The fall in demand from the West has forced Russian gold producers to find new buyers, leading to a shift in the bullion market. While Moscow has found new buyers in the Middle East and Asia, it has also had to bear the brunt of reduced sales and profits. Russia alone mines around $20 billion worth of gold each year, and given that it cannot consume all of it, it must rely on exports to balance its books. The economic sanctions have resulted in the country struggling to meet pre-war levels of gold exports. According to Bloomberg, JPMorgan alone saw $1.2 billion of Russian gold deliveries in the first two months of 2022 before the war began.
It is not just the gold trade that Russia has lost due to the ongoing conflict with Ukraine. The West has also imposed sanctions on the country’s energy and finance sectors, as well as on individuals and companies with ties to the Kremlin. The sanctions have caused significant economic losses to Russia, with some estimates suggesting that they have resulted in a loss of over $100 billion to the country’s economy since they were first imposed in 2014.
The economic losses have impacted the lives of ordinary Russians, leading to higher inflation, lower salaries, and reduced job opportunities. Inflation has surged to over 10% in recent months, leading to a sharp increase in the cost of living. The rise in inflation has been attributed to the economic sanctions, as well as to Russia’s own economic mismanagement. The country’s reliance on oil and gas exports, coupled with its underinvestment in non-resource sectors, has made it vulnerable to fluctuations in global commodity prices.
The Russian government has attempted to mitigate the impact of the sanctions by diversifying its economy, promoting import substitution, and seeking new trade partnerships in Asia and the Middle East. The country has also ramped up its gold production, with the aim of reducing its reliance on exports. In 2021, Russia produced a record 354 tonnes of gold, up from 297 tonnes in 2014. The country’s gold production has been boosted by investment in new mines and the deployment of modern technologies.
However, the efforts to mitigate the impact of the sanctions have not been enough to offset the losses incurred by the country. The Russian economy contracted by 3.5% in 2020 due to the impact of the COVID-19 pandemic and the decline in global oil prices, and the ongoing conflict with Ukraine has made matters worse. According to the International Monetary Fund (IMF), Russia’s economy is expected to grow by just 2.9% in 2022, well below the global average.
The economic sanctions have also impacted Russia’s relationships with the West. The country has become increasingly isolated, and its actions in Ukraine have resulted in condemnation from the international community. The Russian government has responded to the sanctions with its own retaliatory measures, imposing bans on food imports from the West and restricting the activities of foreign companies in the country. The sanctions have also impacted Russia’s ability to access international capital markets, making it harder for the country to raise funds for investment and infrastructure projects.
In conclusion, the Western sanctions on Russian gold exports have had a significant impact on the country’s economy and its relationship with the West. While Moscow has found new buyers in the Middle East and Asia, the loss of sales to the West has had a severe impact on the country’s balance of payments. The ongoing conflict with Ukraine and the wider economic sanctions have resulted in significant economic losses for the country, with some estimates suggesting that they have cost the country over $100 billion since 2014. While the Russian government has attempted to mitigate the impact of the sanctions by diversifying its economy and ramping up gold production, it has not been enough to offset the losses incurred.
The views expressed in this article are the author’s own and do not necessarily reflect Coverpage’s editorial stance.
