A Russian officials reportedly has boasted that Moscow can thrive despite tumbling crude-oil prices because of its massive gold holdings and the government’s efforts to reduce reliance on energy resources, Russian Finance Minister Anton Siluanov told CNBC that while Moscow is satisfied with the current price of oil, possible market turmoil will not result in a “shock” to its budget.
“For this reason, the budget is based on budget rules that take into account an oil price of $42 a barrel. And regardless of how things work out with the oil price, we will be able to finance our obligations because we have accumulated sufficient gold reserves, more than seven percent of the GDP,” he told CNBC.
“Therefore, even if oil prices go to $30 barrel or $20 a barrel we will able to honor our own obligations for three years without any shocks or difficulties for our budget.”
Russia has overtaken China to become the world’s fifth largest official sector holder of gold, as Western sanctions drove buying by its central bank to record highs in 2018, Reuters explained.
With support from President Vladimir Putin, the central bank has been betting heavily on bullion, often seen as a safe haven or a natural hedge against the dollar, with active purchases in the last 10 years.
In 2018, Russia’s buying jumped further as holdings of U.S. Treasury securities were reduced after Washington imposed sanctions on Russian entities in April, the toughest since Moscow’s 2014 annexation of Crimea from Ukraine.
The central bank bought 8.8 million troy ounces last year, beating a record 7.2 million ounces set in 2017, Reuters reported.
Russia has been actively filling its coffers with gold, having added some 12 tons of the precious metal to its reserves in September. Russia’s total gold holdings currently amount to 72.1 million troy ounces (2,242.56 tons) and are worth around $108 billion, according to the latest data from the central bank. The country’s international reserves, which include foreign currency and other high liquid assets, exceeded $535 billion as of October 11.