British Prime Minister Johnson clearly stated in a statement at the G7 summit. He also called on Western allies to pass the ban. The way of transporting gold cuts off Russia’s economic lifeline, thereby “starving” Moscow to death.
According to CCTV news reports, on the 26th local time, the British government announced sanctions on Russian gold and will jointly prohibit the import of Russian gold with the United States, Japan and Canada and other G7 members. In this regard, US President Biden also confirmed it on personal social media. This move can be seen as the further expansion of economic sanctions against Russia by Western countries, in the hope of completely cutting off Russia’s main economic source and dragging Russia down in the long-term war of attrition.
According to public information, precious metals are Russia’s second largest export product after energy. Ninety percent of Russia’s annual gold exports go to the G7, with a significant portion of that going to the U.K., as London is a major financial center for commodities, including metals.
If the G7 sanctions are implemented, the immediate impact on Russia would be a loss of tens of billions of dollars in annual revenue. As the world’s leading gold producer, in 2021, Russia’s gold exports will reach nearly 15 billion euros, accounting for about 5% of the world market. Therefore, this move by Western countries is undoubtedly increasing the economic burden on Russia.
Once a war occurs, the most headache for the participating parties is to fall into the quagmire of a long-term war. In the age of cold weapons, the fighting side is fighting for food and grass. This is the principle of the so-called food and grass before the troops and horses are moved. The modern fight is about the economy, and more specifically, money. For example, in the Iraq conflict in 2003, the direct expenditure of the US government reached 760 billion US dollars. If indirect expenditure is included, the total amount reached about 1.1 trillion US dollars. However, according to the prediction of the American Nobel Prize winner, the actual expenditure of the US government should reach about 3 trillion US dollars.
For the Russian military, subject to its weak economic strength, it is natural not to be extravagant, but it is conservatively estimated that the daily expenditure of the Russian military is about hundreds of millions or even billions of dollars. If calculated according to this cost, the money earned by Russia’s gold exports can only sustain the cost of war for a few days. From this perspective, it is difficult for Western countries to impose sanctions on Russia’s gold exports in the short term. This has also been confirmed by a senior US official, who, according to him, is that “the effect of sanctions will only increase over time”.
In the face of further sanctions from the West, how should Moscow respond? First, transfer the export object, which is the most effective measure. You know, China and India are the number one countries in global gold consumption today. If there is demand, there will be supply, and Moscow will have the opportunity to change its previous export strategy. Second, shorten the war cycle. The longer the war dragged on, the more economic pressure Moscow had to face. The key to solving the problem is still on the battlefield, more specifically on the battlefield of Donbass. From the results, although Russia’s progress on the Donbas battlefield is relatively smooth, it seems that the delay is still too long.