Russia’s Gold Industry

Foreign companies have played an important but ultimately limited role in Russia’s gold industry since the Soviet period. The country’s largest reserves are given federal significance and made available only to Russian companies. The Russian business environment, the climatic and geological challenges, and the long term investment requirement also deter foreign investors. However, Russia has come to rely on foreign equipment and all producers are now facing the prospect of diminished productivity as suppliers pull out of the market. This is a major risk to the industry in the short term.

• While Russia is a top gold producer, it is also a major buyer of its own gold. Russia has increased its gold reserves at a faster rate than any other country since 2006, and the Central Bank of Russia (CBR) has the first refusal on all gold produced. Moreover, until recently firms had to sell their gold through Russian banks, which acted as intermediaries between the producers, the CBR, and export markets.
• Russia’s role as a major resource producer will remain central to its response to Western pressure and its interaction with the rest of the world. The strategic and monetary value of its gold reserves have increased since its foreign reserves were frozen, so what is happening in this industry, as much as any other, is now of considerable international interest.