Niet to Russian gold: ends and unknowns
The G7 countries are preparing to ban imports of Russian gold, to deprive Moscow of another key source of revenue. Facts, numbers and scenarios (what will China and India do?)
On Sunday morning, US President Joe Biden announced via a Twitter post that G7 member countries will impose an import ban on Russian gold as a form of retaliation for the invasion of Ukraine. The leaders of the G7 – a forum that brings together seven economically advanced states: America, Canada, France, Germany, Japan, Italy and the United Kingdom, plus the European Union – are in Munich to attend the group's summit.
The United States has imposed unprecedented costs on Putin to deny him the revenue he needs to fund his war against Ukraine.
Together, the G7 will announce that we will ban the import of Russian gold, a major export that rakes in tens of billions of dollars for Russia.
– President Biden (@POTUS) June 26, 2022
THE ANNOUNCEMENT OF THE USA AND THE UNITED KINGDOM
According to Biden, the ban on gold will serve to deprive Russia of the revenues ("tens of billions of dollars") that allow it to finance the war on Ukraine, which began on February 24th. The United States, Europe and the rest of the allies have already imposed sanctions against Moscow: they have expelled several Russian banks from the SWIFT international financial messaging system, for example, and have banned or restricted purchases of fossil fuels, of which the country is a big exporter.
Also on Sunday, the UK also said it will ban imports of Russian gold, specifying that the ban will apply to recently mined and refined gold and not to gold already purchased.
HOW MUCH RUSSIA MATTERS IN THE GOLD MARKET
According to the World Gold Council, an industrial association in the gold sector, Russia is the second largest producer of gold in the world, with a 10 percent share of the global total.
Reuters reported that Russia has tripled its holdings of gold since it illegally invaded and annexed the Ukrainian peninsula of Crimea in 2014. Gold is a very important asset for the Russian central bank, which already operates in "Severely limited conditions," writes CNBC , due to international sanctions.
THE EFFECTS OF THE NOTICE
AGI writes that 90 percent of Russian gold production is destined for G7 member countries and in particular the United Kingdom: last year the Russian one (for 15 billion dollars) was worth 28 percent of total imports British gold.
According to the Italian news agency, if the G7 were to ban Russian gold, the oligarchs (the big rich) will no longer be able to use it to convert their assets and thus circumvent sanctions. However, Moscow could redirect exports to countries like India and China which are buying large quantities of its oil.
HOW DOES THE RUBLE GO (GOOD)
Despite unprecedented sanctions imposed by Americans, Europeans and allied governments, last week the ruble (the Russian currency) hit its highest value in seven years, following its collapse in February. Specifically, the ruble-dollar exchange rate is 52.3 rubles per 1 dollar. The Kremlin has exhibited the strength of the ruble as proof that sanctions are not working: this is not necessarily the case, however, because the country's high degree of isolation could seriously damage its economy in the long run, beyond of immediate earnings.
The Russian central bank, meanwhile, is working to weaken the national currency, fearing that a strong ruble could make exports less competitive.
– Read also: Do anti-Russia sanctions work? What is said in the White House
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/bando-oro-russo/ on Mon, 27 Jun 2022 07:16:47 +0000.