Mar 22, 2022 - Politics & Policy

Scoop: Senators to discuss freezing Russian gold with Yellen

Illustration of a person sitting on top of a pyramid of gold bars.

Illustration: Shoshana Gordon/Axios

A bipartisan group of senators is working with the Treasury Department to try to lock down Russia's roughly $132 billion in gold reserves after its invasion of Ukraine.

Why it matters: The collaborative approach is a departure from congressional efforts to shame and blame the Biden administration to shape moves on Russian oil imports, or the SWIFT banking system. If successful, it could drive more work across the aisle and along both ends of Pennsylvania Avenue, as the president balances diplomatic pressures abroad with political pressures at home.

Driving the news: Treasury Secretary Janet Yellen will meet this week with Sens. Angus King (I-Maine), John Cornyn (R-Texas), Bill Hagerty (R-Tenn.) and Maggie Hassan (D-N.H.) to discuss the legislation, people familiar with the plans told Axios.

When Axios first reported about this bill two weeks ago, Yellen’s involvement had not occurred.

  • Congressional offices worked with Treasury over the weekend to make some technical changes to the bill.
  • King said it could pass the Senate as soon as this week. Lawmakers originally wanted to slip it into the omnibus spending bill that passed this month.
  • A Treasury spokesperson told Axios, “Secretary Yellen regularly meets with members of Congress to discuss legislation. Additionally, Treasury staff frequently provide technical assistance on sanctions bills."

The big picture: Russia’s gold reserves can be used by its government officials and oligarchs to launder money or for foreign exchange in unregulated markets.

  • The Kremlin began stockpiling gold in 2014 — when the U.S. applied new sanctions for its annexation of Crimea.
  • Now, as the value of the ruble crashes, the Bank of Russia is starting to buy gold again, after stopping when prices spiked at the start of the pandemic.
  • Existing sanctions against Russia already cover any transaction involving the country's Central Bank, Ministry of Finance and National Wealth Fund — including with gold.

What they're saying: That doesn’t cover gold that's been moved or named to someone else, like a non-sanctioned Russian bank, Adam Smith, a partner at Gibson, Dunn & Crutcher and a former Obama sanctions official, told Axios. He said gold can be difficult to trace.

  • The legislation would apply secondary sanctions to any American entities knowingly transacting with, or transporting, gold from Russia’s central bank holdings. They'd also face sanctions if they sell gold physically or electronically in Russia.
  • Gold "is a fourth of their reserves, and we don't want them to be able to monetize the gold and undercut the effect of the sanctions," King told Axios.

What’s next: A bipartisan group in the House, including Reps. Elissa Slotkin (D-Mich.), Mikie Sherrill (D-N.J.), Peter Meijer (R-Mich.), Susie Lee (D-Nev.), Joe Wilson (R-S.C.) and Brian Fitzpatrick (R-Pa.) has introduced a companion bill.

  • President Biden also has the authority to implement such sanctions independent of Congress.
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