US & G7 Freeze Russian Gold Amid Ukraine War: Everything You Need To Know | Russo-Ukrainian War


The restrictions are intended to limit the country’s ability to use its international reserves and circumvent the effect of sanctions.

While the Russian-Ukrainian war enters its second monthWestern powers have taken new steps aimed at destabilizing Russia’s sanctions-hit economy after its invasion of Ukraine last month.

On Thursday, the United States and its allies announced new sanctions targeting, among other things, the Russian defense sector, and blocked financial transactions involving the international gold reserves of the Russian central bank.

The restrictions are designed to limit Russia’s ability to use gold to circumvent Western punishments.

President Vladimir Putin’s government has spent years building up its reserves and currently has the fifth largest stock of gold in the world.

Here’s what you need to know about the Western movement.

What was announced?

The US announcement to block gold transactions was made alongside the Group of Seven allies and the European Union.

According to the US Treasury Department, “the United States people are prohibited to engage in any transaction – including gold-related transactions – involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation or the Ministry of Finance of the Russian Federation.

The rule effectively prohibits individuals – including gold traders, distributors, wholesalers, buyers and financial institutions – from buying, selling or facilitating gold-related transactions involving Russia and various parties. who have been sanctioned.

The statement came as the United States announcement new sanctions against 48 state-owned defense companies; 328 members of the Russian parliament; and Herman Gref, the head of Russia’s largest lender, Sberbank.

What is the effect?

Experts say the trading ban would actually apply secondary sanctions to people who trade gold with Russia.

“It’s another way to close the loopholes in sanctions and increase economic pressure on Russian entities,” Rachel Ziemba, deputy senior researcher at the Center for a New American Security, told the Associated Press news agency. .

The move is also an attempt to prevent innovative financial transactions through other countries that continue to do business with Russia.

Previously, sanctions against Russian elites, the country’s Central Bank and Putin did not affect Russia’s gold stock.

How much gold does Russia have?

Currently, the country has between $100 billion and $140 billion in gold reserves, or about 20% of Russia’s central bank holdings, according to US officials.

The Bank of Russia also announced last month, after being removed from SWIFT banking messaging, that it would resume buying gold on the domestic precious metals market.

How could Russia use gold to evade sanctions?

The US says Russia can and has used gold to back its currency to circumvent the effect of sanctions.

One way to do this is to exchange gold for a more liquid foreign currency that is not subject to current sanctions.

Another way would be to sell bullion through gold markets and traders.

Gold could also be used to purchase goods and services directly from willing sellers.

Source link


Comments are closed.