Russia's Central Bank Begins Gold Sales Amid Financial Strain from Ukraine Conflict

In a significant shift, Russia's central bank has begun selling physical gold from its reserves for the first time in 25 years to address the financial strains of the ongoing war in Ukraine. This move, which has seen 14 tonnes of gold sold in just two months, reflects the Kremlin's urgent need for cash amid a growing budget deficit and declining oil revenues. As the country grapples with high military expenditures and frozen assets, the decision to liquidate gold reserves raises questions about Russia's ability to sustain its wartime efforts without further economic repercussions. Discover the implications of this strategic financial maneuver.

By Narendra Chaudhary Mar 29, 2026, 10:48 IST

Russia's Gold Sales: A Shift in Strategy

For the first time in a quarter-century, Russia has initiated the sale of physical gold from its central bank reserves to address the escalating financial demands of the ongoing war in Ukraine. A report from the Berlin-based news outlet bne IntelliNews indicates that the Central Bank of Russia sold 300,000 ounces of gold in January and an additional 200,000 ounces in February, totaling 14 tonnes in just two months—the largest quantity sold in such a short timeframe since 2002.

This marks a significant departure from Russia's previous approach, where gold transactions between the Ministry of Finance and the central bank were largely theoretical, without actual physical transfers. Now, the central bank is actively selling tangible gold bars in the market. As a result of these sales, Russia's gold reserves have decreased to 74.3 million ounces, the lowest level in four years. Despite still holding over 2000 tons of gold, making it the fifth-largest gold holder globally, the substantial sales reflect immense pressure on the government's finances amid a serious budgetary crisis.

For instance, the government is projected to end 2025 with a budget deficit of 2.6% of GDP, significantly higher than the initial estimate of 0.5%. Some analysts suggest that the actual deficit could reach 3.4%, partly due to postponed spending until 2026, which artificially improves the budget's appearance.

Historically, oil and gas revenues have been a crucial income source for the Russian government. However, these revenues have sharply declined due to Western sanctions and lower oil prices in the latter half of 2020 compared to pre-conflict levels. Meanwhile, military expenditures have remained exceedingly high throughout the four-year duration of the Ukraine war. The decision to sell gold is also strategic, as gold prices have surged, recently surpassing $5,000 per ounce, pushing Russia's total international reserves above $809 billion, despite approximately $300 billion being frozen in Western nations. Gold alone now constitutes about $384 billion of Russia's reserves.

Since February 2022, Russia has sought various methods to secure funds to mitigate its budget issues, including withdrawing from the National Wealth Fund, which still holds around 4 trillion roubles, issuing more domestic bonds, and raising its value-added tax (VAT). However, the recent move to sell actual gold indicates a shift away from these alternatives.

Historically, Russia has accumulated gold reserves in response to its annexation of Crimea in 2014 and the onset of the Ukraine war in 2022, aiming to reduce reliance on the U.S. dollar and safeguard against sanctions. Prior to this, the central bank had largely avoided selling physical gold, viewing it as a long-term strategic asset.

The decision to sell gold bars highlights the financial strain imposed by the ongoing conflict. While 14 tonnes may seem minor compared to Russia's total gold reserves, it underscores the Kremlin's urgent need for cash to support military operations. With low oil prices and high military spending, Russia may need to consider further gold sales or alternative funding sources in the coming months. The question remains: can Russia sustain its wartime financing without incurring significant additional economic challenges?