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RUSSIA’S GOLD RESERVES

UPSC CURRENT AFFAIRS | RUSSIA’S GOLD RESERVES, AND WHY G7 HAS MOVED TO BAN IMPORTS | 30TH JUNE | INDIAN EXPRESS

/ June, 2022, UPSC Daily Current Affairs

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.

SOURCE: INDIAN EXPRESS