Amid mounting economic pressures and international sanctions, Moscow sells gold from its National Wealth Fund to cover increasing budget deficits caused by the ongoing conflict with Ukraine. As Russia sells gold to maintain financial stability and liquidity, the European Union is simultaneously seeking ways to tap into frozen Russian assets to fund Ukraine’s military and economic needs.
This dual approach highlights how Moscow’s decision to sell gold is part of a broader strategy to cope with economic isolation, while the EU eyes these frozen assets as a critical resource to support Kyiv.
Russia Sells Gold to Cover Budget Deficits
According to recent reports, Russia’s Finance Ministry has sold gold from its National Wealth Fund (NWF), reducing its gold holdings from 405 tonnes to 232 tonnes within just a few years.
This drastic reduction reflects the Kremlin’s urgent need for liquidity to maintain its economy amid escalating sanctions and war costs. Analysts estimate that this gold sale could have raised about $17 billion, a significant amount in the face of financial challenges.
Adding to this, the Central Bank of Russia has also been actively selling gold, capitalizing on record-high prices. In October alone, the Central Bank sold 3.1 tonnes worth roughly $400 million. This marked the tenth such sale since the beginning of 2023, gradually shrinking Russia’s gold reserves, which had previously grown substantially after Western sanctions were imposed following the annexation of Crimea in 2014.
The decision for Moscow to sell gold reflects both domestic and international pressures. Domestically, demand for gold as a store of value has increased, but at the same time, Russia needs to generate funds to support its military campaign.
On the international front, mistrust in the U.S. dollar and freezing of Russian assets have pushed several countries’ central banks to increase their gold reserves, signaling a shift towards gold as a financial safe haven.
EU Moves to Leverage Frozen Russian Assets for Ukraine
While Moscow is busy selling gold to maintain its budget, the European Union has taken a contrasting approach by proposing to tap into frozen Russian assets to support Ukraine.
European Commission President Ursula von der Leyen recently urged EU member states to back a plan to utilize up to €185 billion of Russian-owned investments held at Euroclear, the central securities depository in Brussels.
This plan aims to close Kyiv’s estimated €135 billion budget gap for 2026 and 2027, with a majority of the funds earmarked for military spending. The proposal includes either direct financing to Ukraine or offering these frozen assets as collateral for loans issued to EU member states. These loans would then be funded through new bond issuances.
Von der Leyen emphasized, “we need to support Ukraine to defend itself,” highlighting the urgency of continued financial aid. This approach signifies a strong commitment by the EU to pressure Russia economically while bolstering Ukraine’s ability to sustain its defense and recovery efforts.
Also read: Rising Gold Price Breaks Away as U.S. Consumers Pull Back
Gold Prices Surge Amid Geopolitical Tensions
The ongoing conflict and economic sanctions have influenced global precious metal markets. Gold prices surged, with London trading seeing gold reach $4,173 per troy ounce, nearing two-week highs. Silver prices followed suit, climbing close to $53.
The rise in gold prices has been fueled partly by Russia’s continuous strategy to sell gold amid rising prices, maximizing liquidity. At the same time, global investors view gold as a stable asset amid geopolitical uncertainties and currency fluctuations.
According to a recent report by London’s think tank OMFIF, the increased demand for gold by central banks is driven more by political considerations than price.
One reserve manager quoted in the report stated, “holding gold signals independence,” reflecting how countries use gold to diversify reserves away from traditional currencies like the U.S. dollar.
The Financial Impact on Russia and Global Markets
Despite selling gold and other liquid assets, Russia’s financial situation remains strained. The country’s National Wealth Fund, including gold and Chinese yuan assets, has shrunk by approximately 55% since early 2022, down to $51.6 billion.
Deputy Finance Minister Vladimir Kolychev noted that selling gold domestically is partly due to rising household demand for gold as a savings instrument.
Also read: Gold Price May Surge Beyond $4,900 per Ounce in 2026, Predicts Goldman Sachs
On the stock market front, Moscow’s MOEX index dipped slightly, while many global markets experienced gains, indicating diverging investor confidence worldwide. U.S. borrowing costs have risen, while UK government bonds saw yields decline, helped by recent fiscal policy announcements.
Meanwhile, Russia’s parliament approved a VAT increase from 20% to 22%, signaling the Kremlin’s need to increase revenue amid the war’s economic toll. NATO’s Secretary-General Mark Rutte pointed out that the war is significantly impacting Russian citizens’ lives, underscoring the broader consequences of the conflict.
By strategically selling gold, Moscow is attempting to sustain its budget while facing growing economic isolation. On the other hand, the EU’s plan to target frozen Russian assets illustrates how the war’s financial battlefield extends beyond the front lines, shaping global markets and geopolitics in profound ways.
