Russia began selling physical gold from its central bank reserves for the first time in 25 years, as the government seeks to plug a widening budget deficit driven by sustained military spending.

From 2022 to 2025, sales of gold and foreign currency exceeded RUB15 trillion ($150bn), with a further RUB3.5 trillion ($35bn) sold in the first two months of 2026, according to regulatory data. In January alone, the Central Bank of Russia sold 300,000 ounces of gold, followed by 200,000 ounces in February.

The move marks a significant shift in how Moscow manages its reserves. Previously, transactions involving gold were largely conducted on paper, with bullion transferred between the Ministry of Finance and the central bank without leaving vaults. In recent months, however, the central bank has begun selling physical gold bars into the market.

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

Russia’s budget is coming under increasing pressure due to heavy military spending. The government ended 2025 with a deficit of 2.6% of GDP, having started the year with a forecast of 0.5%. The true size of the 2025 deficit was probably closer to 3.4% of GDP, say economists, but part of the payments due in December were shoved off into 2026 to reduce the overall amount, according to expert assessments.

The budget was under extra pressure as oil prices fell in the second half of the year and US sanctions tightened leading to a fall in the share of oil and gas tax revenues shrinking to make up only 20% of revenues – around half of its pre-war levels.

The decision to sell gold is also prompted by the dramatic rise in gold’s price to over $5,000 per ounce. That has boosted Russia’s international reserves to over $809bn (including the $300bn of frozen reserves) as of February 28, according to the Central Bank of Russia (CBR), purely in terms of revaluation of the physical stock of gold. Of that gold reserves are now worth $384bn. When sanctions were first applied in 2022, the value of Russia’s gross international reserves (GIR) had risen by around $200bn, making back two thirds of the money frozen in the West.

Russia holds more than 2,000 tonnes of gold overall, making it the world’s fifth-largest sovereign holder, according to data from the World Gold Council. The country spent years building up its reserves as part of a strategy to reduce reliance on dollar-denominated assets, particularly after sanctions imposed following the annexation of Crimea in 2014 and intensified after the full-scale invasion of Ukraine in 2022. At the same time Russia has paid down most of its external debt and currently has only 14% of GDP outstanding -- by far the lowest level of debt of any major economy in the world, which makes it extremely difficult to sanction.

Since 2022, the Ministry of Finance has followed a complicated strategy to support the military-driven budget deficits by tapping multiple sources of funds, to spread the load. That has included tapping the National Welfare Fund (NWF) which still holds some RUB4 trillion – enough to completely cover this year’s forecast deficit of 3-4% of GDP. MinFin has also doubled the issue of domestic Russian Finance Ministry’s OFZ treasury bills, and raised VAT taxes, the biggest contributor to budget revenues making up 40% of all income, by two percentage points.

The shift to physical gold sales suggests that liquid reserve buffers are being drawn down more directly, highlighting the growing strain on Russia’s fiscal position as the conflict in Ukraine enters its fourth year.