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Despite the sanctions imposed by Western countries, Russia is still able to export plenty of gold. Since the war in Ukraine, Western countries have taken a lot of action against Russia. For example, Russian assets have been frozen and travel bans have been imposed by the EU and the US Russia .to Dubai after it was no longer welcome at the London Bullion Market Association to trade gold. Recently wrote Bloomberg However, Russia is increasingly focusing on the port of Hong Kong for the export of gold. Why do Russia now trade more often via China, instead of Dubai?
Last year we described how Russia circumvented Western sanctions. Russian gold could still be traded in Europe via Dubai, even after sanctions were introduced by Western countries. Dubai has long been an important hub for the gold trade. A lot of gold from Africa was transported to Dubai to be refined. The increase in gold exports from the United Arab Emirates (UAE) in March 2022 gave reason to believe that Russia also used Dubai after the Western sanctions. Because the gold was melted down in Dubai, it could no longer be traced back to Russia and could also be transported to Europe. As seen in the figure below, UAE's exports of gold to Switzerland increased after the outbreak of the war.
However, trade via Dubai is now under pressure as market oversight is tightened. The Financial Action Task Force (FATF), the party that watches over money laundering and terrorist financing issues has been increasingly interfering in the Dubai market in recent times. Already in March 2022, the FATF put the United Arab Emirates on the grey list. Countries on the grey list are more closely monitored due to a suspicion of money laundering. The United Arab Emirates then decided to take action. Not only payments via banks, but also cash payments are now being monitored more closely, which makes it more difficult to pay Russian exporters. Although Russia still transported 96.4 tonnes of gold to the UAE in 2022, that has declined sharply in 2023, it wrote Bloomberg.
The tightened supervision of the market in Dubai has not done the port of Hong Kong any harm. The port had long been important for China's trade and a lot of gold was traded through the port. With London and Dubai gone, Hong Kong seems like a logical alternative to Russian gold traders. In 2023, 68 tonnes of gold were already traded through the port in Hong Kong, which is four times as much as in the whole of 2022.
Russia is the second largest Producer of gold in the world. The country produced nearly 325 tons of gold in 2022. In addition, the Russian central bank is strengthening its gold gold reserves. We signed up October that the Russian central bank was forced to gold to sell to cover the budget deficit. In August, the Russians restored their gold reserves. In September the Russian central bank once again added gold to its reserves. In addition to Russia, countries such as China, Poland, India and Singapore their gold reserves. In doing so, the countries are responding to the geopolitical turmoil of recent years.
The above shows that there is something to be said about the effectiveness of the sanctions announced by the West. Russia manages to circumvent sanctions quite easily, as there are still many countries that have not introduced sanctions. China is helping Russia circumvent the sanctions and getting cheap energy in return. China is now The largest importer of Russian gas. China and Russia Intensifying trade relations, but India is also responding to the situation and for a long time bought Russian gas against Advantageous prices. Although sales for Russians are declining now that the EU wants to get rid of Russian gas, sales increased last summer due to high energy prices.
The income for Russia from the sale of fossil fuels. (Source; energyandcleanair)
The situation of Russia was also highlighted at the event of Holland Gold by Tom Sauer. According to Sauer, support for Ukraine is more nuanced. 'The West sees Putin as the perpetrator and Ukraine as the victim. The West's solution is to fully support Ukraine, thinking that the whole world is behind us, but it is not. China is not participating, India is not participating, and neither are Africa and Latin America."
On top of that, several countries are now looking for alternatives to dollars and euros. After the start of the war, the assets of the Russian central bank were frozen. These assets had a value of more than €300 billion. In a previous piece, we wrote that Russia is therefore doing more and more transactions in the Chinese renminbi. The BRICS countries also flirted with the idea of their own BRICS currency last summer.
In this way, the world can slowly move towards a multipolar world that was previously described by economist Zoltan Pozsar. The economist envisioned a world in which no single currency is dominant, but where different regions use different currencies. Europe and America will stick to the dollar in such a scenario, but countries in Africa or Asia could switch to the renminbi.
The euro is losing ground, while the dollar remains strong. (Source; Macrobond)
Now, however, such a scenario does not seem to be happening. The euro's share in the SWIFT system has been hit hard, but more transactions are being completed in dollars, as shown in the figure above. One possible explanation for the declining use of the euro is the economic headwinds on our continent. German industry in particular is having a hard time at the moment. Soon we will discuss the problems in Europe with Frank Knopers. On the other hand, economic growth in America is very strong. Also, the transition to another currency is a process that takes a long time. So it will be interesting to see if the dollar will indeed lose more ground, or if the dollar will remain dominant for a while.
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