A key Russian CEO just highlighted the clash between stabilizing the economy and growing business in wartime

• Russia's economy is facing challenges despite resilience and high liquidity, says Rosneft's CEO.
• He said the central bank's 16% interest rate to curb inflation hampers borrowing and investment.

Russia's wartime economy appears to be humming along over two years into its war with Ukraine. But doing business is hard, according to the boss of a Russian oil giant.

"Despite a record 103 trillion ruble of liquidity within the perimeter of the Russian banking system, the industry is unable to raise financing," said Igor Sechin, the CEO of Rosneft — Russia's largest oil producer — at the St. Petersburg International Economic Forum on Saturday. That's about $1.2 billion of liquidity.

The country's top central banker, Elvira Nabiullina, has hiked interest rates up to 16% over the last year to tame inflation.

The high rates discourage borrowing and investment, "which are necessary for sustainable development," said Sechin.

It wasn't the first time Sechin griped about high interest rates.

Last month, after Rosneft's first-quarter results, Sechin said that "market conditions in Russia have already resulted in a significant incremental cost of debt."

"The Company's average quarterly debt service cost reached its maximum in the 21st century," Sechin added.

On Friday, Russia's central bank kept its key interest rate at 16% for the fourth straight month. But the bank said in a statement that it "holds open the prospect of increasing the key rate at its upcoming meeting" on July 26 should high inflation continue.

Russia's inflation rate stood at 8.17% from May 28 to June 3 — up from 8.07% a week earlier. This is double the central bank's 4% inflation target.

Russia's overheated economy masks risks

Sechin's comments highlight the challenges in Russia's sanctions-hit economy, which has appeared resilient despite the Ukraine war.

Russia posted 3.6% GDP growth last year and unemployment rate hit a record low 2.6% in April. Meanwhile, real wages jumped nearly 13% in March from a year ago due to an ongoing labor crunch.

It's so hot that Herman Gref, the CEO of Sberbank — Russia's largest bank by asset value — said last week the country's economy is "definitely and strongly overheated." Nabiullina herself warned in December the country's economy was at risk of overheating.

Reports from Russia suggest the country's economy is primarily driven by wartime activities that generate demand for military goods and services, subsidies that steady the economy, and sharp policy-making.