US Treasury Says Gold-Related Transactions Involving Russia Are Strictly Prohibited

US Treasury Says Gold-Related Transactions Involving Russia Are Strictly Prohibited
Signage is seen at the United States Department of the Treasury headquarters in Washington, on Aug. 29, 2020. Andrew Kelly/Reuters
Katabella Roberts
Updated:

The United States is targeting Russian gold reserves and has warned that gold-related transactions involving the country are strictly prohibited.

The move, done in coordination with the European Union and G7, is aimed at further restricting Moscow’s ability to use its international reserves to prop up its currency, thus avoiding the impact of sanctions, and fund President Vladimir Putin’s “brutal war” in Ukraine, officials said.

A notice issued by the U.S. Treasury on March 24 states that gold transactions between Americans and Russia are prohibited, citing executive orders signed by President Joe Biden.

The notice states that any transaction involving gold related to the Central Bank of the Russian Federation is covered by existing sanctions imposed on Moscow by the United States.

“U.S. persons are 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,” the Treasury Department said Thursday in its Frequently Asked Questions section about financial sanctions on its website.

“Sanctioned Russian persons are known to employ a wide variety of measures in their efforts to evade U.S. and international sanctions, the Treasury Department continued. ”As such, U.S. persons, wherever located, including persons that process or facilitate gold-related transactions, must be vigilant against attempts to circumvent OFAC (Office of Foreign Assets Control) regulations and must take risk-based steps to ensure they do not engage in prohibited transactions.”

Individuals found to have violated the OFAC regulations could face criminal or civil penalties.

The United States and its allies have already levied a string of sanctions against Russia since its invasion of Ukraine on Feb. 24.

However, the latest move could deter international banks in counties such as China and India from buying or lending against Russia’s reserves.

Russia began steadily building its gold stockpile in 2014 after the first round of U.S. sanctions in response to the annexation of Crimea, according to Axios.

It currently has around $132 billion in gold reserves, which is roughly 20 percent of the holdings in the Russian Central Bank, according to U.S. officials, and represents the world’s fifth-biggest stockpile.

Gold Reserves in Russia increased to 2298.53 tonnes in the third quarter of 2021 from 2292.31 tonnes in the second quarter of 2021, according to the World Gold Council.

Following a two-year pause, the Bank of Russia announced on Feb. 28 that it would resume the purchase of gold on the domestic precious metals market. That move came after several Russian banks were removed from the SWIFT bank messaging system following Moscow’s invasion of Ukraine.

Officials say that Russia can use its gold stockpiles to support offset the devaluation of its currency, the rouble, and thus circumvent the impact of sanctions.

The rouble dropped below 1 cent against the U.S. dollar after Russia attacked Ukraine, whereas gold is widely seen as a safe-haven asset, given its consistent value during economically volatile times.

This means Russia could effectively swap the gold for a liquid foreign exchange that has not been sanctioned, or sell it through gold markets and dealers, according to the Associated Press. It could also be used directly to pay for goods and services from willing sellers.
The latest decision by the U.S. Treasury comes after the White House announced further sanctions on over 400 Russian elites, Duma members, and defense companies on March 24.

An initiative focused on sanctions evasions has also been established between the United States, G7 leaders, and the EU.

Katabella Roberts
Katabella Roberts
Author
Katabella Roberts is a news writer for The Epoch Times, focusing primarily on the United States, world, and business news.
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