Is This Proof of Collapse? Putin Reaches for Desperate Measures to Save State Treasury

Russia is set to auction diamonds from its state reserves as it seeks additional funds to manage its budget, which is under increasing strain from the costs of the war in Ukraine. The Russian Finance Ministry announced an auction of natural diamonds weighing over 10.8 carats will be held in Moscow on September 9.

The diamonds originate from the Gokhran, the State Repository for Precious Metals and Gemstones, which operates under the Finance Ministry and will act as the seller. Each diamond will be auctioned individually. This decision comes after Russia's central bank reduced its gold reserves for six consecutive months in the first half of 2026, selling a total of 43.5 metric tons of gold. This marks the largest semi-annual reduction in reserves in at least 25 years.

Analysts suggest that the shift from selling gold to auctioning diamonds signals Moscow's strategy to tap into other state reserves for liquidity as it depletes some of its gold holdings. The Russian budget faced a deficit of nearly six trillion rubles, equivalent to over $76 billion, in the first half of the year. This financial pressure is directly linked to the ongoing military operations in Ukraine.

The move to sell state diamonds is seen by some as a desperate measure to shore up the national treasury, especially as the war's financial burden continues to mount. The auction aims to convert valuable state assets into much-needed cash to sustain government operations and fund its military objectives.