(MOSCOW) – Russia has begun selling gold from its official reserves, signalling increased strain on the financial buffers built to withstand Western sanctions and sustain the war against Ukraine.
Approximately 44 tonnes of gold disappeared from the central bank’s reported stock in the first half of 2026. The sale represents less than two percent of Russia’s total gold holdings, which remain among the largest in the world. The shift in direction, however, is what matters. Russia spent years accumulating gold as an insurance policy, deliberately reducing reliance on dollars after earlier sanctions. Now it is drawing down that insurance.
Gold has become a critical asset because much of Russia’s foreign currency is frozen by Western sanctions. The bars held in domestic vaults can be used when tax revenue and borrowing fall short of covering expenditure. Russia’s rainy day fund holds part of its savings in gold and Chinese currency at the central bank. When the government requires rubles, the Bank of Russia exchanges those assets and sells the equivalent value of gold or Chinese currency on the domestic market.
The readily spendable portion of the fund has shrunk by roughly three quarters since the full scale invasion of Ukraine began. The cushion that helped the Kremlin portray Russia as stable and capable of withstanding a long confrontation with the West is significantly smaller than it was four years ago. Rebuilding it under wartime conditions is extremely difficult. The fund is larger overall, but much of it is tied up in projects and bank deposits that cannot easily be converted into cash.
Russia’s federal budget deficit widened sharply in the first half of this year, already surpassing the government’s original plan for the entire year. Spending is rising faster than revenue, driven largely by the war. The state is devoting a huge share of the economy to paying soldiers, manufacturing ammunition, compensating casualties and replacing equipment. These are costs the Kremlin cannot easily cut while the fighting continues.
The real limit on paying that bill comes from Russia’s ability to sell oil and gas to international markets. When the oil price is high, Russia receives revenues, borrowing becomes easier and the domestic financial system is healthier. If the oil price falls to 60 or 40 US dollars per barrel (£46 or £31), a crisis would arrive immediately. Oil and gas revenue has become less reliable. Higher prices can still deliver a sudden windfall, but a drop in oil income can open a hole in the budget just as quickly.
The Russian economy is not about to collapse. It is still growing, albeit slowly, and unemployment is extremely low. Factories continue producing weapons. Yet that apparent strength conceals a deeper problem. Russia is short of workers. Borrowing is expensive and wages are rising faster than productivity. The economy is being pushed hard to serve the war, leaving less spare capacity for everything else.
Two economies effectively exist in Russia. The state dominated sector, driven largely by military expenditure and military industrial industries, continues to function. The rest of the economy, including small and medium sized enterprises and the private sector, is struggling badly. The government could borrow more domestically, raise taxes, cut projects or accept higher inflation, but none of that removes the overall cost. More government borrowing means less money for private companies. Higher prices squeeze households. Investment is pulled towards defence factories and away from civilian industry, roads, hospitals, schools and technology.
The war can continue, but only if the rest of the economy shoulders the burden. The government can create more rubles, but it cannot instantly create engineers, machine tools or imported electronics.
Russia occupies a large part of southeastern Ukraine and the fighting is ongoing. The gold sale is not a sign that Russia is about to stop fighting. Waiting for economic collapse is not a strategy for ending the war. Financial pressure does, however, weaken Russia’s choices over time. A thinner cushion makes Russia more vulnerable. Another fall in oil revenue would hurt more. A banking sector problem, new sanctions or an unexpected rise in war spending would all be harder to absorb. None of these guarantees a change in Kremlin policy, but they can reinforce one another, forcing harsher trade offs between the military, households and the economy.
The 44 tonnes of gold are best understood as another flashing warning light on the economic dashboard of the Russian dictator Vladimir Putin. The Kremlin can probably keep the war machine running, but the price it pays in return is a bigger burden on ordinary Russian families, businesses and the country’s economic future.
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