The Central Bank of Russia (CBR) and the economic wing of the Kremlin are not prepared to provide state development lender Vnesheconombank (VEB) with another monster bailout.

The government has refused to back-stop VEB with a recap worth 1.5 trillion rubles ($23bn) to plug a black hole on its books, Vedomosti daily reported on November 16. Instead, the government is considering removing problem assets from VEB's balance sheets, including a number of loans made to companies involved in building facilities for the Winter Olympics held last year in Sochi.

VEB already received a package worth 330bn rubles earlier this year to help it to continue provide financing to the real economy.

The sheer size of the bailout required is fuelling concerns about the overall state of Russia's economy, as analysts and the Finance Ministry itself warn that the country's Reserve Fund, used to cover the deficit, only has enough funds for less than two years at the current rate of expenditure.

The proposed bailout could also hit Russia's credit rating, which was already lowered to junk by two agencies earlier this year.

Existing support for Russia's crippled financial sector has included a one trillion ruble capital injection in the form of Treasury bonds for 27 of the largest lenders, financed from the government budget. VEB, along with all of the major state banks, have been prevented from tapping the international capital markets following sanctions imposed by the US and Europe over Russia's involvement in the Ukraine conflict.

In October 2014, VEB appealed to the European Court of Justice requesting the lifting of EU sanctions. No court ruling has been made so far.

Vedomosti reported that the presidential administration is wary of letting VEB participate in the Treasury bond scheme, also known as OFZs. Deputy Prime Minister Igor Shuvalov is in favour of a recap for VEB, while the central bank is staunchly opposed to it, according the newspaper reported.

"Different options (about how to help VEB) are being discussed now," CBR governor Elvira Nabiullina told the Duma on November 13. "It is too early to say more. We have simply carried out a valuation of many of its assets."

VEB has external debt of $9bn with a syndicate loan worth $800m due in the third quarter of next year.

The bank, which has assets valued at about $80bn, or about 4% of Russia’s economic output, is a non-commercial state corporation the Kremlin uses to develop the economy and manage state debts. It was the government's bailout manager during the 2008-2009 economic crisis when it rescued troubled companies and lenders such as Globex and Sviaz Bank.

The bank, which owns 10.2% of Gazprombank, lent $7.4bn to Russian oligarchs to help finance construction for the Sochi Winter Olympics. The biggest credit, 73bn rubles, went to billionaire Vladimir Potanin's development company.

VEB's total exposure to Ukraine is about $11bn and much of that in the war-torn eastern Donbas region may have to be written off. Unconfirmed press reports by Syrian newspapers say the bank also provided money to help the government of Syrian President Bashar al-Assad, the Kremlin's strongest ally in the Middle East. VEB has denied it has provided any support to al-Assad's regime.

Meanwhile, the Reserve Fund, one of Russia's key fiscal safety buffers, could even dry up as early as 2016 if oil prices do not climb back to a safe level to sustain the budget, Finance Minister Anton Siluanov warned in late October.

"About RUB2.6 trillion ($40bn) will be cut from the Reserve Fund in 2015, more than a half," Siluanov said in comments reported by TASS news agency, adding that "2016 might be the last year that we are able to spend from the reserves before they are depleted".

The ministry forecast that the fund will be cut in 2016 from RUB3.38 trillion ($52.7bn) to RUB1.25 trillion, after it is tapped to cover financing for the federal budget deficit at below 3% of the GDP ceiling.