Russia's $140billion supply of gold could be sold at bargain prices after sanctions
by the West halted its trade on the open market.
The country has the world's fifth biggest gold supply, with more than 2,300 tonnes of gold stored in Bank of Russia vaults in Moscow and St Petersburg. Vladimir Putin built up Russia's gold supply after the 2014 invasion of Crimea in order to protect Moscow from the brunt of global sanctions.
Global traders and banks, which might typically buy Russia's bullion in return for currency, now fear the bad PR or direct financial penalties of doing business with Russia. That means severing one of Russia's most valuable routes toward economy security - and it appears to be working.
'This is why they bought their gold, it was for a situation just like this,' Cork University business lecturer Fergal O'Connor told Bloomberg. 'But if no one will trade it with you, it doesn't matter.'
Russia may instead be forced to sell its formerly lucrative supply - worth more than £100 billion - to central banks in India and China. Those deals will come at a lower price, commodities analysts CPM Group predict.
And the blow to Russia could be even greater if Western politicians expand so-called 'secondary sanctions' to punish those buying or selling Russian gold anywhere - including key market China.
Earlier this month City marketplace the London Bullion Market Association - the world's most important - banned all gold bars made in Russia. Russians are buying gold as a reliable alternative to collapsed rubles, allowing domestic values to remain steady.
Abroad, however, Russia's once-reliable gold reserves remain out in the cold.
China will insure it gets into the marketplace. So will India. And probably a host of other countries. The US doesn't speak for the world.
ReplyDeleteWe’ve got 2 huge gold mines within 50 miles of here. Plus the AK pipeline runs right thru both military bases here. Ever watch Goldfinger? Vlad drops 1 tactical nuke into my backyard & his gold & oil go WAY up in value with the added bonus of taking out a handful of new F-35’s & a large contingent of ground pounders. No one important lives near here, wiping out a couple thousand yokels who live in the middle of nowhere and any collateral damage will be less of a “howdareyou!” issue as far as the beautiful people are concerned. If we cook even a relatively small population center in retaliation, we’re the bad guys. Interesting times ahead…..
ReplyDeleteI remember reading about how the U.S. put Japan in a financial bind in the late 1930's because we disapproved of their running amok in Asia.
ReplyDeleteI'm trying to find out what happened after that.
Europe gets something like half its energy from Russia, large amounts of food, many minerals like titanium, potash, etc.
ReplyDeleteEurope will have to pay for those things in either Rubles or gold. Russia does not need to sell gold. It will be collecting gold, as will China.