The imposition of sanctions against Russian gold by the G7 and the European Union has led to the sale of the precious metal by unknown companies that promote this product on the sites of the United Arab Emirates (UAE), Turkey and Hong Kong. At the same time, alternative sales markets could not replace Russia's classic Western ones: the volumes sold are too low. This was reported by Bloomberg with reference to data from ImportGenius, which analyzes customs statistics.
The company analyzed data from January to August 2022 and claims that sanctions risks have left the Russian gold mining industry at the mercy of small players and small logistics companies trying to help the multi-billion dollar industry find buyers abroad. The domestic market simply cannot digest such volumes, even taking into account the active imposition of gold bars on the population. Western companies are reluctant to deal with the Russian precious metal due to reputational and sanctions risks, but such conditions are quite suitable for companies from other countries that capture their market share by increasing supplies to countries where there are no such risks.
A prime example is Brink's Co. and Loomis, world leaders in high-security logistics, which includes the supply of precious metals. After the Russian invasion of Ukraine, the companies refused to cooperate with Russian companies, and their shares went, for example, in favor of the Hong Kong-based VPower Finance Security (Hong Kong) Ltd, which delivers cash for the largest banks in China. ImportGenius claims that between March and August 2022, Hong Kong hosted approximately $300 million worth of gold. The publication notes that these are small volumes: after all, for example, only one American JPMorgan managed to buy $1.2 billion worth of gold in Russia in the first two months of 2022, after which it stopped cooperation.
The UAE has become the main destination for Russian gold: according to ImportGenius, over the specified period, the Arab country has hosted about $500 million worth of gold. . The largest importer of Russian gold is Paloma Precious DMCC, registered in the Dubai Free Zone (local preferential tax treatment). The company imported about $109 million worth of gold.
Another major buyer is Al Bahrain Jewelers LLC, which bought about $50 million worth of gold through its subsidiary in the Emirates, Open Mineral AG. Not only relatively professional market participants and traders, but also beginners have been seen buying Russian gold. For example, Actava Trading DMCC has never been engaged in the purchase of gold, but has specialized in the supply of grain from the Black Sea region. However, even she, according to the publication, purchased gold for $25 million. Representatives of the companies declined to comment on their purchases of Russian gold.
Türkiye has become another destination where Russian companies have begun to actively supply their gold. ImportGenius claims that over the 6 months of last year, local companies imported about $305 million worth of precious metal. For comparison: between September 2021 and February 2022, about $10.9 billion worth of gold arrived in the UK, and $222 million in Switzerland, and to Germany – by $164 million. Thus, Russia was only able to partially find a replacement for European buyers. The agency also notes that blocking sanctions against Sberbank and VTB have led to their share in the gold import market falling significantly in favor of smaller players. A large share of the gold produced in Russia is still bought by the Central Bank, but gold miners have complained that the regulator is buying at a price well below the market price.