The West will deprive Russia of currency for gold

Western countries continue to cut one by one the channels through which the Russian economy receives hard foreign currency. Following the gradual embargo on Russian oil, which was included in the sixth package of EU sanctions, the G7 states agreed to impose a ban on the import of Russian gold.

The US is forcing Vladimir Putin to “bear the cost by cutting him off from the income needed to finance his war against Ukraine,” declared on Sunday, US President Joe Biden before the start of the G-7 summit in the Bavarian Alps. The embargo on gold will deprive Russia of “tens of billions of dollars” of revenue, he stressed.

The ban will affect new supplies – the United States, Britain, Japan and Canada are introducing it, the British government said, adding that the value of gold has increased for Russian elites, and the oligarchs “rush to buy” it to avoid the consequences of Western sanctions.

Given that the main gold market in the world is London, through which 80% of the world’s gold trade passes, the sanctions will have a “global scope”, the UK government said in a release.

“The initiative we are announcing involves Russia’s second most profitable export after energy. That’s about $19 billion a year. And that’s significant,” State Department chief Anthony Blinken told CNN.

The gold embargo is backed by France, a spokesman for President Emmanuel Macron’s office told Reuters. However, in order to introduce a pan-European ban, the decision of all EU member states will be required. President of the European Council Charles Michel declaredthat this issue will be discussed.

Russia is the second largest producer of gold on the planet after China (330.9 tons in 2021), but for a long time there was no Russian metal on the world market: all production was bought into reserves by the Central Bank of the Russian Federation, which accumulated the fifth largest gold reserve on the planet – 2 .3 thousand tons.

The situation changed in 2020, when, against the background of the pandemic, the central bank stopped replenishing reserves, and gold miners began to issue general export licenses, effectively allowing the export of all gold that is mined in the country. In 2021, 302.2 tons of gold worth $17.4 billion were exported from Russia.

But the conflict with Ukraine cut off the gold flow. In March and April, only about 100 kg of gold were sold from Russia, although before the war the export reached 25 tons per month.

The London Bullion Market Association (LBMA) has excluded Russian refineries from the list of trusted suppliers (Good Delivery). The G7 embargo “only formalizes what the gold industry has already done,” said Adrian Ash, head of research at BullionVault.

The sale of Russian gold, which is mined at a rate of almost a ton a day, is becoming a problem, especially for small artels and medium-sized enterprises. Production in the country could collapse by 40%, or 120 tons per year, warned last week the Association of Subsoil Users of the Magadan Region (ANMO).

Without work, according to the ANMO, 40 thousand people in the eastern regions of the Russian Federation may remain.