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Switzerland again imported a lot of gold from Russia in November, despite the government's decision last summer to ban precious metals from Russia. Figures from the Swiss Customs show that 6.4 tonnes of gold were imported in November with a market value of 337 million Swiss francs. It also appears that the import of Russian gold has actually increased since the invasion of Ukraine. For example, Switzerland imported August also a lot of gold from Russia. In the first eleven months of 2022, Switzerland imported 23.8 tonnes of Russian gold, almost doubling the 12.9 tonnes in the same period of 2021. What can we conclude from this?
Last July, the European Union decided to ban the import of gold from Russia, because gold is an important export product of Russia. By restricting the gold trade, Russia would have less income to finance the war in Ukraine, according to the idea of European government leaders. This import restriction was also lifted by Switzerland at the beginning of August. Inherited. As a result, the sanctions seemed to have more effect. Switzerland is a major player in the global gold market, as the country's five largest smelters together refine about 70% of all newly mined gold. The country is also an important hub for the physical gold trade and for the storage of precious metals.
However, six months after the introduction of these sanctions, we can conclude that the sanctions are not completely watertight. Figures from Swiss customs show that gold imports - after a brief hiatus in March and April 2022 - have picked up again and that the import ban failed to completely prevent the import of Russian gold. In fact, there has even been an upward trend in recent months. The graph below shows that Swiss gold imports from Russia have increased since the start of the coronavirus pandemic.
And there is a logical explanation for this, because the corona crisis has increased the demand for Gold bars and Gold Coins in Western countries in particular. For example, in 2020, Switzerland exported a lot of precious metals to the United Kingdom and the United States, gold that also came from Russia to a significant extent. Also, from 2020 onwards, more gold came out of Russia on the market, for the simple reason that the central bank has stopped its asset purchase program. discontinued. As a result, more precious metals from Russia were able to find their way to the rest of the world. Over the past two years, a lot of Russian gold went straight to the vaults in London, with which gold ETFs replenished their stocks.
Switzerland continues to import gold from Russia
It is not clear from these customs figures who bought the Russian gold in November. Much more important is the conclusion that the sanctions are not watertight and that Russia can still export precious metals to Europe. Moreover, there are several ways to circumvent the sanctions, for example by melting down the precious metal in another country and then exporting it to Europe. For example, in May last year we wrote about a Notable increase of the United Arab Emirates' gold exports to Switzerland. It can also sell Russia its gold in other countries where sanctions do not apply, so that other gold producers can export more precious metals to Europe. Trade flows will only move because the gold market will adapt to the circumstances.
In response to the Western sanctions, Russia is considering a Proprietary trading platform for gold, complete with an alternative to the LBMA certification. In the spring of 2022, the LBMA decided to sanction the gold bars of a number of major Russian smelters. By setting up its own platform, Russia wants to reduce its dependence on the Western gold market. Russia is the second largest gold producer in the world after China with an annual gold mine production of 343 tons. In total, the precious metals sector of Russia with all mines, smelters and gold banks accounts for a turnover of about $25 billion per year.
The fact that it is not so easy to isolate Russia economically is also evident from Eurostat's trade statistics. Economic sanctions caused European countries' exports to Russia to fall by 33% in the first seven months of 2022, while imports from Russia rose by 69.9% due to higher energy prices. As a result, Russia's income and trade surplus have actually increased since the beginning of the war. In this sense, the sanctions have not yet had the desired effect of European government leaders.
The fact that Switzerland imported more gold from Russia in 2022 than in the previous year confirms that there is still a lot of demand for precious metals and that some traders are able to come up with clever ways to circumvent the import ban.
