AP EXPLAINS: How the US and allies can freeze Russian gold

The United States and its allies indicated on Thursday that they will proceed to block the financial transactions in gold of the Central Bank of Russia, in order to further reduce the country’s ability to use its international reserves after Vladimir Putin’s invasion of Ukraine. Putin has been building up his reserves of the metal since 2014.

Here’s a look at how these sanctions would work:

HOW MUCH GOLD DOES RUSSIA HAVE?

Russia increased its gold purchases in 2014 after the United States sanctioned it for Putin’s invasion of Crimea. Moscow’s gold reserves now stand at between $100 billion and $140 billion, about 20% of the assets of the Russian Central Bank, according to US officials. Similarly, the Bank of Russia announced on February 28—shortly after the expulsion of several Russian banks from the SWIFT banking messaging system—that it would resume gold purchases on the domestic precious metals market.

HOW COULD RUSSIA USE ITS GOLD TO AVOID SANCTIONS?

The United States says Russia can and has used its gold to back its currency to avoid the impact of sanctions. One way to do this is to exchange gold for more liquid foreign currency that is not subject to current sanctions. Another procedure would be to sell bullion through gold markets and dealers. The metal could be used directly to purchase goods and services from interested sellers.

HOW WOULD THE SANCTIONS BE APPLIED?

The announcement by the United States to block Russian transactions in gold was made together with its allies from the Group of Seven and the European Union, which will also prohibit them. Under new US Treasury Department regulations, US individuals, including sellers, dealers, wholesalers, buyers, and financial institutions, are generally prohibited from purchasing, selling, or facilitating transactions in gold involving Russia and sanctioned parties. .

WHAT REPERCUSSIONS COULD THIS MEASURE HAVE IN RUSSIA?

The move should further affect the country’s ability to launder money and will actually lead to secondary sanctions for people trading gold with Russia, experts say. “It’s another way to close sanctions loopholes, and increase economic pressure on Russian entities,” said Rachel Ziemba, an associate fellow at the Center for a New American Security. The ban on gold transactions is also an attempt to prevent innovative financial transactions through other countries that continue to do business with Russia.

WHAT OTHER SANCTIONS HAVE BEEN IMPOSED?

The United States also adopted additional sanctions on Thursday. It sanctioned dozens of Russian defense companies, 328 members of the Russian State Duma, or state assembly, and the head of Russia’s largest financial institution. These actions are in addition to the export controls and financial punitive measures decreed last month against Putin, his circle of closest collaborators and some of the country’s main financial institutions, as well as the expulsion of several banking institutions from the messaging system. SWIFT banking.

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About Alex Marcell

He likes dogs, pizza and popcorn. Already a fanboy of Nintendo and Sony, but today throws anything. He has collaborated on sites and magazines such as GameBlast, Nintendo World, Hero and Portal Pop, but today is dedicated exclusively to Spark Chronicles.

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