SYLLABUS SECTION: GS II (INTERNATIONAL ISSUES)
WHY IN THE NEWS?
The group of Seven (G7) nations agreed on a ban on Russia’s gold reserves imports in the latest round of sanctions over Russia’s invasion of Ukraine.
THE GOLD RESERVES
- Gold is Russia’s second most lucrative export after energy and nearly 90% of the revenue comes from G7 countries.
- Russia began increasing its gold purchases in2014, after the US issued sanctions for the invasion of Crimea.
- Now Russia holds $100 billion to $140 billion in gold reserves, roughly 20% of the holdings in the Russian Central Bank.
- 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.
Why ban gold imports?
- Russia will still be able to sell gold to other countries outside the G7 jurisdiction.
- It will impact the ability of Russia to earn export revenue.
- It could result in penalties on people who come from countries that have agreed on a gold ban from Russia.
Other measures on gold trade
- The US and its allies moved to block financial transactions with Russia’s Central Bank that involve gold.
- The US 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.
Read more: UPSC CURRENT AFFAIRS
SOURCE: INDIAN EXPRESS