G7 plans to ban new Russian gold imports

LAST UPDATE: 15:36

The United Kingdom, the United States, Japan and Canada plan to announce a ban on new gold imports from Russia during the Group of Seven leaders’ summit starting today, according to Bloomberg.

Supported by London’s central role in the gold trade, “this measure will have a global scope, excluding goods from official international markets” and having a “huge impact” on President Vladimir Putin’s ability to raise capital, the British government has said. its announcement.

“These measures will directly hit the Russian oligarchs and attack the heart of Putin’s war machine,” British Prime Minister Boris Johnson said in a statement.

“Putin is wasting his resources in this useless and barbaric war. He is feeding his ego to the detriment of the Ukrainian and Russian people,” Johnson said. with our allies. ”

This ban is expected to take effect soon and will apply to newly mined or refined gold. It will not affect gold of Russian origin that was previously exported from Russia, Downing Street clarified.

The embargo on Russian gold “is an additional means of blocking links between the Russian economy and the financial system,” a senior US official explained.

The effects of sanctions “are accumulating over time and Russia’s ability to wage war will be diminished by the collective action taken by the G7,” he added.

90% of Russian gold exports go to the G7 countries and to a large extent to Britain, as London hosts the main financial center for the trade of raw materials, including metals.

The announced move would therefore have “a huge impact on Putin’s ability to raise funds,” the British government said. This would particularly hurt Russian elites who were able to buy gold “to try to circumvent Western sanctions,” he added.

Missions between Russia and London have collapsed to almost zero since Western countries imposed sanctions on Russia for its invasion of Ukraine. The London Bullion Market Association, which sets the standard for the market, removed Russian gold refineries from its accreditation list in March.

“What it is doing is formalizing what the gold industry has already done anyway,” said Adrian Ash, chief research officer at BullionVault.

The measure will be applied for the first time to gold coming out of Russia and the Treasury Department will issue the US ban on Tuesday, according to a person familiar with the plan. U.S. individuals have been barred from trading in gold-related transactions with Russia’s central bank, the country’s National Wealth Fund and its Treasury Department, following an executive order signed by President Joe Biden on April 15.

While Western sanctions for punishing Russia have largely shut down European and US gold markets from the world’s second-largest rod mining company, the G-7 commitment will mark a complete severance between Russia and its two top trading partners. centers of the world, London and New York. The other G-7 countries are Germany, France and Italy.

The embargo on Russian gold “is an additional means of blocking links between the Russian economy and the financial system,” a senior US official explained.

The effects of sanctions “are accumulating over time and Russia’s ability to wage war will be diminished by the collective action taken by the G7,” he added.

90% of Russian gold exports go to the G7 countries and to a large extent to Britain, as London hosts the main financial center for the trade of raw materials, including metals.

The announced move would therefore have “a huge impact on Putin’s ability to raise funds,” the British government said. This would particularly hurt Russian elites who were able to buy gold “to try to circumvent Western sanctions,” he added.

London has been one of the most important destinations for Russian precious metals: the $ 15 billion in Russian gold that arrived there last year accounted for 28% of UK gold imports, according to the UN Comtrade.

While refineries could theoretically still import Russian gold directly, most have vowed not to. The union of Swiss refineries, which dominate the industry, denied that its members bought gold from Russia, as trade data showed that the country’s bar had entered the country.

With the Russian elite rushing to buy gold in a bid to avoid the economic consequences of sanctions, the ban “will hit Russian oligarchs directly,” UK Prime Minister Boris Johnson said in a statement. The import ban, which will take effect soon, will apply to freshly mined or refined gold, according to the announcement.

Flows of other metals from Russia, such as copper, nickel and palladium, have continued as the commodity industry struggles to manage a long-term relationship with a major supplier of raw materials to the world.

Meanwhile, Russia’s gold industry is looking for new sales options, such as most non-G-7 exports to China and the Middle East.