MOSCOW -
Russian gold is about to become the new victim on the "altar" of Western sanctions during the current summit of European Union leaders, after US President Joe Biden announced that the G7 countries - the United States, Britain, Canada, France, Germany, Italy and Japan - will announce a ban on the import of Russian gold.
This measure comes as a continuation of the policy of sanctions pursued by the West against Moscow because of the special operation in Ukraine, and a diversification of its size and forms from time to time.
Reflecting a divergence in attitudes towards the new package of sanctions, the Scandinavian countries and Eastern European countries suggested that after the summit the seventh package of sanctions be announced, while other countries - including Germany and Belgium - called for focusing on implementing the measures (sanctions) that were taken before the summit. that.
Official information is still vague so far, as it is not yet known whether it is a ban on imports or exports, or any other transactions with the "yellow metal".
It seems that economists are confused about the purpose of the feasibility of this measure, if it is taken into account that Russia has surplus sales markets in China, India, the United Arab Emirates and others, and is practically not dependent on imports.
It should be noted that the new measures will not apply to gold already purchased, as the volume of Russian gold shipments in 2021 amounted to about 12.6 billion pounds ($15.5 billion).
In the same year, the share of gold exports from Russia reached 9.2% of the world market, and this value tripled after the start of the Russian special operation in Ukraine.
London says Russian businessmen have decided to buy the precious metal to avoid sanctions.
Economist Alexander Razovayev stresses that even if the European Union imposes restrictions on the sale of Russian gold, this will have little impact on the Russian gold mining industry, because this ban has been in existence undeclared since last March, adding that gold will become more expensive in the global market , but not too much.
Why sanctions will affect Russian gold?
According to what both US President Joe Biden and British Prime Minister Boris Johnson announced regarding the imposition of a ban on the import of Russian gold, the motive is the importance of gold for the Russian "oligarchy" that is looking for ways to avoid the repercussions of sanctions, according to Johnson, in addition to the fact that gold exports bring Russia has tens of billions of dollars and constitutes a large share, which means that banning it is an attempt to prevent Russia from one of its most important sources of funding, according to Biden.
According to the Russian Central Bank, the share of monetary gold as of January 1, 2022 was estimated at 133.07 billion dollars.
According to the same bank’s statistics, the volume of gold reserves in Russian banks for the period from February 1 to April 1, 2022 decreased by more than 20%.
Russia is currently challenging the Amsterdam court's decision to hand over Scythian gold (ancient gold coins from Crimea) to Ukraine, after it was considered its property. The Russian Duma also raised the issue of transferring almost all gold extracted from Russia abroad, and the reasons for the record export of gold from Russia.
What are the effects of this on Russia's ability to finance its war?
Russian economists are of the opinion that a possible ban on the export of Russian gold may have certain consequences, but they are not significant, and in any case will not affect the ongoing military operations in Ukraine in terms of financing.
In an interview with Al-Jazeera Net, the expert at the Higher School of Economics Vladimir Olichenko explains that this is due to reasons related to the existence of alternative markets for the export of gold, which reduces the repercussions of the decision, as well as Russia's possession of huge quantities of oil and gas and other sources of budget pumping that can compensate for any shortage that may cause By the decision of the Group of Seven major industrialized countries, to impose a ban on new imports of gold from Russia.
What are the most important Russian gold export markets?
According to preliminary estimates:
Russia exported 302.2 tons of gold worth $17.4 billion in 2021, which is 6% less than it was in 2020.
The UK was the main recipient of Russian gold in 2021, with 266.1 tons worth $15.4 billion.
But it is difficult to conclude from the statistics whether gold is still there in the UK or goes to other countries, because London is an important global center for trading and storing precious metals.
According to the data of the Russian Federal Customs Service, exported:
8.1 tons of gold to Kazakhstan.
7.3 tons to Switzerland.
5.7 tons to India.
5.5 tons to Germany.
3.7 tons to Belarus.
2.1 tons to Turkey.
3.7 tons for third parties.
What are the most important mines and companies operating in the sector?
Gold is produced in 26 regions of Prussia, but the main reserves and production are concentrated in Eastern Siberia and the Far East.
About 85% of gold is produced in the Krasnoyarsk and Khabarovsk regions, Irkutsk, Magadan, Amur, Yakutia and Chukotka regions.
POLIUS is the most important Russian company in the gold extraction and production sector, followed in the list of the "big seven": Polymetal, Nordgold, Kinross Gold, Yuzhuralzoloto, and the Petropavlovsk and Vysochaishy group of companies.
Gold is produced in 26 regions of Russia (Reuters)
What is the size of the contribution of the gold sector to the Russian economy?
For Russia, gold and its price are an important macroeconomic factor, given that the gold mining industry plays an important role in the trade balance, although it is much inferior to the oil and gas industry.
Moreover, Russia's international reserves hold a higher share of gold than the average countries that do not issue reserve currencies, which means that they need reserves as protection against possible sanctions.
In recent years, this has contributed to a revaluation of reserves, but if prices fall, there is a risk of a double whammy on both revenues and reserves.
What are the scenarios for the Russian response, internally and externally, to confront this step?
Economist Alexander Razovaev stresses that even if the European Union imposes restrictions on the sale of Russian gold, this will have little impact on the Russian gold mining industry, because this ban has been in existence unannounced since last March, adding that gold will become more expensive in the global market , but not too much.
As for the local gold mining companies, they will most likely not be harmed, because the entire production will be bought by the central bank, according to him.
He goes to the conclusion that gold has become the single most popular and risk-free financial asset, which is becoming increasingly interesting and popular in the global economy amid declining confidence in the dollar and the euro.