Switzerland bans Russian gold
Switzerland - a major global gold hub - has followed the EU's ban on Russian gold imports as part of new sanctions due to the war in Ukraine.
The new measures mainly concern the ban on the purchase, import or transportation of gold and gold products from Russia. Services related to these goods are also banned, Reuters quoted the Swiss Ministry of Economy as saying. The ban took effect from 6pm on August 3. So far, only gold exports from Switzerland to Russia have been banned.
This decision is in line with the ban on Russian gold imports issued by the European Union (EU) on July 21. The US, UK, Canada and Japan - the four G7 countries - have announced a ban on gold imports from Russia since the end of June to prevent Russian tycoons from buying the precious metal to avoid sanctions.
The potential impact of the new ban on Switzerland is unclear: After Russia launched a military campaign in Ukraine, gold imports from Russia have been largely avoided. In addition, since March 7, the trade of Russian-made gold bullion has not been able to be carried out in Switzerland, due to the decision of the London bullion Market Association (LBMA).
Reacting to Switzerland's decision, the nongovernmental body Swissaid said it was a welcome move, but more should be done to ensure that no Russian gold enters Switzerland through indirect channels - such as after being handled in a third country.
five Swiss gold refineries process about 70% of the world's raw gold output each year. Meanwhile, for Russia, gold is the country's most valuable export item after energy.
Why target gold?
An effective ban would mean preventing Russian mining companies and banks, as well as wealthy individuals, from selling gold for strong foreign currency especially as the ruble is hit by sanctions.
The ultimate goal of the ban is to cut Russia's main source of income so that the country can run out of money for its military campaign in Ukraine.
How important is gold to the Russian economy?
Russia is the world's second largest gold producer. The UK government is estimated to value Russian gold exports to the London market alone at £12.6 billion ($15.5 billion) in 2021.
Last year, Russia mined 314 tons of gold, accounting for nearly 10% of the gold mined globally - Reuters reported, citing data from the Russian Ministry of Finance.
Gold miners in Russia mainly sell gold to domestic commercial banks. These banks then often sell to the Central Bank or export. Polyus is Russia's largest gold producer, followed by Polymetal.
For about a decade, most of Russia's gold has been exported to the UK - the world's largest gold bar trading hub. But in recent years, Russia has also exported gold to countries including Turkey and Kazakhstan.
According to analysts, although the ban on Russian gold will cause difficulties, it will not have a serious impact such as the ban on Russian oil and gas.
"This is not too important for the Russian economy, but as people often say, Western sanctions are designed to kill with a thousand cuts, and this is just one of them," said Fawad Razaqzada, market analyst at financial services company City Index.
Will the ban affect supply to Western markets?
The World Gold Council (WGC) does not believe that the ban on Russian gold imports will have a significant impact on the global gold market.
The WGC said in a statement to Al Jazeera: Due to large reserves, there is a lot of gold to meet manufacturing and trading needs.
So in fact, while Russia is a major gold producer, its supply may not be enough to become a factor that can significantly shake the gold market. But even a slight decrease in supply means gold prices increase?
Where is Russian gold going?
At least in the six months of global economic uncertainty, war and political tensions, Russia's current gold buyers have included the country's central bank, domestic customers, buyers in Asia, especially China and India - countries that do not sanction Russia.
As both Beijing and New Delhi continue to buy Russian crude at discounted prices, gold traders in both countries will not be swayed by the Western ban on Russian gold.
Carsten Menk, senior analyst at Julius Baer commodity brokerage, said that Russia's gold exports have been redirected since the start of the conflict, towards the East rather than the West.
The impact of the ban on the gold market may be very limited. The impact on the Russian economy is also insignificant, as Moscow is still likely to sell gold to its current customers in some Asian countries.
So what is the point of banning like that?
The ban is symbolic. The ban may have a small impact on Russia's ability to buy and sell gold and trade gold in the short term, but the West hopes that the closure of another bustling market could affect the domestic industry in the long term and affect the general spirit.
"The imposition of sanctions on Russian gold should not be considered individualally but should be seen as part of a series of increasingly important measures to increase pressure on the Russian economy and foreign currency income," the LBMA said.
What does this mean for consumers?
Not many, except for those in countries that have approved the ban and those planning to buy or trade Russian gold afterwards.
As analysts say, with abundant supply in most markets and falling gold prices, the gold market in general may not be ascertained.
