It’s not yet 1998 all over again, but National Bank Financial Inc. warns that there are growing worries about the safety of Russia’s financial system.

Back in 1998 a collapse of the Russian financial system, culminating in it defaulting on its ruble debt, helped precipitate a global financial crisis. The trouble helped bankrupt the massive hedge fund, Long-Term Capital Management, and threatened overall global financial stability. Today, NBF warns, “The clouds in Russia’s sky are getting darker and darker.”

It notes that Moody’s Investors Service has placed 18 Russian banks on its credit-watch list with potential negative implications. “After three bank closures in as many months, the Russian central bank cut the minimum reserve requirements in half, to 3.5%, in order to provide support to the banking sector. Banks on Moody’s watch list include three of the four largest privately-owned banks in Russia,” NBF says.

Earlier this week, Guta Bank, shut its doors and ATMs to prevent a run on deposits. It later struck a deal to be sold to another Russian banking group. Nevertheless, the rumbles are starting to concern some investors.

NBF notes that the banking crisis is not the only dark spot on the Russian horizon. “The Justice Ministry said it would start enforcing payment of Yukos Oil Co. tax bills – US$3.4 billion for 2001. Such a move will involve asset seizures,” it says. “The Yukos saga is not without its ripple effect on the world oil market, since it is Russia’s largest oil exporter.”

“Will this have the same contagious effect on financial markets as the 1998 Russian crisis? Unlikely, but the situation is on our radar screen,” it concludes.