By FATIMA HUSSEIN – Associated Press
WASHINGTON (AP) — Russia appears to have defaulted on its foreign debt for the first time since the 1917 Bolshevik Revolution, and the United States and its allies are targeting the former Soviet Union’s second-largest export industry. after energy – gold.
On Tuesday, the Group of Seven countries will formally announce a ban on Russian gold imports as part of the latest round of sanctions against Vladimir Putin’s invasion of Ukraine.
The United States claims that Russia used gold to back its currency to circumvent the impact of sanctions. One way to do this is to exchange gold for a more liquid foreign currency that is not subject to current sanctions.
Some experts say that since only a few countries enforce the gold ban, the move is largely symbolic, while others, including those in the administration, say a ban on Russian gold imports will target its ability to interact with the global financial system.
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How a G-7 Russian gold ban would work:
HOW MUCH GOLD DOES RUSSIA HAVE?
Secretary of State Antony Blinken told CNN on Sunday that since gold is Russia’s second most lucrative export after energy and nearly 90% of revenue comes from G-7 countries, “cutting that , denying access to approximately $19 billion in revenue per year, that’s significant.
“It can’t acquire what it needs to modernize its defense sector, to modernize its technology, to modernize its energy exploration,” Blinken said.
Russia began increasing its gold purchases in 2014, after the United States imposed sanctions on Russia for Putin’s invasion of Crimea. Today, the country holds between $100 billion and $140 billion in gold reserves, or about 20% of the Russian Central Bank’s holdings, according to US officials.
HOW WOULD A GOLD BAN WORK?
While Russia can still sell gold to other countries outside of the Group of Seven’s jurisdiction, this “will impact Russia’s ability to generate export revenue,” Chris Weafer said. , a Russian economic analyst at the consulting firm Macro-Advisory.
“It is this high level of export earnings that has sustained the country and sustained the economy since the sanctions were tightened after February 24,” Weafer said.
In practice, this could lead to civil or criminal penalties for people coming from countries that have agreed to ban gold from Russia.
In practice, this could lead to secondary sanctions against people who trade with Russia as well as the seizure of gold exports to countries that participated in the ban. ???
On Friday, Swiss customs officials said they were tracking around three tonnes of Russian gold – worth more than $202 million – which entered Switzerland from the UK last month as they monitored potential violations of economic sanctions against Russia.
WHAT OTHER MEASURES HAVE BEEN TAKEN ON THE GOLD TRADE?
In March, the United States and its allies decided to block financial transactions with the Central Bank of Russia involving gold, in an attempt to further restrict the country’s ability to use its international reserves. This came after calls from members of Congress to restrict Russia’s gold trade.
The Treasury Department issued guidance that U.S. individuals, including gold dealers, distributors, wholesalers, buyers, and financial institutions, are generally prohibited from buying, selling, or facilitating transactions related to gold involving Russia and the various parties that have been sanctioned.
HOW WILL THIS MOVE PUNISH RUSSIA?
Like the thousands of sanctions imposed on Russia through various means, the gold import ban is intended to economically isolate Russia, starve its financing arm, and prevent money laundering.
British Prime Minister Boris Johnson told G-7 meetings in Elmau, Germany that the ban “will hit Russian oligarchs directly and strike at the heart of Putin’s war machine”.
“Putin is wasting his dwindling resources on this useless and barbaric war. He is funding his ego at the expense of the Ukrainian and Russian people,” Johnson said.
A White House official told reporters the ban was another way to block the paths between the Russian economy and the wider global financial system.
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