Is Switzerland Allowing Russia to Fund Their War Effort With Gold?

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Last Updated on: 7th July 2023, 08:49 pm

An investigation by the Swiss newspaper Wochenzeitung suggests that Switzerland might be aiding Russia's economic recovery by importing large quantities of gold from Moscow. Since the onset of the war in Ukraine, approximately 75 tons of Russian gold, valued at over 4 billion euros, have reportedly been imported into Switzerland, with 35 tons imported during the first five months of 2023 alone.

In the years prior to the conflict, the average annual import of Russian gold into Switzerland stood at only 20 tons. The Swiss Federal Customs and Border Protection Agency, as cited by Wochenzeitung, asserts that “everything is legal.” According to the agency, Russian gold was exported to the United Kingdom in February 2022 before the war began and then made its way to Switzerland.

Source: SwissInfo

However, some industry experts are skeptical of this explanation. They believe that Swiss gold refineries might provide a means to “whiten” the Russian gold by melting it into small ingots, effectively removing any trace of its Russian origin. Consequently, the gold leaves the refinery with an unmistakable Swiss label of origin.

Reuters reports that the United Arab Emirates (UAE) also plays a role in this alleged laundering process. As the UAE does not support sanctions against Russia, it serves as a central hub for the exchange of gold from Russia. Importations from the UAE are under scrutiny because Swiss refiners risk processing Russian gold produced after the war began, thereby violating the sanctions.

Since the annexation of Crimea in 2014, the Russian Central Bank has been purchasing almost the entire domestic gold production to counterbalance the economic sanctions imposed on Russia. According to Wochenzeitung, the central bank has exported over 700 tons of gold since 2019, predominantly to the United Kingdom.

At the time of writing, it remains to be seen whether these claims will prompt further investigation or scrutiny from authorities.

Is Russian Skirting Sanctions With Gold?

Dedollarization has gained attention as countries around the world seek to reduce their reliance on the U.S. dollar in various aspects of their economies. This is especially true for Russian and Chinese central bankers who, together, have purchased over 3,000 tons of gold over the past decade. 

Exactly how much gold Russia, China, and other authoritarian states have in their reserves is a matter of debate. Some estimates suggest that China alone could be hoarding up to 30,000 tons of the metal in order to shore up its strategic reserves and lessen its dependence on the U.S. dollar. 

Source: Moscow Times

Following the Russian invasion of Ukraine in February 2022, international sanctions have essentially severed Moscow’s participation in the global economy. Nevertheless, Russia remains in deeply embedded trade networks with rogue states and select international partners—notably the People’s Republic of China—for the sale of natural gas and crude oil that currently sells at a 35% discount compared to Western Brent oil. 

However, the extent of Russia’s gold laundering scheme, as revealed by Wochenzeitung, suggests that Moscow’s war economy may depend on cash secured from gold sales to Western buyers. Selling gold to Western refiners who then refine the ingots for a second time effectively turns Russian-origin gold into a freshly minted finished product without a prior history—in essence, it makes the assets untraceable and resilient to sanctions. 

United Arab Emirates: Russia’s Accomplice?

While neutral Western states such as Switzerland are reportedly harboring Russian gold buyers, so too as a variety of other non-aligned states. Of particular interest is the United Arab Emirates (UAE), an oil-rich Gulf kingdom whose imports of Russian gold have skyrocketed since the outbreak of the war in Ukraine. 

In 2021, the UAE imported only 1.3 tons of Russian gold into the kingdom. The following year, the country imported an astounding 75.7 tons of gold from Moscow, marking an enormous increase in Emirati cash inflows into Russia. 

Russia, Gold, and the War Economy

The Russian war economy is dependent on the country’s vast reserves of natural resources and commodities such as natural gas, crude oil, essential minerals, and, yes, even gold. Customs records show that key gold trading hubs such as Switzerland and the UAE have supplied the Moscow regime with billions in cash to fund their war effort. 

Amid a stiff suite of sanctions from NATO-aligned Western states, gold and other physical assets have proven to be useful for Russian entities to bypass trade restrictions. While banned in EU and G-7 member states, gold sales are now being routed through private companies in intermediating countries like Hong Kong before eventually reaching London markets. 

For Russia, Western sanctions have amounted to little more than an inconvenience when it comes to the sale of physical resources and commodities. As long as there are willing buyers in foreign states, Moscow appears to be fully content to sell them through third-party mediators in order to skirt sanctions and fund their war effort in Ukraine. 

The demand for gold appears to be impervious to sanctions. For as long as gold is needed for industrial use, it will find a way to hit the international market—no matter its origin.

If you’re interested in taking a position in gold, silver, or any other precious metal, consider opening a precious metals IRA today. As a safe haven store of value, savvy investors may want to load up on the yellow metal, especially while it plays a role in geopolitical conflict. 

Liam Hunt
Liam Hunt

Liam Hunt, M.A., is a financial writer and analyst covering global finance, commodities, and millennial investing. His coverage has been featured in publications such as the New York Post, Forbes, and Barron's.

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