Russia Liquidates Reserve Gold for First Time in 25 Years to Address Ukraine War Deficit, According to Report

Russia has initiated the sale of physical gold from its central bank reserves for the first time in 25 years, a move aimed at addressing a growing budget deficit exacerbated by ongoing military expenditures. According to a report from Berlin-based bne IntelliNews, the country has sold significant amounts of gold and foreign currency, totaling over RUB 15 trillion ($150 billion) from 2022 to 2025, with an additional RUB 3.5 trillion ($35 billion) sold in just the first two months of 2026. This shift in strategy marks a notable change in how Russia manages its reserves, as it transitions from notional gold transactions to actual sales of gold bars.

Significant Gold Sales and Reserve Management Changes

In January and February of this year, the Central Bank of Russia sold a total of 500,000 ounces of gold, marking the largest two-month sale since 2002. This move reflects a significant change in reserve management practices, as previous transactions primarily involved transfers between the Ministry of Finance and the central bank without the physical movement of gold. As a result of these sales, Russia’s gold holdings have decreased to 74.3 million ounces, the lowest level in four years. The recent sales indicate a strategic pivot as the government seeks to bolster its finances amid increasing fiscal pressures.

Fiscal Strain and Budget Deficits

Russia’s fiscal situation has become increasingly precarious, with the government reporting a budget deficit of 2.6 percent of GDP for 2025, significantly higher than the initial projection of 0.5 percent. Economists suggest that the actual deficit may be closer to 3.4 percent, with some payments deferred to 2026 to manage the reported gap. The budgetary pressures have intensified due to declining oil prices and tightening U.S. sanctions, which have reduced oil and gas tax revenues to about 20 percent of total government revenues—approximately half of what they were before the conflict in Ukraine began.

Impact of Rising Gold Prices

The decision to sell gold has also been influenced by a surge in bullion prices, which have risen above $5,000 per ounce. As of February 28, Russia’s international reserves exceeded $809 billion, including around $300 billion in assets that remain frozen in Western countries. The value of Russia’s gold reserves alone is estimated at about $384 billion. Holding over 2,000 tonnes of gold, Russia ranks as the fifth-largest sovereign holder of gold globally, according to the World Gold Council. This accumulation of gold reserves has been part of a broader strategy to reduce reliance on dollar-denominated assets, particularly following sanctions imposed after the annexation of Crimea in 2014 and further restrictions after the invasion of Ukraine in 2022.

Alternative Funding Strategies

In response to the mounting budgetary challenges, the Ministry of Finance has explored various funding avenues since 2022. These strategies include utilizing the National Welfare Fund, which still retains around RUB 4 trillion, increasing the issuance of domestic OFZ treasury bonds, and raising value-added tax rates, which now account for approximately 40 percent of government revenues. The recent shift towards selling physical gold underscores Russia’s need to access its liquid reserves more directly, highlighting the ongoing fiscal strain as the conflict in Ukraine continues into its fourth year.

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