It might come as a surprise but the G7 group of industrialised nations (Canada, France, Germany, Italy, Japan, the United Kingdom and the US) has only just got around to imposing a ban on imports of Russian gold. The G7 used to be the G8; Russia was kicked out of this informal yet influential club in 2014 after a previous violation of Ukraine’s territorial integrity.
On 26 June, as the latest G7 summit was starting, US President Joe Biden said in a tweet “together, the G7 will announce that we will ban the import of Russian gold, a major export that rakes in tens of billions of dollars for Russia”.
The gold price barely reacted, largely because the London Bullion Market Association (LBMA), which regulates the world’s biggest and oldest market for trading physical gold and silver, had already suspended dealing by all six Russian gold miners and refineries, on 7 March this year. The G7’s ban on Russian gold imports looks “largely symbolic” said Warren Patterson, head of commodities strategy at ING group.
Russian gold became a pariah in Western markets after its invasion of Ukraine, although mystery lingers over more than three tonnes of Russian gold imported into Switzerland in May, almost all of which was marked as being for refining, according to data from the Swiss Federal Customs Administration. The Swiss Association of Manufacturers and Traders of Precious Metals (ASFCMP) said that none of its members was responsible for the imports. It gave a statement in which it said “dubious” gold “has no place in Switzerland”. The gold arrived from the UK but had a Russian ‘destination of origin’. In 2019, the UK was the destination for about 90% of Russia’s gold exports. In 2021, Russian gold exports were worth £12.6 billion ($15.45 billion). The export ban applies to newly minted or newly refined gold, not to previously exported metal.
In 2021, Russia produced about 363 tonnes of gold, and has tripled its output in the last 20 years. According to the US, Russia had prior to 24 February gold worth $140 billion (20% of its total reserves) in its central bank. It has tripled the gold it holds since 2014.
The G7 suspects that Russia may resort to nefarious means of selling some of its gold to help fund its war in Ukraine. An opposition Venezuelan politician said last year that Russian-chartered planes picked up gold from Venezuela to be refined in Mali and then resold in the United Arab Emirates for dollars and euros. However, the pressure to sell gold has eased considerably since the invasion and G7 sanctions on Russia’s oil pushed international oil prices much higher. The US blacklisted the Latin American country’s central bank in 2019, isolating Venezuela from the global economy. Russia helped Venezuela to harness its gold wealth by transporting some of its gold around the world, to sell in unregulated markets, beyond the reach of sanctions.
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