What sanctions mean for Russia’s $140 billion worth of gold

The US is cracking down on Russia’s ability to sell its gold reserves and raise money in the latest attempt to cripple the country’s war chest as Ukraine’s invasion continues.

The Treasury Ministry clarified Thursday that any transaction involving gold related to Russia’s central bank falls under existing sanctions, the latest move to limit Russia’s ability to raise funds. Although it would be difficult for Russia to sell its gold hoards, analysts say the challenge of tracking gold through the legacy physical market opens up potential loopholes for Moscow to raise funds that way.

Here’s a look at how sanctions could affect Russia’s gold stocks.

How much gold does Russia have?

According to the World Gold Council, Russia’s central bank holds more than 2,000 tons of gold worth around 140 billion US dollars. This is the fifth largest reserve in the world, a hoard that has been built up in recent years, also with purchases from local producers. The gold is stored in vaults in Moscow and across the country.

Gold accounts for about a fifth of Russia’s foreign exchange reserves, which include a mix of the euro, dollar and Chinese yuan, according to the Central Bank of Russia.

Granules of gold and silver in Russia. The original sanctions that banned US companies from doing business with Russia’s central bank also covered the sale of gold.



Could Russia sell its gold to raise money?

Russia has imposed a series of capital controls to stabilize the ruble and keep its value from plummeting after Western sanctions. The currency has started to stabilize in recent days, raising concerns that one force that could support the ruble is the country that sources and sells foreign currency.

Analysts are wondering if that money could come from gold even after sanctions by the US and other nations.

Selling that gold now is likely to be a difficult process, but not impossible, analysts say. The original sanctions that banned US companies from doing business with Russia’s central bank also covered the sale of gold. Federal legislation proposed by a group of senators would impose secondary sanctions on those who trade or transport Russia’s central bank gold.

It is possible that Russia has found or may find other ways to sell its reserves. Venezuela has historically routed some of its gold through countries like Turkey and Uganda to avoid US sanctions.

Analysts say Russia could try similar tactics, selling its gold to countries like China, India or Kazakhstan — or through intermediaries. The country could still have gold that was refined a long time ago or is not part of its official reserves making its way out of the country, analysts say. Russia could also potentially use the gold as collateral for loans.

“They can definitely find ways to still sell their gold,” said Jeffrey Christian, managing partner of precious metals research and advisory firm CPM Group. He has been following the gold trade for several decades. “Gold has been loved by people for millennia, partly because of the secrecy of everything.”

The consequences of the tough economic sanctions against Russia are already being felt around the world. WSJ’s Greg Ip joins other experts in explaining the significance of what has happened so far and how the conflict could transform the global economy. Photo illustration: Alexander Hotz

How is gold tracked in the financial system?

Much of the world’s gold is tracked by trading centers in London and New York, overseen by the London Bullion Market Association and the CME Group inc,

and respectively, both the LBMA and the CME recently removed six Russian bullion refiners from their accredited lists, essentially banning new Russian bullion from entering their markets. Only standardized gold bars from approved refiners can be stored in LBMA and CME depots, with each one closely tracked and its characteristics well documented.

“Most people want to source their metal from a legitimate refiner or from someone who is certified,” said Suki Cooper, Executive Director of Precious Metals Research at Standard Chartered.

Some analysts say that outside of these official institutional channels, gold may hold little information other than a certificate or stamp showing where it was originally refined, meaning there are still ways Russia could attempt to sell gold .


Much of the world’s gold is tracked from trading centers in London and New York.


Akos Stiller/Bloomberg News

Would blocking gold sales limit Russia’s access to foreign currencies?

While gold could be an important source of foreign currency, Western sanctions against Russia are currently allowing carve-outs on energy sales, allowing an important source of dollars and euros to keep flowing.

Europe remains heavily dependent on Russian energy, with around half of Russia’s crude oil exports going to Europe. This made it necessary to allow for the continuous flow of energy from Russia, giving Moscow a continuous source of foreign currency.

Russia exports more than it imports – a propensity that has only intensified as hundreds of companies have announced they are pulling out of Russia. After Western sanctions, Moscow ordered its exporters to sell 80% of their foreign exchange earnings for rubles to create demand for the currency.

“The biggest thing is that they’ve shut out oil and gas deals,” said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics. “That will be more important for FX than a sanctions leak.”

How could sanctions affect the price of gold?

Gold prices have been sharply higher of late, nearing records set in the summer of 2020, when the invasion sparked demand for the port metal and stoked worries of rising inflation. Some investors are turning to gold as a store of value during times of geopolitical tension and rising consumer prices. Front month futures in New York on Thursday rose 1.3% to $1,961.60 a troy ounce, bringing their gain for the year more than 7%.

Still, many analysts assume prices will remain volatile. Unlike industrial commodities such as oil and copper, gold is not as heavily influenced by near-term supply and demand and instead typically trades based on investor demand and expectations for the economic outlook. That means even if Russian gold is cut off from global markets, the disruptions might not push futures prices up all that much, analysts say.

Traders are watching Russia’s domestic purchases of gold for signs it is trying to increase its holdings. The country’s central bank recently said it would resume domestic gold purchases after a multi-year hiatus, only to say last week that it was suspending those purchases amid high household demand.

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com and Caitlin Ostroff at caitlin.ostroff@wsj.com

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