Venezuela gold holdings in Bank of England soar on Deutsche deal
CARACAS – Reuters
Venezuela’s gold holdings in the Bank of England have jumped after it closed out a gold swap deal with Deutsche Bank, according to two sources, as Britain remains reluctant to release gold held for the troubled OPEC nation.
The government of Nicolas Maduro has since last year been seeking to repatriate about $550 million in gold from the Bank of England on fears it could be caught up in international sanctions on the country.
Its holdings at the bank more than doubled in December to 31 tons, or around $1.3 billion, after Venezuela returned funds it had borrowed from Deutsche Bank AG through a financing arrangement that uses gold as collateral, known as a swap, one of the sources said.
Under the deal struck with Deutsche Bank in 2015, Venezuela put up 17 tons of gold in exchange for a loan, according to one of the sources who asked not to be identified because they are not authorized to speak publicly about the issue.
Operations with Turkey
This is in part because Venezuela last year started carrying out gold barter operations with Turkey to import food following U.S. sanctions that have made international banks reluctant to handle Venezuelan transactions.
The Bank of England is facing political pressure from Venezuela’s opposition and from members of British parliament to not assist Maduro, whose just-begun second term has been widely described as illegitimate.
Losing the gold would be a significant blow to the country’s finances by undermining Venezuela’s ability to obtain hard currency crucial to importing items ranging from food and medicine to auto parts and consumer electronics.
Maduro’s government is struggling under hyperinflation now approaching 2 million percent annually, and a broad economic collapse has fueled an exodus of some three million people since 2015.
Opposition critics, including exiled leader Julio Borges, have argued that the gold should not be repatriated because it could be used to finance corruption.
Calixto Ortega, president of Venezuela’s central bank, met with Bank of England officials in December to discuss repatriating the gold but was unable to convince them, according to sources familiar with the situation.
The country’s late socialist leader Hugo Chavez, citing the need for Venezuela to have physical control of central bank assets, in 2011 repatriated around 160 tons of gold from banks in the United States and Europe to the central bank in Caracas.
Maduro says his government is victim of an “economic war” led by the opposition and fueled by Washington’s sanctions. His critics blame the country’s struggles on a state-led economic model, stringent exchange controls and nationalization of private companies.