Russian gold may have passed through Dubai before reaching Switzerland

The gold souk brings in Dubai around 56 billion francs a year. Afp Gold Licensors

Since the beginning of economic sanctions against Russia, the share of Dubai gold has increased in Switzerland to 15%. NGOs and refiners point to an increased risk of sanctions evasion.

This content was posted on June 10, 2022 – 1:21 PM

Feriel Mestiri, RTS

Dubai, the city of gold. A true world trade center for this precious metal. The city sees between 20 and 40% of the world’s gold stockpiles go through each year.

Its trade was valued at 56 billion francs last year, according to the Dubai Customs Department. It is the most profitable source of export after oil. A large part of these exports arrive in Switzerland, the 4th trading partner for UAE exports.

But the city is regularly singled out, particularly by the UN, for its laxity in controlling the gold’s provenance. The UAE has also moved closer to Moscow in recent months and has refused to condemn the invasion of Ukraine.

This reinforces the arguments of the NGO Swissaid, which fears that Russian gold will transit through Dubai before being imported into Switzerland, evading economic sanctions.

Russian gold retreats, Dubai explodes

The day after Switzerland resumed European sanctions, Swiss refiners stopped all gold imports from Russia (17 tonnes in 2021, worth nearly a billion francs). At the same time, the UAE’s gold quantities increased: 56 tonnes in two months, worth 3.3 billion francs. Unreleased for 6 years.

For Marc Ummel, Swissaid’s head of raw materials, it is to be feared that part of this gold will be used to finance the war: “We know that Russia exports its gold in part to China, India or the United Arab Emirates. And the latter has already played this transit role in the past for countries that were under international sanctions like Venezuela, Libya or Iran. These countries were laundering their gold in Dubai.”

Major producer and gold holder

According to the World Gold Council, Russia is the world’s second largest producer of gold, with over 330 tonnes mined in 2020, or 10% of global production.

There is gold from Russian mines, but also gold that the Russian Central Bank has accumulated in its reserves. With almost 2,300 tons of gold, it is the fifth largest sovereign gold holder in the world. Equivalent to $132 billion worth of gold, this reserve is a potential bargaining chip with trading partners that do not apply economic sanctions.

Four Swiss refiners give up on Dubai

Who in Switzerland buys gold from Dubai, knowing these risks? Among the five Swiss refiners that are members of the London Bullion Market Association (LBMA) international standard, four say they have not imported gold from Dubai since March: MKS PAMP, Metalor, Argor-Heraus and PX Précinox SA.

Some even gave it up for several years. In La Chaux-de-Fonds, the boss of PX Précinox SA is even surprised by the amount of gold imported from the United Arab Emirates since March: “It is very difficult to guarantee traceability, particularly for gold from Dubai. What surprises me above all is the lack of commitment by refiners to alternative sources, for example for artisanal gold.

Last week Robin Kolvenbach, managing director of the Ticino-based Argor-Heraeus refinery, told Reuters: “One can assume that gold from Russia also ends up in Western value chains via Dubai.”

>> Watch the 7:30pm RTS thread:

Valcambi, safe from its control system

The Swiss (and world) leader in the field, Ticino Valcambi, confirms that he imported gold from Dubai, but refutes the accusation of circumventing sanctions against Russia. In writing, he responds to RTS: “We are as aware of the potential danger as everyone else, but we have created systems that allow us to verify whether the information received from refineries and local traders is correct or not. […] The gold we buy is not of African or Russian origin. Sanctions are not circumvented by Valcambi, nor by our counterparts in Dubai, who strictly follow all sanctions imposed.

This diligence does not convince Marc Ummel, who has already denounced a Valcambi client in Dubai in the past. “Once gold is refined in the UAE, all traces are lost. This raises many questions about the true origin of this gold, which could be linked to serious violations or the financing of conflicts.

The NGO cites several reports as proof of this, in particular from the Federal Council in 2018, the Federal Audit in 2020, or even a letter from the Secretary of State for the Economy (SECO) sent to Swiss refineries last October, asking to properly verify the integrity. of Dubai’s gold supply chain.

Gaps in legislation

For its part, SECO considers that there are not enough elements that go beyond mere speculation to support suspicions of circumventing the sanctions. His spokesperson responds in writing: “We do not know the reasons that lead to these increases in gold imports from the UAE. […] Note that this country is not affected by the sanctions imposed by the European Union and Switzerland. That means gold can be imported legally.”

For Swissaid, Swiss legislation, which refines nearly two-thirds of the world’s gold, is not enough. Marc Ummel denounces two major deficiencies. The first: that refiners are not required to declare the real origin of gold. The second concerns the Precious Metals Control Act, which does not require refiners to track the entire supply chain. “Today, refineries are only obliged to return to the first supplier, but not to control the entire chain. That’s the whole problem.”

According to JTI standards

According to JTI standards

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