Russia’s Sovereign Wealth Fund Hollowed Out as Liquid Reserves continue to Collapse
The month of May saw more hardship for Russia’s National Welfare Fund as the liquid portion decreased by another -$4 billion, leaving $36.1 billion according to state data released today.
For the month a total of 29 tons of gold were reportedly sold, leaving 139. In addition, 11 billion Yuan were sold, leaving 153 billion.
Russia’s National Welfare Fund (NWF), once touted as a strategic financial buffer for the country’s economy, has seen its liquid reserves plunge to a multi-year low while its portfolio fills with illiquid, high-risk domestic assets of questionable value. The trend, accelerating throughout 2024 and 2025, underscores growing fiscal pressure on the Kremlin amid sanctions, wartime spending, and declining revenue.
According to official data, the NWF’s liquid assets have fallen to under $40 billion as of May 2025, down from more than $140 billion in early 2022. At the same time, illiquid holdings have ballooned to over 9 trillion rubles, marking a historic shift in the fund’s composition—from externally usable currency assets to domestic instruments that are largely non-tradable and deeply tied to state-owned enterprises and infrastructure projects.
A detailed breakdown of the fund’s illiquid portion reveals a striking accumulation of politically connected assets, including:
$3 billion in Ukrainian Eurobonds issued under President Viktor Yanukovych in 2013—still carried at full face value despite being in default for nearly a decade. Ukrainian officials and independent analysts have long described the issuance as a corruption scheme in which Yanukovych secured funds from Russia and then diverted or misappropriated them before fleeing.
Subordinated deposits totaling over 300 billion rubles in Sberbank, VTB, GPB, and Sovcombank, intended to prop up lending for large infrastructure projects such as the Kryukovo–St. Petersburg high-speed rail route. These deposits yield below-market interest and are inaccessible for short-term fiscal needs.
Billions more in equity stakes and bonds of state-linked corporations, including Aeroflot, Rostec, VK (formerly Mail.ru Group), AviaCapital, and the Territorial Development Fund—many of which require ongoing government support to survive.
Significant investments in metro renovations, aircraft leasing, and social housing companies—projects whose completion timelines and returns remain highly uncertain.
As liquidity shrinks, the NWF’s capacity to serve its original purpose—stabilizing the federal budget in crisis scenarios—has diminished sharply. The Central Bank of Russia reports that capacity utilization in the automotive sector, a key beneficiary of NWF funding, has also dropped to a post-pandemic low, raising further doubts about the fund’s strategic efficiency.
While the Kremlin has framed the shift toward domestic infrastructure as a pivot to economic “sovereignty,” the reality is more precarious. Many of the fund’s current holdings are non-transferable, non-cash-generating, and politically motivated. Analysts warn that in the event of an external financing need, Russia may lack usable reserves.
The visual trajectory of the NWF confirms the broader trend: as ruble-denominated, non-liquid assets rise, dollar-based liquidity collapses. What remains is a reserve fund in name only—one whose solvency depends not on market value, but on the state’s willingness to keep revaluing failed assets at par.
In essence, the National Welfare Fund no longer functions as a sovereign wealth instrument. It has become a repository of frozen capital, stranded infrastructure, and strategic denial.
