Russia's Gold Reserves Shrink
The Central Bank of the Russian Federation has been rapidly reducing its gold reserves to address a shortfall in the state budget. Since the beginning of the year, almost 28 metric tons of gold have been sold, generating roughly $4.3 billion. As of May 1, Russia's gold stockpile fell to 2,298 tons—the lowest level since the start of its full-scale invasion of Ukraine. This marks the steepest decline in reserves since 2002.
Analysts at Bloomberg note that the Bank of Russia was once the world's largest sovereign buyer of gold. However, that purchasing trend halted in early 2020. The Russian regulator is now being forced to offload gold due to falling revenues from oil and gas. Proceeds from these gold sales are being used to finance the state budget deficit and support the ruble's exchange rate.
Energy Sector Struggles
In addition, following Ukrainian drone strikes, most major oil refineries in central Russia have either halted operations or cut fuel production. The combined capacity of the facilities that have fully or partially shut down exceeds 83 million metric tons per year—equivalent to about 238,000 tons daily. These plants previously supplied over 30% of Russia's gasoline and roughly 25% of its diesel fuel.
Residents of Ryazan and the temporarily occupied Crimea have voiced frustration over gasoline shortages at filling stations. Fuel disappeared sharply after the attacks on refineries, with Russians complaining about the lack of AI-92 and AI-95 gasoline at pumps. These developments highlight serious challenges facing the Russian economy amid declining revenues and growing deficits.
The situation with Russia's gold reserves and fuel production reflects the severe economic difficulties the country faces as a result of falling oil and gas income and ongoing military operations. The reduction in gold holdings may indicate the government is seeking alternative ways to fund its expenditures, while fuel supply problems underscore strains in the energy sector. These issues could have long-term consequences for economic stability and social conditions in the country.
As the situation with gold reserves continues to deteriorate, the Russian economy faces additional pressures from a significant gasoline shortage triggered by recent attacks on refineries. This shortage exacerbates the challenges of rising deficits and declining revenues, highlighting the interconnectedness of Russia's energy sector struggles and its financial stability.