India, July 7 -- Russian President Vladimir Putin's war in Ukraine may be about to detonate a crisis far from the battlefield, according to a classified European intelligence assessment that warns Russia's banking system has become dangerously overextended after four years of financing the Kremlin's invasion.

The two-page document, titled "Note on the probability of a banking crisis in Russia in 2026" and reviewed by Reuters, was prepared in recent weeks to inform European officials about the state of Russia's banks and outlines their vulnerability to further Western curbs. Its conclusion is stark: while Moscow's financial institutions have absorbed sanctions shocks since the 2022 invasion, mounting bad loans and surging household debt h...