U.S. Executive Order Sanctions the Trade of Russia’s Gold Reserves
In another step towards closing off all avenues for Russia to sidestep international sanctions in response to the country’s unprovoked invasion of Ukraine last month, U.S. President Joe Biden signed an executive order that bars all transactions with the Russian central bank’s gold reserves, valued at roughly US$130 billion.
The new restrictions, implemented by both the U.S. as well as its G7 partners, are designed to prevent Russia from selling its gold reserves on the international market for other, more highly valued currencies, thereby mitigating the damage done to the ruble, which has been devalued by as much as 40 percent since the country invaded Ukraine.
President Biden’s executive order to close this loophole for Russia comes two weeks after the proposal of the Stop Russian GOLD Act, a bill drafted by both Democrats and Republicans that aims to bar any U.S. citizen or entity from selling or trading gold with Russia’s central bank holdings.
The legislation was drafted in response to the Bank of Russia’s declaration last month that it would resume buying gold on its domestic precious metals market, in what was largely seen as an attempt to sidestep international sanctions imposed on the country’s financial institutions.
The executive order, however, appears to have fast-tracked the effects of the bill while it awaits to be voted on in the Senate.
According to the U.S. Treasury, American citizens are now “prohibited from engaging in any transaction – including gold-related transactions – involving the Central Bank of the Russian Federation, the National Wealth Fund of the Russian Federation or the Ministry of Finance of the Russian Federation.”
Additionally, the executive order stipulates that non-Americans are prohibited from aiding or conspiring with American citizens to violate U.S. sanctions, including those levied against Russia.
Gold is widely viewed as a safe-haven asset since it consistently retains its value during times of economic strife.
As of 2018, Russia was estimated to have as much as 1,857 tons in gold reserves — the fifth largest stockpile in the world — according to SchiffGold.
Experts fear that Russia’s current stockpile, comprising roughly 20 percent of its central bank’s holdings and worth $130 billion today, could be used as a means to sustain its war efforts in Ukraine which, despite having suffered setbacks across multiple fronts, show no immediate sign of coming to an end.