Struggling under economic sanctions and currency collapse, Russia is buying up gold and eyeing cryptocurrency as sanction workarounds.

Simone Del Rosario Business Correspondent

Crippled by sanctions, Russia piles into gold, cryptocurrency

Mar 02, 2022

Simone Del Rosario Business Correspondent

By Simone Del Rosario (Business Correspondent), Emma Stoltzfus (Video Editor)

Struggling under crippling economic sanctions and currency collapse, Russia is financially fleeing to a familiar safe haven: gold. And with the growing prevalence of cryptocurrencies, experts expect Vladimir Putin will also turn to the less familiar, non-tangible asset.

The gold standard

After a 2-year pandemic pause, Russia’s central bank announced this week it is restarting gold buying, returning to the country’s relentless effort to de-dollarize with bullion.

In times of crisis, the yellow metal is frequently a financial refuge for governments. But over the past decade, Russia has aggressively built up its gold reserves — now the fifth largest in the world — to act as a weapon against economic sanctions.

Since 2014, the country has been a repeated target for Western sanctions that have cost Russia an average of $50 billion per year in growth, according to estimates by the right-leaning think tank Atlantic Council.

Since 2014, the U.S. has sanctioned Russia over the illegal annexation of Crimea, 2016 and 2020 election interference, a 2018 nerve-agent attack against a former Russian spy on British soil, and now the invasion of Ukraine.

Russia initially paused buying gold in 2020 after prices surged at the start of the pandemic but largely held onto its stockpile since then. Ironically, the crisis of its own making — the Ukraine invasion — is sending gold prices rising again. Some analysts predict escalation could push the price above $2,000 per ounce.

The cryptocurrency chapter

In an increasingly isolated financial world, cryptocurrency could serve as an additional tool in Russia’s effort to de-dollarize. And as the ruble crashes, ordinary Russians are also seeking refuge in cryptocurrency. Trading volume between the ruble and Bitcoin spiked to a 9-month high this week, according to cryptocurrency researcher Kaiko.

This week, Bitcoin went from trading around a low near $35,000 to a high near $45,000.

“The prevailing narrative of Bitcoin being that digital gold, a censorship-resistant technology, especially when we see sanctions not only United States to Russia but China sanctioning Raytheon or Lockheed and Canada sanctioning some of their own citizens, I think this is going to become a bigger and bigger narrative and Bitcoin is going to continue to serve as one of the solutions,” investor and entrepreneur Anthony Pompliano said on CNBC.

While U.S. adversaries like Russia work like mad to reduce reliance on the dollar, the U.S. Treasury Department warned in October that digital currencies could erode the power of Western sanctions.

SIMONE DEL ROSARIO: THE ECONOMIC SANCTIONS AGAINST RUSSIA ARE CRIPPLING. THE COUNTRY IS CUT OFF FROM MOST FOREIGN MONEY – WHILE ITS OWN CURRENCY COLLAPSES.

BECAUSE OF IT – RUSSIA IS NOW FLEEING TO A FAMILIAR SAFE HAVEN. GOLD. AND EXPERTS SAY THE LESS FAMILIAR CRYPTOCURRENCY – COULD BE NEXT.

LET’S START WITH THE TRIED AND TRUE. AFTER A TWO-YEAR PANDEMIC PAUSE – RUSSIA’S CENTRAL BANK IS RESTARTING GOLD BUYING…RETURNING TO ITS RELENTLESS EFFORT TO DE-DOLLARIZE WITH BULLION.

IN TIMES OF CRISES, THE YELLOW METAL IS FREQUENTLY A FINANCIAL REFUGE FOR GOVERNMENTS. IT’S SIMPLE, WELL-KNOWN, AND SINCE ANCIENT TIMES BEEN USED TO STORE VALUE.

BUT OVER THE PAST DECADE – WE’VE SEEN RUSSIA AGGRESSIVELY BUILD UP ITS GOLD RESERVES – NOW THE FIFTH LARGEST IN THE WORLD – TO ACT AS A WEAPON AGAINST ECONOMIC SANCTIONS. AND THERE’S BEEN A LOT OF THEM.

THERE WAS THE 2014 SANCTIONS WHEN RUSSIA ILLEGALLY ANNEXED CRIMEA.

2018 SANCTIONS FOLLOWING U-S INTELLIGENCE REPORTS ON ELECTION INTERFERENCE.

MORE SANCTIONS THAT YEAR OVER A NERVE-AGENT ATTACK AGAINST A FORMER RUSSIAN SPY ON BRITISH SOIL.

NEW SANCTIONS OVER ELECTION INTERFERENCE.

AND NOW THE INVASION OF UKRAINE.

THE ATLANTIC COUNCIL ESTIMATES WESTERN SANCTIONS HAVE COST RUSSIA AN AVERAGE OF 50 BILLION DOLLARS A YEAR SINCE 2014.

EVERY TIME RUSSIA ADDS AN OUNCE OF GOLD TO ITS RESERVES IT’S FURTHER DECLARING INDEPENDENCE FROM THE GREENBACK.

BUT IN THE DRIVE TO DE-DOLLARIZE – EXPERTS SAY RUSSIA WILL ALSO INEVITABLY TURN TO SOMETHING NON-TANGIBLE – CRYPTO.

AND RUSSIANS – ALREADY ARE. LOOK AT THIS SPIKE IN TRADING VOLUME BETWEEN THE RUBLE AND BITCOIN!

PEOPLE ARE CLEARLY SEEKING REFUGE FROM SANCTIONS AND RUBLE COLLAPSE IN CRYPTOCURRENCY.

AND THE PRICE OF BITCOIN IS SURGING OVER DEMAND.

ANTHONY POMPLIANO: The prevailing narrative of bitcoin being that digital gold, a censorship resistant technology especially when we see sanctions not only united states to russia but china sanctioning raytheon or lockheed and canada sanctioning some of their own citizens, i think this is going to become a bigger and bigger narrative and bitcoin is going to continue to serve as one of the solutions.

SIMONE DEL ROSARIO: WHILE U-S ADVERSARIES LIKE RUSSIA WORK LIKE MAD TO REDUCE RELIANCE ON THE DOLLAR – THE U-S TREASURY DEPARTMENT WARNED LATE LAST YEAR THAT DIGITAL CURRENCIES COULD ERODE THE POWER OF WESTERN SANCTIONS.

I’M SIMONE DEL ROSARIO. FROM NEW YORK IT’S JUST BUSINESS.