How a G7 ban on Russian gold would work
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 G7 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 G7 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 defence 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 US$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 G7 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.
Get in touch
Do you have any questions about the attack on Ukraine? Email email@example.com.
- Please include your name, location, and contact information if you are willing to speak to a journalist with CTV News.
- Your comments may be used in a CTVNews.ca story.
The next time the Bank of Canada raises interest rates on the scheduled date of September 7, 2022, it could potentially trigger a recession. Although there may be a chance that we don’t enter into a recession and the BoC is still hoping for a soft landing, it’s best to be prepared. Contributor Christopher Liew explains how.
Rising interest rates might be bad news for Canadians with mortgages, but it also means higher rates on savings vehicles such as guaranteed investment certificates (GICs), prompting renewed interest in the investments.
Factors beyond your control, like inflation or supply chain shortages, can limit your access to the things you need and make it harder to achieve your financial goals.
Amid high inflation and rising cost of living, a person's relationship status can impact their finances. There are five ways in which flying solo can put you at a financial disadvantage and a few ways to mitigate them.
For millennial and gen Z Canadians, owning a home in this real estate market might seem like a pipe dream. In an exclusive column for CTVNews,ca personal finance contributor Christopher Liew offers some strategies to consider if you can’t afford the housing market yet.
Is Canada's 'historic' housing correction affecting your plans to buy or sell? CTVNews.ca wants to hear from you
Following a series of interest rate hikes, Canada's housing market is now facing a 'historic' correction. CTVNews.ca wants to hear from Canadians looking to buy or sell homes in a changing market landscape.
With inflation rising at its fastest pace in nearly 40 years, the cost of everything from food to gas has skyrocketed. Canadians across the country are feeling squeezed, but big families with multiple children are at times shouldering much of the higher costs — and changing demographics and consumer patterns have left some of them more exposed to inflation than in previous generations.
The Canadian Association for Retired Persons is raising alarms about the increase in old age security only being made eligible for those 75 and above.