Since the invasion of Ukraine three years ago, Russia has found itself in the eye of the financial storm. Many countries around the world have agreed to apply various types of sanctions to Vladimir Putin's country, in order to weaken the Russian economy by limiting its ability to finance the conflict. 

But while the main oil companies, banks, oligarchs and public figures are now being hit in the wallet, the fact remains that Russia has effective alternatives for getting round all these sanctions. The use of physical gold is one of these formidable weapons, enabling Russia to stabilise its economy in the face of external pressure. 

ARTICLE SUMMARY: 

• A country with a substantial stock of gold
• Russian gold mining
• Using gold to further de-dollarise the world economy
• Using Russian gold to facilitate international transactions
• The alliance with states that are adept at gold transactions

A country with substantial gold reserves 

It should be remembered that historically, before the conflict with Ukraine, Russia was a power that already held substantial gold reserves. This was an essential strategy for freeing itself from dependence on Western currencies and protecting itself against market fluctuations. 

Although Russia remains discreet on the subject, in the fourth quarter of 2024 it held almost 2,340 tonnes of gold. This makes Russia the 5th largest holder of gold among the G20 countries, behind the United States, Germany, Italy and France. Russia has also become the world's largest sovereign buyer of gold over the last decade. 

Source : Tradingview

At the same time, Russia holds an unknown quantity of gold and precious stones in a state fund called ‘Gosfund’. Since the invasion of Ukraine, Russia has regularly added gold to this fund, which can be used at the discretion of the executive. 

Russian gold mining 

Geographically, Russia is the world's largest country, covering more than 10% of its landmass. It is a country with very substantial natural resources. These include oil, gas, rare earths and gold. 

Although Russia has long aspired to become the world's leading producer of gold, it is struggling to achieve this goal and its national production is stagnating. The fault lies with its mining industries, which are far too dependent on Western equipment and services. This is why the country has joined forces with its Chinese ally to rebuild its supply chain and accelerate its gold extraction capacity. 

It should also be remembered that Russia still holds major stakes in gold industries in several countries of the former Soviet Union and in several African countries. 

Using gold to further de-dollarise the global economy 

For several years now, China has been trying to impose its currency, the yuan, as an alternative to the US dollar in international trade. To increase its hold over the Asia-Pacific region, China can already count on its long-standing ally, Russia. 

These two countries have joined forces around gold to circumvent the hegemony of the dollar. To this end, Russia and China have been building up their gold reserves for years. Indeed, Russia did not hesitate to transfer part of its gold reserves to China after the introduction of sanctions in 2022. Unscrupulous states seek to secure their gold reserves in places where they cannot easily be seized by Western governments. 

Using Russian gold to facilitate international transactions 

One of the first measures taken against Russia after the start of the conflict in 2022 was to restrict access to the international payment system known by the acronym ‘SWIFT’. Moscow has had to use its ingenuity to continue its international transactions discreetly. At the time, analysts specialising in currency flows noted large inflows of dollars into Russia from the Gulf States and Turkey in exchange for precious metals such as gold.  

The United Arab Emirates (UAE), for example, never agreed to sanctions against Russia. As a result, while in 2021 the UAE imported 1.3 tonnes of Russian gold, by 2022 this figure had risen to 75.7 tonnes (worth $4.3 billion at the time). 

Alliances with states that are adept at trading in gold 

Necessity being the law, and in order to finance its war, Russia has drawn closer to countries such as North Korea (sending arms and soldiers to the front) and Iran (sending drones). 

Taking its Iranian ally as an example, the latter has been subject to US sanctions for decades. Iran has therefore not hesitated to use physical gold to circumvent the oil embargo by exchanging gold with countries such as Dubai and Turkey. This ‘gold-for-oil’ strategy has enabled Iran to recover nearly $20 billion in just a few years, despite the sanctions. 

As Russia is itself one of the world's leading producers of black gold, it has a fleet of ghost ships plying the seas to sell its oil. There is little doubt that gold is also an effective means of evading controls. 

Conclusion

With numerous international sanctions in place, Russia has had no choice but to use its gold to further its ambitions. This has enabled it to maintain its economic stability and continue its international transactions, which are essential in particular to finance its war. 

Russia therefore turned to markets not aligned with the sanctions, strengthening its strategic alliances. Because of its universal value and the difficulty of tracing it completely, gold is the perfect criminal weapon. 

However, international pressure is increasing year on year to better control these financial and monetary flows. These include international initiatives such as the FATF (Financial Action Task Force) and the OECD, which are tightening regulations against gold laundering.  

There is also increased pressure on hubs such as the United Arab Emirates. Although the UAE was removed from the FATF's grey list in February 2024 for its role in the illegal gold trade, the European authorities still classify it as a ‘high-risk country’.