Russia taps gold reserves to offset oil dollar deficit
Illustrative photo: Russia has begun selling off gold from its reserves (Getty Images)
Russia has begun selling off gold from its reserves. In January, the Russian central bank reduced its metal holdings for the first time in a long while, taking advantage of a surge in global prices to a historic high, Bloomberg reports.
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Details of the reserve sale
According to the outlet, Russia’s gold reserves decreased by 300,000 ounces and now stand at 74.5 million ounces. This reduction in reserves was recorded for the first time since October of last year.
In January, the average price of gold remained around $4,700 per ounce. Preliminary estimates suggest that the operation could have brought approximately $1.4 billion to the Russian budget.
Despite the physical decrease in the amount of metal, the value of the remaining reserves in monetary terms increased by 23% due to record-high prices.
Why Russia is using gold
The Russian central bank has begun actively using gold bars for operations related to the sale of assets from the National Wealth Fund.
In this way, the Russian Ministry of Finance is trying to offset declining revenues from oil and gas sales, which is contributing to a growing budget deficit.
Crisis in the Russian economy
The Russian economy continues to face significant pressure due to international sanctions and declining revenues from energy exports. Recently, US President Donald Trump extended for another year the sanctions against Russia that were imposed over its aggression against Ukraine.
It has also been reported that the aggressor’s oil sector is suffering enormous losses, already leading to defaults by individual companies.
Last year, Russia ended with failures in the aviation and space sectors, and at certain periods, the price of Russian oil dropped to critical levels.
Due to a shortage of foreign currency inflows, the Kremlin has begun a large-scale sale of assets to cover "gaps" in the state budget and finance military expenditures.
