Sale of Gold Reserves by the Bank of Russia

Since the outbreak of full-scale hostilities between Russia and Ukraine in February 2022, the Bank of Russia (BoR) has faced a series of challenges that have altered its reserve-management strategy — amongst them Western financial sanctions, the freezing of large blocks of foreign-exchange assets, fluctuations in the ruble, and surging global gold prices. In response, the bank’s treatment of its gold reserves has become a significant component of the financial dimension of Russia’s war economy. Here we trace the background, the recent developments in the BoR’s gold transactions, explore the motives behind sales, analyse the implications for Russia’s macro-financial stability and for the war economy, and examines the diplomatic and humanitarian consequences, particularly for Ukraine and her Western supporters.

Russia’s gold build-up and the sanctions environment

In the years preceding the full-scale invasion of Ukraine, Russia had steadily increased the share of gold in her international reserves. By March 2025 Russia’s gold holdings were reported at about US$ 217.4 billion, making her one of the largest gold-holders globally. The volume of gold held was estimated at around 2,329.6 tonnes as of the third quarter of 2025; the value of those holdings rose sharply given the rally in gold prices (for example a rise from ~US$2,700 to US$4,000 per troy ounce from one period to the next). 

What drove this accumulation? Two principal factors: first, a desire by Russia to reduce her exposure to the US dollar and euro given growing geopolitical risk and sanctions from the West (especially after the annexation of Crimea in 2014). The accumulation of gold was part of a “de-dollarisation” and “sanction-proofing” stance. 

Second, gold offered a tangible, on-shore asset that could in principle be shielded from foreign legal claims and freezing of overseas bank deposits. As one commentary put it: given that the Western financial system could freeze Russia’s foreign-currency reserves, gold held within Russia offered a relatively safer form of reserve. 

Thus insofar as Russia anticipated western financial pressure or sanctions, gold accumulation was part of a hedging or self-insurance strategy.

From accumulation to sales: what has changed

Despite the strong position in gold, recent data indicate that the BoR (and the related state apparatus) has shifted from pure accumulation to sales of gold in the domestic market, and possibly to monetising gold to cover budget and war-expenditure needs. For instance, a recent 2025 article noted that the BoR’s “operations with gold in the domestic market … have been increasing in recent years” and that the bank had been “selling yuan and gold for rubles”. 

Why this shift:

1. Budget pressures and war cost: With Russia’s fiscal burdens mounting — both because of high military spending and the disruption to export revenues (principally from sanctions, oil/gas pricing politics and Ukrainian disruption of energy infrastructure) — the government has had to tap liquid assets to fund the budget. Gold, given high global prices and liquidity in the domestic market improving, becomes a viable source of ruble-liquidity. As the BoR itself noted: “… the purchase or sale of liquid currency assets of the NWF [National Wealth Fund] for rubles entails the central bank conducting equivalent volume operations in the domestic market.” 

   
   

2. Frozen foreign reserves: Large portions of Russia’s foreign reserves held abroad are effectively frozen by sanctions, leaving limited means of converting foreign currency assets into budget-usable resources. In contrast, gold reserves inside Russia are not subject to the same freezing mechanisms. Therefore gold becomes more attractive as a source of domestic liquidity. 

   
   

3. Rise in gold prices and domestic market liquidity: Because gold prices have soared (50% or more in 2025 compared to earlier years) and the domestic gold market’s liquidity has improved, the opportunity cost of holding gold may have changed for Russian policy-makers. Selling gold now yields high nominal ruble returns and can be used to back budget shortfalls. 

   
   

4. Sanction-driven reshuffling of reserve structure: Russia has reportedly adjusted the composition of her reserve assets. For example in 2023 Russia removed the US dollar, euro and other Western currencies from the currency structure of her fiscal reserves; instead the reserves held by the NWF consist of Chinese yuan and gold (60% yuan, 40% gold).  As such, gold takes on a dual role: both as a reserve asset and as a monetisable domestic asset.

Thus while gold accumulation remains important for Russia, the shift to active sales indicates that gold is being used as a working reserve—not just as passive, long-term reserve.

Mechanics of the sale and available data

The publicly available data on exactly how much gold the BoR or Russia’s state entities have sold is limited and often indirect, given the opacity of Russia’s financial disclosures. Nonetheless a few key points emerge:

• The trading platform data show that in August 2025, the World Gold Council noted that the BoR was the only central bank amongst those surveyed to have sold gold (3 tonnes net) in that month. 

  
  

• The gold volume held by Russia changed only slightly: according to the TradingEconomics data set, Russia’s gold reserves remained unchanged at 2,329.63 tonnes in Q3 2025 compared to Q2.

• Nonetheless, despite the physical volume being stable (or marginally declining), the value of the holdings rose steeply: one source cited a jump of about US$ 92 billion in value over 12 months driven by price increases from ~US$2,700 to ~US$4,000 per ounce. 

  
  

• The BoR explicitly stated that “since the liquidity of the domestic gold market has increased … the central bank conducts equivalent operations … also partially through the purchase and sale of gold.” 

This implies that while quantities may not show large declines, the bank is engaging in domestic market operations that convert gold holdings into rubles via sales (or via swaps) rather than simply accumulating gold passively.

Implications for Russia’s economy and war-effort

The decision to monetise gold reserves has several inter-locking implications:

For Russia’s macro-financial stability

• By selling gold for rubles, the BoR supports the domestic currency and helps the government access liquidity without resorting (as heavily) to foreign borrowing, which is constrained by sanctions.

  
  

• However, using gold reserves diminishes the cushion of reserves held for external shocks. Should Russia face a deeper economic shock or further sanctions, the diminished gold buffer may weaken resilience.

  
  

• The shift signals that reserves are being used for near-term budget needs, which may suggest that Russia considers the war-economy imperative more urgent than long-term reserve maximisation.

For the war on Ukraine and Russia’s military spending

• The monetisation of gold provides the Kremlin with an additional means of financing the war effort without overtly increasing reliance on foreign borrowing—which would be vulnerable to sanctions.

  
  

• It may reduce pressure to raise domestic taxes or slash expenditure in other non-military sectors, thus enabling the war-economy to continue.

  
  

• However use of reserve gold as a financing mechanism may indicate that conventional revenue sources (oil and gas, domestic taxation, commodity exports) are under strain. This could, over the medium term, impose constraints on Russia’s capacity to sustain prolonged heavy expenditure on the conflict.

For the sanction regime and Western policy

• Russia’s capacity to draw on gold reserves domestically means that Western sanctions targeting foreign-currency reserves and cross-border flows are less effective in constraining Russia’s ability to finance its war expenditure.

  
  

• In turn, this may force Western policy-makers to contemplate measures targeting gold markets or domestic Russian gold-transactions. However such counter-measures are complex, given the global nature of gold and the difficulty of isolating Russian gold from the international market.

Implications for Ukraine, diplomacy and humanitarian consequences

From the Ukrainian and international vantage point, the sale of Russia’s gold reserves has the following consequences:

• Ukraine’s hope that sanctions and asset-freezes will rapidly degrade Russia’s war-fighting capacity may be partly frustrated by Russia’s ability to convert domestic reserves (gold) into liquidity. This suggests that Russia retains financial manoeuvrability despite sanctions.

  
  

• For Ukraine’s reconstruction planning, the fact that Russia still holds significant reserve value means that eventual reparations or settlement discussions may be more complex: if Russia finances expenditure via reserves instead of foreign borrowing, tracing and enforcing claims becomes more difficult.

  
  

• From a humanitarian viewpoint, the continued normalisation of war-financing via domestic reserves implies that prolongation of conflict remains feasible for Russia; this has the effect of prolonging the suffering of civilians in Ukraine and delaying post-war recovery.

  
  

• Diplomatically, the sale of gold may signal that Russia expects the war to endure and thus is reorganising its reserve strategy accordingly—reinforcing Ukraine’s need to maintain Western financial and military support for an extended period.

Risks and future scenarios

Several risk scenarios emerge from the current trajectory:

• If gold-prices fall or Russian domestic gold liquidity declines, the monetisation strategy may become less effective, increasing pressures on Russia’s budget and war-financing. A sharp reversal in gold-price or liquidity could expose Russia’s vulnerability.

  
  

• Should Western sanctions or global coordination extend to gold transactions (for example restricting exports of Russian-mined gold or limiting access to international refiners), Russia’s ability to monetise gold might diminish.

  
  

• In a negotiated peace settlement, the question of reserves may feature prominently: whether Russia retains control of her gold reserves or whether they become subject to claims or guarantees for Ukraine.

  
  

• For Ukraine, the longer Russia can persist financially, the more the humanitarian burden grows. But if Russia becomes financially over-stretched, this could open a window for shifting the strategic balance.

Conclusion

The BoR’s sale of gold reserves marks a strategic adaptation to the era of war, sanctions and financial isolation. What was once a purely accumulation-oriented reserve policy has shifted towards a monetisation strategy, with gold serving not only as a safe-haven asset but as a working source of liquidity for a state under boycott from the Western financial system.

For Ukraine and her supporters, this development complicates the sanctions narrative: Russia is not merely being squeezed from the outside but is drawing inward on domestic reserve assets to keep the war-economy running. For Russia, the strategy mitigates one dimension of sanction-pressure but places increasingly heavy reliance on reserve-assets for near-term financing rather than long-term reserve strength. The humanitarian and diplomatic stakes remain high, because the ability to finance a prolonged war has direct consequences for civilians, reconstruction prospects, and the post-war order in Europe.