聽is an Associate Professor in International Development Studies at聽.
. Yet the Russian economy and war machine grew by .
. At a time when Ukrainian President Volodymyr Zelenskyy is scrambling to acquire arms, funds and recruits, Vladimir Putin seems .
How have failed to derail Putin?
As I recently watched the news break on CBC about Russia鈥檚 robust economy, an advertisement from popped onto the screen. And there was the answer, hiding in plain sight: Gold.
The role of gold
Sanctions against Russia needed to be strategic, targeting the environment it operates in.
Economic sanctions targeted shipping and trade into Russia, but the gold market is a massive environment left largely untouched. After Russia invaded Ukraine two years ago, .
According to the , Russia is now the second largest producer of gold at .
Since 2013, Russia has been and managed to isolate its economy from transactions requiring American dollars.
, and 5,000 rubles will now buy an ounce of pure gold. The plan was to shift the currency away from a pegged value and into the gold standard itself so the .
Usually the rationale for holding on to gold reserves is to use them to settle foreign transactions at home and abroad. Gold holders can trade it on one of several bullion exchanges; it can be swapped for currencies to settle transactions and then swapped back into bullion.
Usually countries want gold . Many central banks are purchasing gold at breakneck pace, with about . A single tonne is about US$65 million, which means $110.6 billion in gold went into central banks globally in 2023.
Gold prices fluctuate
China is the world鈥檚 leading producer of gold, and also the world鈥檚 second largest buyer of it. , whereas .
China鈥檚 appetite for gold has a great deal to do with stabilizing its own currency. In 2022, if someone purchased a new condo in Shanghai, often the developer would throw in a few .
The World Gold Council argues that gold is the safest place to invest in times of conflict. But if that were true, there would have been a permanent bull market for gold dating back to .
Its price rises and falls like anything else. Which is why Putin鈥檚 goal of turning the ruble into pure gold is not genius, it is desperate.
The U.K., the United States and Canada will not touch Russian gold. But others will. of Russian gold in 2022 following the British sanctions. That鈥檚 up 15 times from the 2021 imports of only 1.3 tonnes (US$84.5 million).
It鈥檚 no mystery why so many following the war and ensuing sanctions.
The other big client of Russian gold is Switzerland.
In 2022, Switzerland imported 75 tonnes of Russian gold (US$4.87 billion). in gold from the U.A.E., which doesn鈥檛 produce its own but buys enormous sums from Russia, and US$3.92 billion from Uzbekistan, Russia鈥檚 next-door neighbour.
Billions upon billions of dollars of Russian gold is being freely traded at top dollar while avoiding every one of those 16,000 sanctions.
That鈥檚 why global sanctions against Russia haven鈥檛 derailed a thing. In order for Putin鈥檚 plan for economic resilience through gold to work, however, gold needs to increase in value. His long-term goal is that gold, not the U.S. dollar, will be the global trading currency.
Consumer activism
Here鈥檚 where average citizens come in, and how they can help determine what鈥檚 to come.
Right now, if you鈥檙e a Costco member, (limit two per member, and no refunds). This is not a speculative investment. Physical gold will not quadruple in value by Christmas.
Instead, buying gold is a in times of uncertainty. It鈥檚 the doomsday currency, which is why the World Gold Council advertises gold on cable news networks in exactly that vein.
If North American consumers, central banks and investors are panicked enough to buy gold en masse, the price will go up, and Putin鈥檚 plan works.
In the last quarter of 2023, American consumers purchased more than .
Is there actual Russian gold in those bars? Between Switzerland鈥檚 2022 gold purchases from Russia and the 2023 purchases from the U.A.E., it鈥檚 likely there is.
If people are worried about the ethics of purchasing Russian gold, they can always buy . It comes from Qu茅bec, and as demand for coins like this increases, so too does the price of gold overall.
Still, bars and coins cannot compete with the power of demand from the central banks, and currently it鈥檚 high.
Tarnishing gold
To thwart Putin鈥檚 plan, the lustre needs to be removed from gold. Increasing gold supply could lower the price. Australia, Canada and the U.S. have important roles to play as leading gold producers.
Rising interest rates also tend to lower gold prices. A mass sell-off of government holdings in gold could also cause a tailspin for the ruble, but likely for the U.S. and Canadian dollars as well.
No single policy can thwart Putin鈥檚 goals 鈥� it requires disrupting the supply of gold beyond Russia, and that might well mean involving the U.A.E.
But with 16,000 sanctions on the books against Russia, one more smart sanction against the Emirates might be the golden egg Zelenskyy needs right now.
This article is republished from under a Creative Commons license. Read the .