Russia invaded Ukraine in February of this year, causing a standstill in energy exports for months and leading to the current energy crisis in Europe. Last week, the U.S. House of Representatives approved the annual National Defense Authorization Act, which will increase the Department of Defense’s spending to $857.9 billion in fiscal year 2023.
The spending legislation authorized $30.3 billion for national security programs in the Department of Energy and $816.7 billion for the defense department. It also includes an amendment that will make it harder for Russia to use its gold reserves. Under the proposed bill, any entities in the United States that transported gold from or transacted with gold from the Kremlin’s central bank reserves would be directly sanctioned.
The amendment is similar to a legislation that was introduced earlier in the year by Maggie Hassan, the Democratic senator of New Hampshire; Republican senators Bill Hagerty of Tennessee and John Cornyn of Texas, and Angus King, an independent senator from Maine.
In a statement, King explained that the enormous supply of gold in Russia was one of the remaining assets that President Vladimir Putin could use to fund his nation’s expansionism. He noted that sanctioning the country’s gold reserves would make Russia’s costly military campaign all the more difficult while isolating the Eastern European country from the global economy even further.
King added that including this amendment in the national defense legislation was a powerful and clear way to undermine Putin’s amoral and illegal acts while making the financial pinch even tighter.
Following approval in the House, the bill has been advanced to the Senate for a vote.
Currently, the central bank of Russia has the fifth largest gold reserves globally. The reserves hold about 2,298.50 tons of gold, which is valued at $133.6 billion.
The country’s gold has been the target of sanctions imposed by various countries globally for much of this year. A month after the invasion of Ukraine, the London Bullion Market Association struck out all Russian silver and gold refineries from its good delivery list. This move cut the Eastern European nation off from the precious metals market in London.
A few months later, leaders of the seven biggest global economies banned imports of gold from Russia.
Some analysts believe that western sanctions imposed on Russia will not impact the gold market significantly because the country can still export its gold to China and Middle Eastern countries.
As Russian gold gets restricted on the international market, mining companies such as Newmont Corporation (NYSE: NEM) (TSX: NGT) are likely to sell theirs at a better price given that Russia is a major player in the industry.
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