What the ban on Russian gold imports means for its increasingly isolated economy.

The weekend decision to ban the purchase of newly mined and refined gold from Russia has been made by the United States, the United Kingdom and its allies to dial up a wave of sanctions imposed on Russia in response to four months. The latest effort-an old invasion of Ukraine.

The announcement made when President Putin and other leaders of a group of seven countries gathered for a meeting in Germany this week is to separate Russia from the international financial system and rob Russia of additional income to help raise funds. Based on the measures already taken in to punish the war in Ukraine and Russian President Vladimir Putin and the wealthy executives of his circle.

Ukrainian allies are already Ban on most trade In Russia, it has frozen its hundreds of billions of dollars in assets at its financial institutions, preventing Russian banks from using the messaging system behind the international payment system known as SWIFT.

London’s Bullion Markets Association, the world’s leading hub for gold trading, suspended trading with six Russian silver and gold refineries in March.

Christopher Swift, a national security lawyer for Foley and Ladner, said Russia, one of the world’s largest gold producers, has begun mining new gold to make up for some of its paralyzed assets. ..

“They brought in new gold online to supplement the reserves held by Russian companies and oligarchs,” said Swift, who previously worked for the Treasury Department’s Office of Foreign Assets Control. “The G7 is closing access to this new gold.”

Russian billionaire businessmen are buying gold bullions to mitigate the effects of sanctions. British Prime Minister Boris Johnson emphasized this point on Sunday, saying the move would “hit Russia’s oligarchs directly.”

The ban also aims to deprive Russia of new income from the export of jewelery, some industrial processes and gold used for investment. As is often the case during a crisis, the purchase of gold for investment has skyrocketed since the coronavirus pandemic began to disrupt the global economy. And central banks, including the Federal Reserve, were often big buyers through intermediaries.

Last year, Russia earned more than $ 15 billion from gold exports.

After an early round of sanctions stopped many of the existing international gold transactions, the Central Bank of Russia announced that it would resume buying domestic gold. This has also been seen as a way to help support the currency. Approximately 20% of the $ 600 billion reserve held Central Bank of Russia is goldIt is estimated to be worth between $ 100 billion and $ 140 billion.

“Basically, this is not a major escalation, but a gradual increase in sanctions,” Swift said. “If your goal is to undermine Russia’s economic ability to wage war in Ukraine, this is a necessary but not enough means.”

Since the beginning of the war, European countries, which are heavily dependent on Russia’s oil and gas, have performed difficult dances with the aim of punishing Russia without causing too much damage to its economy.

After several weeks of tense negotiations last month, the European Union agreed to significantly ban Russia’s oil imports by the end of this year. But so far, the question of whether to ban Russian gas, which is much harder to find an alternative than oil, is off the table. German government and industry leaders have warned that a gas embargo will be devastating to the economy.

“If the G7 wants to have a strategic effect, they really need to think about what they’re trying to do with Russian gas,” Swift said.