Joe Biden says sanctions have ‘crippled’ Russian economy
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Amid reports circulating in Russian state media that claims Putin this week signed a law exempting individuals from value-added tax (VAT) on the purchase of the precious metal, Washington is moving to deter the country from liquidating gold to resist biting sanctions.
A bipartisan group of senators — Angus King, John Cornyn, Bill Hagerty, and Maggie Hassan — are trying to target Russia’s ability to sell gold reserves, of which it held around $132billion (£100.9billion) in January.
Meanwhile, the Kremlin is reportedly trying to provide support to Russian citizens who are looking to invest their rubles – though not by buying US dollars, which has been banned.
Putin’s regime is increasingly isolated, with Moscow describing its situation as “turbulent”.
Spokesman Dmitry Peskov said on Thursday: “Our economy is experiencing a shock impact now and there are negative consequences. They will be minimised.
“This is absolutely unprecedented. The economic war that has started against our country has never taken place before. So it is very hard to forecast anything.”
While Mr Peskov added measures were already being taken to soften the impact, he did not hint at what these looked like.
The US, in efforts to continue to punish Moscow over the war launched in Eastern Europe, is looking to tackle areas the country might resort to in order to dodge some of the damage received in the first place.
Senator Cornyn said: “Russia has taken a page out of Venezuela’s book by exploiting a loophole in current sanctions that allows them to launder money through the purchase and sale of gold.”
Russia is the world’s fifth-biggest sovereign gold owner.
Over the six years to the start of the pandemic, as part of an effort to reduce the proportion of dollars held in its reserves, the Bank of Russia bought so much gold it doubled its holding.
In March 2020, as prices spiked due to the coronavirus pandemic, it halted its mission, with its stockpile pretty much steady since.
Last month, before the invasion of Ukraine, it announced it would resume buying from domestic producers.
If the senators’ bill passed, it would apply secondary sanctions to any American entities knowingly transacting with or transporting gold from Russia’s central bank holdings, or selling gold physically or electronically in the country.
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Senator Hassan claimed: “The US and our allies must be steadfast in standing up to Russian aggression and ensure that we block any escape hatch Putin has in getting around the full weight of our sanctions.”
Senator King, calling Russia’s gold supply one of the Kremlin’s “few remaining assets” to support the country’s economy, added: “By sanctioning these reserves, we can further isolate Moscow from the world’s economy and increase the difficulty of Putin’s increasingly-costly military campaign.”
The move could also stop banks in countries such as China and India from buying or lending against Russia’s sovereign gold stockpile, which would add to a ban already imposed in the West.
Russian gold is virtually excluded from the biggest markets in New York and London as the Western lenders are blocked from transacting with the central bank.
As the country scrambles to prevent a financial meltdown, JPMorgan last week said the country’s economic output decline is comparable to the crisis of 1998.
The ruble, having lost 40 percent of its value, is under intense pressure.
On February 23, the day before the full-scale invasion of Ukraine began, it took 80 rubles to buy one US dollar. On Thursday, despite desperate measures such as doubling interest rates to 20 percent, it took 119.
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