Low Ball Offer: How Russia Undervalued Alaska

For those contemplating the sale of their assets there is a historic lesson to learn. The 1867 sale of Alaska by Russia to the United States for $7.2 million or about two cents per acre, has long been regarded as a historic bargain. But it also highlights how Russia undervalued the territory’s immense potential. At the time, Alaska was seen by Russia as an economic liability rather than a strategic asset.

The Russian Empire, financially strained after its defeat in the Crimean War and unable to defend Alaska from potential British aggression, sought to offload the territory. Tsar Alexander II and his advisors initially set a minimum price of $5 million but capitalized on U.S. Secretary of State William Seward’s eagerness, ultimately agreeing on $7.2 million. The Russians thought they made a good deal.

Know the value of your assets before selling

From Russia’s perspective, Alaska seemed expendable. Its sparse population of Russian settlers, never exceeding 400, coupled with the logistical challenges of maintaining control over such a remote region, made it appear unprofitable.

Talk about a lack of vision! Indeed, this assessment ignored the vast natural resources and strategic advantages that would later make Alaska invaluable. For the United States, the acquisition added 586,412 square miles of land rich in timber, fur, and eventually gold and oil, while securing a foothold in the Pacific and Arctic regions.

Seward’s Folly that turned into gold

Critics in both countries questioned the deal at the time. In the U.S., skeptics dubbed it “Seward’s Folly,” doubting its value until gold was discovered in 1896. Meanwhile, some Russian officials believed they had undersold Alaska’s potential wealth.

Modern analyses suggest that Russia underestimated both the economic and geopolitical significance of Alaska, which today serves as a critical hub for U.S. Arctic strategy and resource exploration.

The price of failure: missing the true value

In hindsight, Russia’s decision to sell Alaska for such a low price reflects short-term financial concerns overriding long-term strategic thinking. This undervaluation not only shaped U.S. expansion but also left Russia without a presence in North America—a decision still debated by historians today.

See Valuation Tour