Russia Profiting From ‘Price Spikes’ After Ukraine Invasion

Far from suffering from sanctions imposed by western nations over his invasion of Ukraine, Russian President Vladimir Putin may well be turning a profit. The shock to his economy that many in the Biden Administration are counting on may instead become a buying spree if the prices of oil and gold continue to skyrocket.

As the Financial Times reported, the window for hurting Putin with sanctions may have closed, especially with his maneuvering of Russian reserves away from foreign grasp.

Economies the world over invest in US Treasury bonds as a reliable reserve for their funds, and as recently as 2010, Russia held $176 billion in these securities. However, Putin embarked on a switch to investing Russian reserves in gold and other assets, now holding 2,300 metric tons of the precious metal.

In one 30-minute period Thursday, Moscow’s holdings in gold gained a cool $3 billion in value. If gold rises only 10% in the coming days, the switch from US Treasuries means another $15 billion in spending cash. Not precisely a deterrent, is it?

Speaking of $3 billion, Russia produces 10 million barrels of oil every day. Earlier this month, as the world watched troops amass along the Ukraine border, analysts predicted oil prices would spike to $120 a barrel, and some say even higher. Simple math says if oil rises $10 a barrel, Russia pockets an extra $3 billion each month. There’s that number again.

And for clarity, by Thursday afternoon, less than 24 hours after troops and tanks crossed the Ukraine border, oil and gold were surging skyward across world markets. The global benchmark for oil prices, Brent Crude Futures, soared to $103.17 a barrel, breaking through the $100 barrier for the first time in eight years. As for gold, the spot price climbed to 1,943.10 and is set to eclipse the $2,000 mark for only the second time in history. Investors have long viewed precious metals as a haven in troubled times, particularly gold. Please start with the highest inflation rate in 40 years and pile European conflict on top of it, and gold is set to rise much higher.

Adding fuel to the fire, so to speak, is President Joe Biden, who says the sanctions package rolled out by the White House Thursday is specifically designed to allow energy payments to continue. In other words, Putin pockets the profits from invading his neighbor.

So, what is it exactly that these sanctions are trying to accomplish? Does anyone, even in the Administration, believe that lining the Kremlin’s pockets with exponentially rising profits will give them invasion remorse?