Chinese State Media: Russian Gold Sanctions Will Only Fuel Inflation Without Effect
Sanctions Seen as Calculated Move to Divert Investor Capital from Oil to Gold
[Asia Economy Beijing=Special Correspondent Jo Young-shin] Chinese state media claimed that the Group of Seven (G7) sanctions banning imports of Russian gold will not be effective. They also pointed out that the price cap on Russian crude oil is an unfeasible sanction.
On the 27th, the state-run Global Times reported that the G7 sanctions banning imports of Russian gold will only drive up global inflation without significantly impacting Russia.
In 2020, Russia's gold export value was $19 billion (about 25 trillion won), accounting for 5% of the world's gold exports. Gold is Russia's second-largest export item after energy resources such as crude oil and natural gas.
Citing experts from the Global Times, it was forecasted that while the U.S. expects Russia to be economically isolated by sanctions on Russian gold, the result will be similar to that of Russian crude oil.
Professor Xi Junyang of Shanghai University of Finance and Economics predicted, "Trading of Russian gold may be suspended at international gold exchanges in New York and London," and said this measure will only drive up international gold prices. He added that sanctions on Russian gold will further fuel global inflation.
The Global Times reported that after the sanctions on Russia, emerging countries have been importing Russian crude oil, and gold will follow a similar path. It explained that sanctions on gold by the Western camp, including the U.S., will be ineffective.
Some analysts argue that the recent ban on Russian gold imports by the Western camp, including the U.S., is a calculated sanction intended to divert speculative capital flowing into crude oil to the gold market. If speculative funds in the crude oil market move to the gold market, international oil prices could fall.
The Global Times also claimed that the Western camp's idea of setting an international price cap on Russian crude oil is impossible to realize in reality.
Professor Lin Bochang of Xiamen University emphasized, "Many countries participating in sanctions against Russia paradoxically want to import Russian crude oil and natural gas at cheaper prices," and said, "As long as energy transactions between companies in each country are allowed, the introduction of a price cap is impossible."
Tian Yun, former vice chairman of the Beijing Economic Operation Association, explained, "While the Western camp, including the U.S. and Europe, does not purchase Russian crude oil, other emerging countries are importing it," meaning Russian crude oil has become a hard currency. He further criticized the U.S. and Western camp, saying the current global inflation is caused by supply not keeping up with demand recovery, and sanctions on energy-exporting countries (Russia) are completely wrong decisions.
The Global Times condemned the G7 and North Atlantic Treaty Organization (NATO) summits as President Joe Biden's last attempt to rally allies before the U.S. midterm elections in November.
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