The United States and its allies said on Thursday they were moving to block financial transactions with the Central Bank of Russia involving gold, with the aim of further restricting the country’s ability to use its international reserves due to the invasion of Vladimir Putin. Ukraine. Putin has been building his gold reserve since 2014.
This is how these sanctions would work:
How much gold does Russia have?
Gold purchases in Russia rose in 2014, after the US issued sanctions on Russia over Putin’s invasion of Crimea. The country now has between $ 100,000 and $ 140 billion in gold reserves, which is about 20 percent of Russia’s Central Bank shares, according to U.S. officials. In addition, the Bank of Russia announced on February 28, shortly after several Russian banks were removed from the FAST banking courier system, which would resume the purchase of gold in the domestic market of precious metals.
How could Russia use gold to evade sanctions?
The United States says Russia can and has used gold to support its currency as a way to circumvent the impact of sanctions. One way to do this is to exchange gold for a more liquid currency that is not subject to current sanctions. Another way would be to sell bullion through gold markets and distributors. Gold could also be used to buy goods and services directly from volunteer sellers.
How would the sanctions be applied?
The US announcement to block gold transactions was made alongside the Group of Seven and the European Union’s allies, which will also impose a ban on gold reserves. New U.S. Treasury Department guidelines state that U.S. individuals, including gold traders, distributors, wholesalers, buyers, and financial institutions, are generally prohibited from buying, selling, or facilitating gold-related transactions involving Russia and the various parties that have been sanctioned.
What kind of impact would this have on Russia?
According to experts, the measure should further affect the country’s ability to launder money and, in fact, will apply secondary sanctions to people who trade gold with Russia. “It’s another way to close the sanctions gap and increase economic pressure on Russian entities,” said Rachel Ziemba, a senior deputy member of the Center for a New American Security. The ban on gold transactions is also an attempt to prevent innovative financial transactions through other countries that continue to do business with Russia.
What other sanctions have been imposed?
The United States also took additional sanctions on Thursday. It sanctioned dozens of Russian defense companies, 328 members of the Russian State Duma – or state assembly – and the head of Russia’s largest financial institution. These actions add to the export controls and financial sanctions issued last month on Putin, his inner circle, some of the country’s major financial institutions, along with the removal of several banking institutions from the SWIFT banking messaging system. .
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