28 Mar 2022
Could Russia turn to bitcoin mining to diversify its exports?Some speculate that the heavily sanctioned Russian government could turn to bitcoin mining to gain export income. How likely is this scenario?
Source: IEA, CoinMetrics, Cambridge Centre for Alternative Finance
Russia is the world's leading natural gas exporter and the second-largest oil exporter. With these exports making up 45% of their federal budget, where more than half of them go to sanctions-committed Europe, Russia may want to diversify its export income.As we explained last week, the business model of bitcoin mining is turning energy into hashes that are "sold" to the Bitcoin network. Bitcoin miners have no customers to deal with, a property that Russia should welcome as they face increasing difficulties in dealing with their western trade partners.Russia also has enormous amounts of stranded natural gas and hydropower in Siberia. Bitcoin mining makes it possible for them to monetize this energy, which has led to a sizeable bitcoin mining industry in Russia, producing 11% of Bitcoin's hashrate. The Russian government is already involved in mining as state-owned Gazpromneft has mined bitcoin with stranded natural gas in Siberia since 2020.Still, if we look at Russia’s massive oil and gas exports, we can see that their bitcoin mining revenue is only a drop in the ocean in comparison. Russia's 11% of the $15 billion Bitcoin mining industry gives them yearly mining revenues of $1.7 billion, only 0.7% of their $241 billion oil and gas exports.Therefore, it's unlikely that Bitcoin mining will play a significant role in Russia's exports in the coming years, but Moscow is undoubtedly paying attention to the emerging industry.