AP

EXPLAINER: How a G-7 ban on Russian gold would work

Jun 27, 2022, 9:36 PM | Updated: Jun 28, 2022, 11:50 am

WASHINGTON (AP) — Russia appears to have defaulted on its foreign debt for the first time since the 1917 Bolshevik Revolution, and the U.S. and its allies are taking aim at the former Soviet Union’s second largest export industry after energy — gold.

On Tuesday, the Group of Seven nations agreed on a ban on Russian gold imports in the latest round of sanctions over Russian President Vladimir Putin’s invasion of Ukraine.

The U.S. says Russia has used gold to support its currency as a way to circumvent the impact of sanctions. One way to do that is by swapping gold for a more liquid foreign exchange that is not subject to current sanctions.

Some experts say since only a few countries are implementing the gold ban, the move is largely symbolic, while others, including those in the Biden administration, say a ban on imports of Russian gold will target its ability to interact with the global financial system.

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 the revenue comes from G-7 countries, “cutting that off, denying access to about $19 billion of revenues a 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 U.S. issued sanctions on Russia for Putin’s invasion of Crimea. Now the country holds $100 billion to $140 billion in gold reserves, which is roughly 20% of the holdings in the Russian Central Bank, according to U.S. officials.

HOW WOULD A GOLD BAN WORK?

While Russia will still be able to sell gold to other countries outside the Group of Seven jurisdiction, it will “impact the ability of Russia to earn export revenue,” says Chris Weafer, a Russian economy analyst at consulting firm Macro-Advisory.

“It’s that high level of export receipts that is sustaining the country and sustaining the economy since sanctions were ratcheted up after February 24th,” Weafer said.

In practice, it could result in civil or criminal penalties on people who come from countries that have agreed on a gold ban from Russia.

Swiss customs officials on Friday said they are tracking roughly 3 tons of Russian gold — worth more than $202 million — that entered Switzerland from the United Kingdom last month as they monitor potential violations of economic sanctions against Russia.

WHAT OTHER MEASURES HAVE BEEN MADE ON GOLD TRADE?

In March, the U.S. and its allies moved to block financial transactions with Russia’s Central Bank that involve gold, aiming to further restrict the country’s ability to use its international reserves. That came after calls from members of Congress to restrict Russia’s gold trade.

The Treasury Department issued guidance that American individuals, including gold dealers, distributors, wholesalers and buyers, and financial institutions are generally banned from buying, selling or facilitating gold-related transactions 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 a variety of means, the gold import ban is meant to isolate Russia economically, starve its funding arm and prevent money laundering.

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

“Putin is squandering his dwindling resources on this pointless and barbaric war. He is bankrolling his ego at the expense of both the Ukrainian and Russian people,” Johnson said.

A White House official told reporters the ban is yet another way to block off paths between the Russian economy and the broader global financial system.

___

Follow AP’s coverage of the G-7 summit at https://apnews.com/hub/g-7-summit.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

FILE - Crystal Baziel holds the Pan-African flag Monday, June 19, 2023, during Reedy Chapel A.M.E C...

Associated Press

The beginner’s guide to celebrating Juneteenth

For more than one-and-a-half centuries, the Juneteenth holiday has been sacred to many Black communities. It marks the day in 1865 enslaved people in Galveston, Texas found out they had been freed — after the end of the Civil War, and two years after President Abraham Lincoln’s Emancipation Proclamation. Since it was designated a federal […]

23 hours ago

A Boeing 737 Max suffered damage to parts of the plane's structure after it went into a “Dutch ro...

Associated Press

Plane that did ‘Dutch roll’ on flight from Phoenix suffered structural damage, investigators say

A Boeing 737 Max suffered damage to parts of the plane's structure after it went into a “Dutch roll” during a flight from Phoenix last month.

5 days ago

This photo provided by Randy Shannon shows Mooney Falls on the Havasupai reservation outside the vi...

Associated Press

Dozens report illness after trips to waterfalls near Grand Canyon

Dozens of hikers say they fell ill during trips to a popular Arizona tourist destination that features towering blue-green waterfalls deep in a gorge neighboring Grand Canyon National Park.

6 days ago

Mugshot of Rudy Giuliani, who was processed Monday, June 10, 2024, in the Arizona fake electors cas...

Associated Press

Rudy Giuliani posts $10K cash bond after being processed in Arizona fake electors case

Rudy Giuliani, a former New York City mayor and Donald Trump attorney, was processed Monday in the Arizona fake electors case.

9 days ago

FILE - White House former chief of staff Mark Meadows speaks with reporters at the White House, Wed...

Associated Press

Former Trump chief of staff Mark Meadows pleads not guilty in Arizona fake elector case

Former Donald Trump presidential chief of staff Mark Meadows and Trump 2020 Election Day operations director Michael Roman pleaded not guilty Friday in Phoenix to nine felony charges for their roles in an effort to overturn Trump's Arizona election loss to Joe Biden.

12 days ago

deadly heat wave last summer...

Associated Press

After a deadly heat wave last summer, metro Phoenix is changing tactics

Fresh memories of the deadly heat wave last summer have led Arizona authorities to launch new tactics ahead of summer 2024.

23 days ago

Sponsored Articles

...

Sanderson Ford

3 new rides for 3 new road trips in Arizona

It's time for the Sanderson Ford Memorial Day sale with the Mighty Fine 69 Anniversary, as Sanderson Ford turned 69 years old in May.

...

Collins Comfort Masters

Here’s how to be worry-free when your A/C goes out in the middle of summer

PHOENIX -- As Arizona approaches another hot summer, Phoenix residents are likely to spend more time indoors.

...

DISC Desert Institute for Spine Care

Sciatica pain is treatable but surgery may be required

Sciatica pain is one of the most common ailments a person can face, and if not taken seriously, it could become one of the most harmful.

EXPLAINER: How a G-7 ban on Russian gold would work