How a G7 ban on Russian gold would work

Fatima Hussein –

Russia appears to be in default on its foreign debt for first time since 1917 Bolshevik Revolution. The U.S. and its allies have taken aim at the former Soviet Union’s second largest export industry, after energy — gold.

The Group of Seven nations voted Tuesday to ban Russian gold imports as part of the latest round of sanctions against Russian President Vladimir Putin’s invasion of Ukraine.

The U.S. claims that Russia used gold to support its currency to avoid sanctions. Swapping gold for a more liquid currency that isn’t subject to current sanctions is one way to do this.

Experts say that only a few countries have implemented the gold ban. Others, including the Biden administration, believe that a ban on Russian gold imports will limit its ability to interact in the global financial system.

How a G7 Russian ban on gold would work

HOW MUCH GOLD DOES RUSSIA HAVE

On Sunday, Antony Blinken, Secretary of State, told CNN that gold is Russia’s second most lucrative export, after energy, and that almost 90% of the revenue comes to G7 countries. “Cutting that off, denying access at $19 billion a year, that’s substantial.”

Blinken: “It can’t acquire the necessary modernizations in its defense sector, its technology, or its energy exploration,” said.

After the U.S. placed sanctions against Russia for its invasion of Crimea, Russia began to increase its gold purchases in 2014. According to U.S. officials the country has approximately 20% of the Russian Central Bank’s gold reserves.

WHAT WORKS A GOLD BAN?

Russia will still be allowed to sell gold to countries outside the Group of Seven, but it will “impact Russia’s ability to earn export revenues,” says Chris Weafer (a Russian economic analyst at Macro-Advisory).

Weafer stated, “It’s the high level export receipts that are sustaining the country since sanctions were increased after February 24, 2005.” said.

In practice, it could lead to civil or criminal sanctions for those who are citizens of countries that have agreed to a ban on Russia’s use of gold.

Friday: Swiss customs officials saidThey are monitoring the movement of 3 tons of Russian gold, worth more than $202million, into Switzerland last month. This is to monitor possible violations of economic sanctions against Russia.

WHAT OTHER MEASURES ARE AVAILABLE ON GOLD TRADE

The U.S. and its allies acted in March to block financial transactions that involved gold with Russia’s Central Bank. This was done to further limit the country’s ability use its international reserves. After Congress members called for restrictions on Russia’s gold trade, the U.S. and its allies responded.

The Treasury Department issued guidance stating that Americans, including gold dealers and distributors, wholesalers, buyers and buyers, are generally prohibited from buying, selling or facilitating gold-related transactions involving Russia and sanctioned parties.

HOW WILL THIS MOVE THE PUNISH RUSSIA?

The gold import ban, like the many sanctions imposed upon Russia through a variety means, is designed to isolate Russia economically and starve its funding arm. It also serves to prevent money laundering.

British Prime Minister Boris Johnson saidThe ban was announced at the G7 meeting in Elmau, Germany that it would “directly hit Russian Oligarchs and strike directly at the heart of Putin’s war machine.”

“Putin wastes his resources on this barbaric and pointless war. Johnson says Putin is bankingrolling his ego at both the cost of the Ukrainian people and the Russian people. said.

According to a White House official, the ban is another way to block the flow of money between Russia and the wider global financial system.

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