$15 billion in exports from it during 2021

Russia's gold ban doubles Moscow's isolation from the international financial system

Russia is one of the largest producers of gold in the world.

Reuters

The decision to ban the purchase of newly mined and refined gold from Russia is the latest effort by the United States, Britain and their allies to tighten the wave of sanctions against Russia, in response to its five-month war against Ukraine.

The decision, which was issued during a meeting of US President Joe Biden and the leaders of the Group of Seven countries in Germany, comes to complement the steps that have already been taken, to isolate Russia from the international financial system, deprive it of additional revenue that helps fund its war against Ukraine, and punish Russian President Vladimir Putin and his allies for Wealthy businessmen.

Western countries have already banned most of their trade with Russia, have frozen hundreds of billions of dollars of Bank of Russia assets in their own financial institutions, and have banned Russian banks from using the international bank transfer system, known as SWIFT.

gold production

Christopher Swift, a lawyer specializing in national security affairs at Foley & Lardner, said that Russia, one of the world's largest gold producers, has recently increased gold mining to sell it and compensate for some suspended commodities.

He added that the London Gold Bullion Market Association, a major center for global gold trade, had already halted transactions with six Russian silver and gold refineries last March.

And Swift continued, "In order to compensate for the reserves held by Russian companies and the Russian wealthy class, they bought new gold via the Internet, but the decision of the Group of Seven closes the door to access to this new gold."

In turn, the American newspaper "New York Times" says that the wealthy in Russia are buying gold bullion in an attempt to mitigate the impact of the sanctions.

British Prime Minister Boris Johnson stressed this point, saying that the gold ban directly harms the rule of Russia's wealthy minority, pointing out that this move would also strike "the heart of Putin's war machine."

pressure on Russia

Western countries, led by the United States, have continued to pressure Russia to deprive President Putin of the resources to operate his war machine, without exposing their economies to significant risks.

This balance is difficult, especially for the European Union, which depends heavily on Russian oil and gas.

The skyrocketing oil prices, combined with worldwide demand for fuel, are making Russia more money selling crude oil than it did before the war, even though it is being sold at a discount.

In turn, the German government and industry leaders in Germany have warned that a gas ban would be disastrous for its economy.

Jeffrey Schott, a fellow at the Peterson Institute for International Economics in Washington, said the increased pressure on the Russian economy is going as planned.

Russia's deprivation

The new ban on Russian gold aims to deprive Russia of the additional revenue generated from exporting gold, which is used in the jewelry industry and some industrial processes.

Buying gold for investment jumped after the Corona pandemic began to upend the global economy.

Investors expect gold to maintain its value, especially as central banks, including the US Federal Reserve, have bought Russian gold through intermediaries.

Last year, Russia earned more than $15 billion from its gold exports, according to British government data.

As gold is widely held as a reserve by central banks around the world, Russia had a ready market.

"Russia is a big producer of gold, and if you can't sell it, an important source of income will disappear," said Lucrezia Richlin, a professor at the London Business School.

buy gold

After the first rounds of sanctions halted much of the current international gold trade, the Russian Central Bank announced that it would resume buying domestically produced gold, which was also seen as a way to help prop up the ruble.

The value of gold held by the Russian Central Bank is estimated between $100 billion and $140 billion.

Christopher Swift, a national security attorney at Foley & Lardner, said the Russian gold ban was an increased tightening of sanctions rather than a significant escalation.

"If the goal is to undermine Russia's economic ability to wage war in Ukraine, this is a necessary but not sufficient measure," he added.

"If the G7 wants to have a strategic impact, it really has to think about what it will do about Russian gas," he added.

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