Russia’s gold may soon be almost as worthless as its ruble under sanctions by the West in reaction to the war in Ukraine.
On Monday, the London Bullion Market Association suspended its accreditation of six Russian precious metals refiners, effectively barring them from selling gold and silver on the world’s largest market. Shortly after that announcement, a bipartisan group of U.S. senators introduced a bill aimed at preventing Russia from liquidating gold to get around crippling sanctions imposed by the West. The double whammy could make it difficult for Russia to do much with its enormous gold reserves, estimated to be worth over $130 billion.
“Russia’s massive gold supply is one of the few remaining assets that Putin can use to keep his country’s economy from falling even further,” Sen. Angus King, a Maine independent, said in a statement. “By sanctioning these reserves, we can further isolate Russia from the world’s economy and increase the difficulty of Putin’s increasingly-costly military campaign.”
Western governments have imposed a raft of punishing sanctions on Russia and its key citizens since the invasion began on Feb. 24. The measures have helped drive the value of Russia’s ruble to under a penny, but gold has always been a tricky asset to target with sanctions. In addition to its massive reserves, Russia accounts for nearly 10% of gold mining every year, generating more than $20 billion worth of the precious metal at current prices.
GOLD PRICES SURGE ABOVE $2,000 AS WAR RAGES IN UKRAINE
The U.S. proposal is aimed at ensuring Russian gold holdings can’t be a lifeline as Moscow grapples with the freezing of many of its foreign assets. The proposal would sanction any American entity if it knowingly transacted with or transported gold from Russia’s central bank holdings or sold gold physically or electronically in Russia, according to a report. The lawmakers want to include the proposal in the spending bill lawmakers hope to pass by Friday.
“Russia has taken a page out of Venezuela’s book by exploiting a loophole in current sanctions that allows them to launder money through the purchase and sale of gold,” said Sen. John Cornyn, a Texas Republican.
The six refineries suspended by the LBMA process metals on behalf of Russian banks, which then sell them on international markets or to the Central Bank of Russia.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
“These six refiners will no longer be accepted as Good Delivery by the London Bullion market until further notice,” the LBMA said in a market notice.
Still, bankers and traders told Reuters that kicking Russian refiners out of the LBMA may not have much effect if they can still sell to China and the Middle East.
