Russia's Financial Strain: Kremlin Sells Gold Reserves and Military Sector Faces Debt Crisis

Russia's Economic Challenges

According to ХВИЛЯ: Confronted with severe economic pressures, Russia has begun actively selling its gold reserves to cover a growing state budget deficit. According to Ukraine's Foreign Intelligence Service, falling oil and gas revenues have created a significant budget shortfall, forcing the Kremlin to revise the state budget three times. In 2025, Russia's oil and gas income amounted to $106 billion, a 24% drop from the previous year. The projected budget deficit at the start of 2025 was $15 billion, but the actual figure by year-end exceeded $75 billion.

The volume of liquid assets in Russia's National Welfare Fund has shrunk by two-thirds since the war began. Consequently, the planned use of gold and precious metal reserves for the first half of 2026 is nearly $19 billion. Oleg Lugovsky noted that the Kremlin has resorted to selling off these gold and precious metal reserves to address the budget deficit. This move highlights the pressure on Russia's finances from international sanctions and a volatile global energy market.

Crisis in the Defense Industry

A separate crisis is unfolding in the defense-industrial complex, where wage arrears at military-industrial enterprises and strategic sites have grown by almost $10 million. Compared to 2024, wage debt at defense industry enterprises has surged by 88%. In 2026, the Russian economy is expected to face heightened recession risks, increased inflation, and growth in the shadow economy.

The overall economic situation points to serious structural problems for Russia under the weight of international sanctions and lower energy prices. The use of gold reserves indicates the Kremlin is scrambling to find alternative funding for state expenditures, but this is likely only a temporary fix. Further growth of debt in the defense and industrial sectors could lead to greater economic instability, threatening not only domestic policy but also Russia's foreign relations.