Why did gold become the new Russian target of the West?

First modification: 06/29/2022 – 04:51

Having lashed out at Russian oil, the United States and its allies are now targeting the former Soviet country’s second-largest export industry after hydrocarbons: gold.

This Tuesday, June 28, 2022, the nations of the Group of Seven (G7) agreed to ban imports of Russian gold in the latest round of sanctions for the invasion of Ukraine by Russian President Vladimir Putin.

In the case of France, Germany and Italy, the veto of Russian gold is a goal yet to be specified, since any new sanction must be assumed by the 27 members of the European Union as a whole.

The White House believes the Kremlin has used gold to back its currency as a way to evade the impact of Western punishment. One way to do this is to exchange gold for more liquid currencies that are not subject to current sanctions.

The importance of Russian gold for the finances of the Putin government

Russia produces around 10% of the gold mined globally each year and is the country’s largest non-energy export. In addition, it shares second place in production with Australia, only surpassed by China.

Gold is a crucial asset for the Russian Central Bank, which has faced restrictions on accessing some of its assets abroad due to Western sanctions. Washington estimates that it has reserves of between $100 billion and $140 billion.

British Prime Minister Boris Johnson told G-7 meetings in Elmau, Germany, that the gold ban “will hit the Russian oligarchs directly and strike at the heart of Putin’s war machine.”

Indeed, the G7 countries buy 90% of this mineral from Russia, which is equivalent to about 19,000 million dollars a year.