Russia’s State Duma has passed the largest overhaul of its bankruptcy law since the statute was written. On paper, the reform saves jobs by favoring rescue over liquidation.
It hands the Kremlin a legal instrument to decide which companies survive the insolvency wave.
In practice, Ukraine’s foreign intelligence assesses, it hands the Kremlin a legal instrument to decide which companies survive the insolvency wave building inside Russia’s war economy—a state-run version of “too big to fail,” where Moscow writes the list.
The fine print lets Moscow overrule creditors
The scale explains the urgency. Russian companies now owe more than everything Russia’s economy produces annually: 293 trillion rubles ($3.85 trillion) in liabilities by the end of April, against a GDP of about 214 trillion rubles ($2.8 trillion). Overdue payments rose 18% in a year to 7 trillion rubles ($92 billion).
That unpaid sum equals roughly three-quarters of Russia’s official annual defense budget. More than a third of corporate profits now go to paying interest alone.
In a system where the biggest lenders are state banks, that lets Moscow impose survival on chosen enterprises.
The law flips the system’s default from liquidation to rescue. Companies gain a pre-bankruptcy sanation track to settle with creditors before any court case opens, plus a judicial debt-restructuring procedure with plans running up to four years, extendable by four more. A new anti-crisis manager oversees the debtor’s finances, payments, and recovery plan.
The decisive mechanism is the binding clause. For large debtors—companies with assets above 1 billion rubles ($13 million)—a court-approved sanation agreement, backed by a majority of independent creditors, becomes binding even on creditors who refuse to sign it. In a system where the biggest lenders are state banks, that lets Moscow impose survival on chosen enterprises and silence holdouts.
Six years of stalling ended in two days
Versions of this reform stalled for six years, with one government bill frozen in the Duma for two and a half years. Then the package cleared its second reading on 7 July and passed the third a day later.
“Its hasty advancement coincided with a sharp deterioration in Russian companies’ finances,” Ukraine’s Foreign Intelligence Service assessed on 13 July. The system being replaced rescued almost no one: external administration was applied in 51 cases in all of 2025, financial recovery in eight, and rehabilitation accounted for less than 1% of corporate bankruptcies.
Sberbank chief German Gref told shareholders in late June that investment had fallen more than 14% and could drop a further 3% this year.
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The agency expects Moscow to apply the new mechanisms selectively—defense plants first, then critical infrastructure, large employers, and companies dependent on state orders—to stagger big insolvencies and keep distressed assets from flooding the market at once.
Russia’s own top financiers had already publicly linked the strain to the war. Sberbank chief German Gref told shareholders in late June that investment had fallen more than 14% and could drop a further 3% this year, while central bank governor Elvira Nabiullina’s Bank of Russia conceded that pro-inflationary risks had worsened.
The warnings are not only Ukrainian. In February, Ukrainian intelligence put non-performing loans above the 11% threshold that defines a systemic banking crisis, citing research on the $210–250 billion in loans Russian banks were forced to extend to defense contractors.
And a European intelligence note seen by Reuters warned on 6 July that the burden banks carry for the war economy creates an “explosive” risk—more than 500,000 Russians declared personal bankruptcy in 2025, up almost a third in a year.
Russian bankruptcy practitioners caution the new procedure works only if courts genuinely assess whether a business can recover.
Russian bankruptcy practitioners caution the new procedure works only if courts genuinely assess whether a business can recover—and with over a third of profits going to interest, many cannot. The law postpones the reckoning rather than canceling it.
