Previously safe from EU sanction, now EU foreign ministers are discussing a ban on Russian gold imports. This is the most significant measure in a limited plan by the bloc to cause Putin to stop the war in Ukraine.

The EU’s representative for foreign policy, Josep Borrell, said the ban on Russian gold was the most important measure of the latest plan, which is focused largely on “improving the implementation of the already existing sanctions”.

The EU has passed six rounds of sanctions against Russia, but agreeing the last package– an incomplete ban on oil agreed in May 2022– was a bruising experience that revealed stark differences on how far the bloc could go.

The latest measures have been nicknamed the “six and a half package”, in a sign of the limited appetite for further sanctions against Russia.

Borrell laid bare the disagreements, noting that: “There is a big debate about… the sanctions affecting us more than Russia. Some European leaders have been saying that the sanctions were an error, was a mistake; well, I don’t think it was a mistake.”

EU Draft Regulation

According to the draft regulation, the EU will ban “the direct or indirect import, purchase or transfer of gold, which constitutes Russia’s most significant export after energy”. The plan is expected to be formally approved later this week.

The gold ban follows a similar move by the G7, which includes the EU’s three largest economies. The value of gold exports to Russia elite has increased as a way to avoid western sanctions.

Ukraine’s special envoy on sanctions, Oleksiy Makeyev, said he would “not underestimate the meaning” of the latest EU sanctions. In an interview he said, sanctions pressure was increasing on Moscow, and he predicted the Russian economy would contract at least 10% by the end of the year.

However, he implied the EU was lagging behind western countries on sanctions. He said: “Of course we expect the European Union to take the leadership in terms of introducing sanctions. At the very moment, this was United States, United Kingdom and Canada who have the lead in this sanctions coalition, but it is important that we are moving altogether.”

EU Trade with Russia

Before the invasion of Ukraine, the EU did far more trade with Russia than any of those countries and was heavily dependent on Russian gas. The bloc has in effect ruled out an imminent ban on gas, but diplomats say the Kremlin’s decision to cut supplies is having the same effect. “Putin’s decisions are making it go faster than if we had a gas package,” a senior EU diplomat said.

The latest proposal also offers some response to criticism that African countries are being harmed by EU sanctions. In May 2022, the African Union president, Macky Sall, told EU leaders that their sanctions on Russian banks were making it hard, or even impossible, for African countries to buy fertiliser from Russia.

The latest EU sanctions broadens an exemption for agricultural products, stating that none of the bloc’s sanctions “target in any way the trade in agricultural and food products, including wheat and fertilisers, between third countries and Russia.”

EU foreign ministers will discuss further military support for Ukraine. Lithuania’s foreign minister, Gabrielius Landsbergis, urged big industrial countries to do more.

“If anything that needs to be continued, it is weapons deliveries. And anybody who can do that– obviously this is the main industrial countries of the western world – they have to step up their deliveries.”
Gabrielius Landsbergis

In Ukraine, its gold is being traded. Ukraine’s Deputy Governor Kateryna Rozhkova confirmed that the nation sold around $12 billion worth of gold during Russia’s invasion of the nation. “We are selling (this gold) so that our importers are able to buy necessary goods for the country.”

As of January 2022, Ukraine held around 27 tonnes of yellow metal, which could be significantly lower. It was said that the sale was not to shore up the local currency (hryvnia).