Reported by Robert Huish, Dalhousie University
How have 16,000 strategic sanctions issued by some of the most powerful economies in the world failed to derail Putin?
As I recently watched the news break on CBC about Russia’s robust economy, an advertisement from the World Gold Council popped onto the screen. And there was the answer, hiding in plain sight: Gold.
The role of gold
Economic sanctions targeted shipping and trade into Russia, but the gold market is a massive environment left largely untouched. After Russia invaded Ukraine two years ago, the United Kingdom, a major gold broker with one of the world’s largest gold reserves, cut all Russian imports of gold into the U.K.
According to the World Gold Council, Russia is now the second largest producer of gold at 324.7 tonnes in 2023, behind China at 374 million tonnes. Russia is expected to increase production of gold by four per cent a year until 2026.
Since 2013, Russia has been preparing for western sanctions and managed to isolate its economy from transactions requiring American dollars.
In early 2022, Russia pegged its currency, the ruble, to gold, and 5,000 rubles will now buy an ounce of pure gold. The plan was to shift the currency away from a pegged value and into the gold standard itself so the ruble would become a credible gold substitute at a fixed rate.
Usually the rationale for holding on to gold reserves is to use them to settle foreign transactions at home and abroad. Gold holders can trade it on one of several bullion exchanges; it can be swapped for currencies to settle transactions and then swapped back into bullion.
Usually countries want gold as a safety backing to insulate against broader global financial shocks. Many central banks are purchasing gold at breakneck pace, with about 1,073 tonnes purchased in 2022. A single tonne is about US$65 million, which means $110.6 billion in gold went into central banks globally in 2023.
Read full report: https://theconversation.com/vladimir-putins-gold-strategy-explains-why-sanctions-against-russia-have-failed-225748
Financial Crime News Briefs 