Russia sells gold bars for first time in 25 years to fund budget deficit amid high military spending: Report

According to a report by bne Intellinews, Russia has sold physical gold from its central bank reserves for the first time in 25 years as the government seeks to bridge a widening budget deficit driven by sustained military spending.

The report notes that between 2022 and 2025, combined sales of gold and foreign currency exceeded RUB 15 trillion ($150 billion), with an additional RUB 3.5 trillion ($35 billion) sold in the first two months of 2026. Data shows that the Central Bank of Russia sold 300,000 ounces of gold in January alone, followed by 200,000 ounces in February.

The report highlights that this marks a notable shift in reserve management.

Earlier, gold-related transactions were largely notional, involving transfers between the finance ministry and the central bank without physical movement. In recent months, however, the central bank has begun offloading physical bullion into the market.

As a result, Russia’s gold reserves have declined to 74.3 million ounces, the lowest level in four years. The sale of 14 tonnes in January and February is the largest two-month disposal since the second quarter of 2002, when 58 tonnes were sold in a single tranche.

The report adds that fiscal pressures have intensified due to heavy military spending. Russia ended 2025 with a budget deficit of 2.6% of GDP, compared with an initial estimate of 0.5%. Economists cited by the news agency suggest the actual deficit may be closer to 3.4%, as some payments due in December were deferred to 2026.

Budget stress was further aggravated by falling oil prices in the second half of the year and tighter US sanctions. As a result, the share of oil and gas tax revenues declined to about 20% of total revenues, roughly half of pre-conflict levels.

bne Intellinews also points out that the decision to sell gold comes amid a sharp rise in prices, which have crossed $5,000 per ounce. This surge has lifted Russia’s international reserves to over $809 billion as of February 28, including $300 billion of frozen assets. Gold holdings alone are now valued at $384 billion. Following the 2022 sanctions, total reserves have increased by about $200 billion, recovering roughly two-thirds of the frozen funds.

According to data from the World Gold Council cited in the report, Russia holds more than 2,000 tonnes of gold, making it the world’s fifth-largest sovereign holder. The country has steadily built these reserves to reduce reliance on dollar assets, particularly after sanctions following the annexation of Crimea in 2014 and the escalation of the conflict in 2022. At the same time, Russia has reduced its external debt to about 14% of GDP, among the lowest levels globally.

Since 2022, the finance ministry has used multiple funding channels to manage war-driven deficits. These include drawing from the National Welfare Fund, which still holds around RUB 4 trillion, enough to cover the current year’s projected deficit of 3% to 4% of GDP. The government has also increased issuance of domestic OFZ bonds and raised VAT rates by two percentage points, with VAT contributing about 40% of total revenues.

The move towards selling physical gold indicates a more direct drawdown of liquid reserves, underscoring the growing strain on Russia’s fiscal position as the conflict in Ukraine enters its fourth year.

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