Gold is fuelling Putin’s war machine and keeping Russia afloat
Facing sanctions, soaring inflation and labour shortages, Russia is relying on one of the oldest and most stable commodities to shore up its wartime economy.
And Vladimir Putin’s mercenaries are accused of murdering and torturing their way through central Africa to get their hands on it.
Moscow has been hoarding gold for nearly two decades and the precious metal now plays a key role, alongside oil, in the finances of Putin’s war machine.
Successors to the Wagner Group have taken control of mines in the Central African Republic where they have gained a reputation for ruthlessness and violence.
The mercenaries have been accused of killing people to extend their grip on the trade and protect their claims.
Two months ago, the Russians allegedly shot dead 10 local prospectors near the Ndassima mine in the centre of the country.
A fortnight later, they seized another 10 prospectors and locked them in sun-baked metal containers for several days. At least one captive died, local media reported.
The incidents were far from the first alleged since Wagner took control of the mine and its gold deposits – worth $1bn (£760m) – in 2021.
Meanwhile, in Burkina Faso, Russia-based Nordgold was granted a lucrative licence to mine the Niou deposit in Kourweogo province earlier this year, on top of two gold mining sites it already operates in the country.
Over the border in Mali, the Kremlin-backed military junta started building a gold refinery this summer with the Yadran Group, a Russian conglomerate.
The facility will have a 200-ton capacity and is expected to become a processing hub for the whole region.
Across the continent, Russia has been stepping up its involvement in Africa’s gold trade.
Gold is easy to physically move around and smuggle beyond the scrutiny and paper trails of normal financial networks.
It is easy to melt down, easy to disguise its origins, and easy to launder in well-established black markets.
This makes it a useful tool for the Russian state and its businesses to beat Western sanctions if they want to access foreign currency, or make international purchases after being shut out of much of the global financial system.
Gold has become even more important since Donald Trump effectively blacklisted two of Russia’s largest oil companies last month.
John Kennedy, an expert at the RAND Europe research institute who has investigated Russian use of the metal, said: “Gold has never been more critical to Russia.
“For a long time, it’s been hoarding gold and since the invasion, it’s been putting it to use.
“Gold is crucial to managing growing economic pressures, which include an increasing budget deficit and new sanctions on its major oil exporting companies. Russia is also really interested in using gold to access international markets.”
Russia has its own vast domestic gold deposits and in recent years has been producing more than 300 tons each year.
But such is the demand for the metal and its utility that it has also become a pillar of Russian involvement in Africa.
Access to gold mines has often been sought as part of strategic deals to provide security assistance for African leaders.
Mr Kennedy said: “Gold is a strategic priority for Russia and it follows that gold acquisition is too.
“Mineral extraction is one of the means through which Russia develops international relations. We have seen that during wartime, Russia is creating these mineral relationships and as Russia increasingly comes under Western pressure, gold becomes more important.”
Between 2006 and 2020, Russia added more gold to its reserves than any other country.
Moscow has been trying to limit its reliance on the US dollar, preferring gold and the Chinese yuan, to make the country more stable.
Putin accelerated the process after the West imposed sanctions on Moscow for annexing Crimea in 2014.
By the time Russia launched its full-scale invasion of Ukraine in 2022, it had amassed the world’s fifth-largest gold reserve, though researchers warn that official Kremlin figures are not transparent.
With Russia’s economy now dominated by war and sanctions, the research group RAND Europe last year reported the country was “using physical gold in state-to-state payments, and Russian businesses are involved in gold-for-goods, gold-for-weapons and gold-for-cash exchanges”.
Another research group, the Centre for Advanced Defence Studies, reported earlier this year that Russia had paid Iran in gold bars in return for help building a new military drone industry. The report alleged at least $104m (£78.6m) worth of gold bars were delivered as part of a contract with Sahara Thunder, a Tehran-based company. Russia is also said to have used gold to pay for weapons from North Korea.
Both Iran and North Korea have denied sending weapons to Russia.
Yuri Chikhanchin, Russia’s financial watchdog chief, admitted in July that Russian companies were using both gold and cryptocurrency to make international payments.
Last year, Sayari, a financial intelligence company, reported that some Russian banks had appeared to manoeuvre around a ban on shipping dollars and euros to Moscow by trading gold in the United Arab Emirates and Turkey.
Russia’s central bank also announced last week that for the first time it had begun selling physical gold from its reserves as part of finance ministry operations to fund the state budget.
Sanctions have made the precious metal attractive to ordinary Russians, who have been buying gold at an unprecedented pace to safeguard their wealth.
Alexei Moiseyev, Russia’s deputy finance minister, said in September that gold had “started serving the same functions that cash once did, including money laundering and, I’m sorry to say, drug trafficking”.
Just how much gold is heading from Africa to Russia is difficult to determine, experts have claimed.
Vladislav Netyaev, the head of the dirty money department at anti-corruption group Transparency International Russia, estimated at least $2.5bn (£1.9bn) in gold was exported from Africa to Russia since early 2022.
Gold was not Russia’s only priority in Africa as Moscow was courting countries for other resources, such as aluminium, and trying to win political support in the United Nations.
But he said as the war in Ukraine continued, the precious metal had probably become an increasingly important way, alongside cryptocurrency, to make payments and finance the war machine in the face of sanctions.
He also said records on gold transactions in Russia stated that almost none of the gold coming into the country had originated in African nations.
However vast quantities were recorded as being from the UAE.
Mr Netyaev said: “We clearly understand that this gold was gold that was mined in some African countries and then sent to the UAE and then mixed with legally obtained gold. After that it is sent to Russia or any other country.”
The UAE is the world’s second-largest gold hub. The country says it has “a robust regulatory framework to maximise the security, integrity and transparency of every gold transaction”.
It also says its safeguards and regulations are in line with international standards and “are consistent with the world’s leading gold-trading hubs”.
Marc Ummel, of Swissaid, an aid charity that campaigns for transparency in the minerals trade in poorer countries, said: “It has been documented that gold under Russian control in some African countries ends up in Russia via indirect routes.
“Most of this gold seems to have transited via the UAE but other countries might also be involved in these supply chains, for example Hong Kong.”
He said much of the gold extracted under Russian control in Africa may never go to Russia, but may be directed or traded elsewhere.