Russia Copes with US Sanctions by Buying Gold

The Russian Federation plans to overcome the new US sanctions by increasing its holding of gold. According to official data, the Russian central bank bought 29 additional tons of gold.

Previously, the central bank increased its gold reserve by 20 tons in May, and 17 tons in June. All in all, compared to January 2016, the holding increased by 37%.

Russia has been dealing with economic sanctions since 2015, related to its support of Ukrainian separatists and the Crimea annexation. Recently, new pressures were raised by the United States which put tariffs on imports of steel and aluminum from Russia. The value of the Russian Ruble plummeted from 55 per dollar (€48) in February to 70 (€60) after the US announced the new sanctions.

The Russian central bank sold 84% of its ownership of US government debt. Now, it only represents 17% of the central bank’s reserves. According to Russia’s Finance Minister, Anton Siluanov, Russia will keep on this momentum in response to the sanctions. “In fact, the dollar, which is considered to be the international currency, is becoming a risky tool for payments," Siluanov noted.

This dual strategy is aimed at insulating the Russian economy, in particular from the dollar value.

Russia is one of the largest gold holding countries, just before China, according to the World Gold Council. The USA remains the largest.

By Antoine Dewaest

Image source: Andrzej Barabasz