Executives from the gold industry will gather at Dubai’s five-star SO/ Hotel next week for the city’s annual precious metals conference.
Speakers include the London Bullion Market Association’s General Counsel, who will deliver a speech titled “Strengthening Governance in Challenging Times.”
Hanging over the meeting was the prospect of Russian gold.
Last week, the UK’s National Crime Agency (NCA) issued a red alert: Russia is increasingly using gold to avoid sanctions.
The NCA warned of a deliberate attempt to “launder sanctioned gold to disguise its origin so that it can be hidden in supply chains and sold in the UK and around the world”.
The UK government has also just become the first Western country to announce a series of sanctions targeting specific companies involved in the Russian gold trade.
Among them is UAE-based gold trader Paloma Precious. Paloma is said to have traded $300m (£246m) in Russian gold since Vladimir Putin invaded Ukraine.
The UAE is currently under intense scrutiny for its role in the global secretive Russian gold market.
The metal is being shipped from Russia to refineries in countries such as the United Arab Emirates that do not impose sanctions on Russia. There, the gold is melted down to remove its ties to Russia before being sold.
“Once melted, recast or refined, its origin cannot be determined by inspection as any markings will be lost,” the NCA warns.
Traces of gold are generating an important source of revenue for President Putin’s war machine. And it’s becoming increasingly clear that much of it is shipped through the UAE.
London is the center of the world’s gold trade, and the London Bullion Market Association (LBMA), which regulates gold trading, banned imports of Russian gold shortly after the Ukrainian invasion.
The LBMA, which certifies gold refineries and sets standards for global trade, will ban the trading of Russian-made gold bars from March 7, 2022. Western allies have followed suit, banning all Russian gold exports from July 2022.
However, rather than being crushed, trade changed course. United Nations data shows that the UAE’s imports of Russian gold increased 15 times between 2021 and 2022.
Other data suggests the true number may be higher. Russian customs records obtained by Reuters earlier this year showed that the UAE imported 75.7 tons of gold from Russia in the year since the outbreak of the war in Ukraine, with a total value of $4.3 billion. In weight terms, this is 58 times the 2021 import volume.
The UAE is by far the largest destination for Russian gold, followed by China (mainly via Hong Kong) and Turkey, which import about 20 tons each.
These figures suggest that the sanctions against Paloma Presis are just the tip of the iceberg.
According to customs records, the $300 million worth of Russian gold traded by Palomar amounted to only about 7% of the total gold that entered the UAE in the 12 months before the war.
Most gold refineries in the world are accredited by the LBMA, which means they must prove the provenance of every gram of gold they process and undergo annual external audits. LBMA-accredited refineries account for approximately 90% of the world’s annual mined gold production. world.
But in the recycled gold industry, there is less regulation. LBMA accredited refineries account for approximately 50-60% of recycled gold production.
Recycled gold accounts for the majority of the UAE market. There are three to four major gold refineries in the UAE, but none are accredited by the LBMA.
Until July this summer, Emirates Gold Refinery was an associate member of the LBMA. But after the LBMA completed its due diligence review this summer, it suspended the refinery’s membership “until further notice.” It is understood the suspension was due to an alleged link. to Russia.
In addition, the UAE has also blocked access to the Dubai gold market because its gold failed to meet responsible procurement and anti-money laundering standards.
The beneficial owner of Emirates Gold is Paloma Precious. In September, London-listed Rockfire Resources announced a deal to acquire 100% of Emirates Gold, subject to the gold being restored to the UAE Good Delivery List. Rockfire has since said it is taking urgent legal advice to determine the impact of UK sanctions on the deal.
Paloma Presis did not respond to a request for comment.
Since the UAE has no sanctions on Russia, Putin is free to export Russian gold to these refineries.Russia relies on friendly countries such as the United Arab Emirates to launder money, imitating Putin’s way of circumventing the G7 oil price ceiling. Building a “Dark Fleet” of tankers Operating outside of Western insurance markets.
Most of the Russian gold passing through the UAE is likely destined for China and India, but some also goes to the UK. Due to the lack of LBMA certification, it cannot be imported into the UK in bullion form, but it can be imported. British holidaymakers who bought jewelery in the UAE may also have inadvertently purchased Russian gold and brought it home.
The end result is a lifeline for the Kremlin. Russia produces more than 300 tonnes of gold each year and the industry will have an economic value of £12.6 billion by 2021. This is a “key revenue source” for the Russian war effort and one of Russia’s main sources of income. The Foreign Office warned it was the largest after oil and gas.
“Gold is critical to Russia,” said Christopher Swift, a national security lawyer at Foley & Lardner and a former official in the U.S. Treasury Department’s Office of Foreign Assets Control.
“Russia has developed into a barter economy, using products from extractive industries such as oil, gas and metal mining to pay for weapons and consumer goods abroad.”
While the West was quick to realize the importance of oil and gas to Putin’s war machine, it was slower to realize the importance of gold.
However, as last week’s Foreign Office sanctions showed, Westminster is now waking up – and putting pressure on Putin.