Venezuela seeks to repatriate $550 million of gold from Britain
Venezuela is seeking to repatriate about $550 million in gold bars from the Bank of England because of fears it could be caught up in international sanctions on the country, two sources with direct knowledge of the effort told Reuters. Venezuela’s hard currency holdings have dwindled as existing U.S. financial sanctions have effectively blocked President Nicolas Maduro’s government from borrowing on international markets. The plan has been held up for nearly two months due to difficulty in obtaining insurance for the shipment, needed to move a large gold cargo, one of the officials said. ‘They are still trying to find insurance coverage, because the costs are high,’ the official said.
The government has promised to auction 2 billion euros in foreign exchange over an unspecified time frame, without saying where it plans to obtain those funds. But even if Venezuela manages to repatriate the gold, the new U.S. sanctions could make selling it to raise hard currency difficult. Venezuela has been exporting gold to Turkey in the last year, a business that has grown as Maduro has built up ties with Turkish President Tayyip Erdogan. Selling the gold directly from the Bank of England to a foreign buyer would be logistically easier than shipping it, but could also risk running foul of sanctions. The country’s late socialist leader Hugo Chavez, citing the need for Venezuela to have physical control of central bank assets, in 2011 repatriated around 160 tonnes of gold from banks in the United States and Europe to the central bank in Caracas. But some of Venezuela’s gold remained in the Bank of England. Starting in 2014, Venezuela used this gold for ‘swap’ operations in which global banks lent Venezuela several billion dollars with the gold as collateral. Venezuelan central bank statistics show the central bank’s gold holdings by June this year had dropped to 160 tonnes from 364 tonnes in 2014, as some of the swap agreements expired without Venezuela returning the funds – leaving the gold in the hands of the banks. In 2017, such swap agreements became difficult due to U.S. sanctions, which blocked U.S. financial institutions from bankrolling any new financing operations.”