Bank of England withholds £420 million of Venezuela’s gold
19 Nov 2018
The Bank of England is reportedly stalling on the repatriation of £420 million worth of gold, approximately 14 tonnes, belonging to the South American nation of Venezuela. The Banco Centrale de Venezuela (BCV) submitted a request over two months ago to have the good delivery bullion bars exported back to the country’s capital, Caracas.
Several nations, including the UK, USA, and France, use their financial bodies as gold custodians to hold onto large quantities of bullion to allow protection against political volatility. The Bank’s current estimate is that it has holdings for more than 70 central banks, as well as some private bullion banks.
The delay is supposedly being caused by difficulty obtaining the appropriate insurance for the gold, though anonymous staff members within the UK Treasury have spoken to both Reuters and The Times to explain that the Bank – as well as colleagues in the United States – aren’t satisfied by just the request and wish to know the Venezuelan government’s plans for the gold upon return.
The news of this dispute broke two weeks ago via the Reuters news agency, who stated that Venezuela initiated proceedings at the start of September in order to avoid any US tariffs or sanctions against the country. The delay meant that Venezuela did not beat these sanctions, with the United States signing Executive Order 13850 on November 1st stating that the gold industry would be better off not dealing with Venezuela as a whole, and especially its gold industry.
Venezuela and Gold:
The South American country is currently the world’s largest seller of gold and has been for the past two years. Venezuela has a rich history (no pun intended) with gold, having previously held one of the largest reserves. Since 2010 the country has stuck to a program of selling, with Turkey being a keen buyer. Perhaps the delay in the shipment to Venezuela is related to US sanctions against Turkey, with the Bank of England cautious that the repatriation may end up being a workaround to avoid the US restrictions against the Middle Eastern country.
The rocketing inflation rate in Venezuela means that 1oz of gold was worth 211 million bolivars as of the end of July – a 3.1 million percent rise since the New Year – but some economists feel that a growth in gold holdings could help curtail some of the dangerous inflation levels. President Maduro is also seemingly working to this end, announcing 32 new gold fields and a huge mining project (funded publicly and privately) with the expectation of operations commencing at 54 gold processing plants in 2019.
2011 – 2012 Repatriation:
Venezuela previously received 14 tonnes of gold – this exact amount – on January 30th, 2012. The gold was flown to Caracas International Airport and was the last of 23 flights to the country, carrying a total of 160 tonnes of gold or 85% of Venezuela’s bullion reserves.
The then president Hugo Chavez was accused of acting out of fear, with Chavez believing that Venezuela’s assets held overseas could eventually be frozen via sanctions similar to the action taken against Colonel Gaddafi in Libya. This is now the case in present-day Venezuela.
Nicolás Maduro is the current President of Venezuela, representing the United Socialist Party. He served as the Minister of Foreign Affairs between 2006 and 2013, as well as Vice President in the final year of that tenure. He became party leader after the death of Hugo Chavez, the former president, and is five years into a six-year term.
Maduro’s government, like Chavez’s, has been constantly under-fire from critics of the left-wing government, with accusations of corruption, money laundering, and bribery rife amongst elected officials. Reportedly anywhere between 2 and 4 million people have emigrated from the country to neighbouring states like Brazil and Colombia, unhappy with hyperinflation (400,000%) within the country’s economy. Venezuela has been in recession for the entirety of Maduro’s premiership, although Maduro believes this is an “economic war” against the socialist ideology funded by external sources and backed by Washington sanctions.
Venezuela’s opposition blames poor management of the many nationalised companies in the state, as well as claiming that senior officials and leaders have been forced to flee – some to other countries with their families – after intimidation from Venezuela’s secret police.
The main critics of Venezuela are the United States and Brazil, with Presidents Trump and Bolsonaro potentially having the opportunity to cooperate and take action in the future. There have already been reports of tactical hoarding and burning of supplies within Venezuela, and President Trump has reportedly proposed invasion according to an Associated Press piece from last year.