of sound.
Military experts point out that the technology in question is designed for use in anti-ship and land-attack cruise missiles.
Fabian Hinz, an expert at the UK-based arms monitoring group Conflict Armament Research, emphasised that this strategic transfer, which the Iranians have sought to obtain for decades, would require approval at the highest political level in Russia.
Jim Lamson, an expert at the James Martin Center for Nonproliferation Studies and a former CIA analyst, stated that this system would provide Iran with a new strategic weapon capable of threatening US naval assets.
Supersonic cruise missiles combine high speed with low-altitude flight capabilities, narrowing the time available for advanced air defence systems to detect and intercept the missile. This represents a strategic advantage for the Tehran government along the Persian Gulf line, where the US and its regional allies possess land- and sea-based defence systems.
The report noted that while Iran had built the ramjet system and conducted flight tests, there was no concrete evidence that a Russian-backed supersonic missile had yet been deployed in the field.
State enterprises and chief engineers involved
The supersonic missile assistance programme is reportedly coordinated by Russia’s state-owned arms export company Rosoboronexport, with the project being executed alongside NPO Mashinostroyenia.
NPO Mashinostroyenia, which was placed on the US sanctions list in 2014, is known for its work on cruise missile systems launched from ships, submarines, and land platforms, as well as Russia’s nuclear forces comprising intercontinental ballistic missiles.
Leaked travel records show that senior Russian engineers and export officials travelled to Iran multiple times before a contract was signed with Iran’s Ministry of Defence and Armed Forces Logistics in November 2023.
These figures include Aleksandr Dergachev, chief designer of naval missiles at NPO Mashinostroyenia; Aleksander Chebakov, a ramjet specialist; Yuri Prokhorchuk, head of the aerodynamics department; and Vladislav Kuzmichev, head of the Defence Technologies and Space Department at Rosoboronexport.
The documents indicate that by 2025, the company had received extensive Iranian technical materials regarding the ramjet propulsion system, analysed telemetry data obtained from a flight test, and submitted detailed queries to Tehran on topics including the fuel system, combustion stability, and the air intake.
In April 2025, Rosoboronexport proposed sending a delegation of around twenty experts to Iran for technical consultations.
Military cooperation between the two countries deepens
The programme is regarded as part of a deepening military partnership between Tehran and Moscow. Iran had previously supplied Shahed-type armed unmanned aerial vehicles used by Russia in the Ukraine war and assisted in their production within Russia.
Western officials also accuse Russia of providing satellite imagery and weapon components to Iran during the ongoing hostilities with the US and Israel.
The report recalled that Russian President Vladimir Putin, during his meeting with Iranian President Masoud Pezeshkian in Kyrgyzstan, said Moscow was “striving to provide the necessary aid and goods in this difficult period”.
Nicole Grajewski of Sciences Po University in Paris stated that the covert ramjet programme demonstrated “Russia’s effort to widen the war in Ukraine and draw the US to different fronts”, noting that Moscow no longer attached as much importance to regional red lines as it once did.
Leaked correspondence reveals that the C430L programme continued into 2026, with the parties continuing to negotiate technical reports and the next phase of the development process.
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