**Russia’s Cunning Trade Tactics**
Russia has been using gold and informal networks to get around Western sanctions. This is a clever move by the Kremlin, showing how resourceful it can be.
The West imposed severe economic pressure on Russia after its invasion of Ukraine. To cope with this, Russian trade practices have changed dramatically. Now, international trade often happens in secret. Accessing goods depends on clever schemes.
To understand Russia’s tactics and its relationship with China, it’s crucial to grasp the role of their new partner. Knowing this can help apply pressure effectively on Russia’s war economy.
**Russia’s Entrepreneurial Spirit**
History shows that when the Kremlin faces a crisis, officials and businesses become more entrepreneurial to meet extraordinary goals. Today, the Kremlin encourages people to find new ways around conventional trading practices.
This includes selling important commodities through secret fleets, buying weapons with gold from Iran or North Korea, and using import-export entrepreneurs who funnel foreign goods to Russia through other countries.
**Paying Foreign Counterparts**
Russia’s biggest trade challenge is how to pay foreign partners worried about secondary sanctions, especially in China. This is a big problem for Russia, which has become more dependent on Chinese imports.
There are three clear trends. First, Russia is making informal trading official. This started with legalized gray imports but now includes barter trading and exchange in kind. Barter trading relies on willing trade partners, so it’s unclear how widespread this will be.
Second, the Russian state is trying to create payment systems that avoid exposure to or provide an alternative to the dollar. One example is central bank-backed digital currencies. However, these systems may not work because they rely on foreign cooperation and components.
Third, Russia is using gold and other precious stones as payment. This might be its most promising workaround option. Russia is a major gold producer and hoarder, consistently producing over 300 tonnes of gold annually.
**Gold: A Key Role in Trade**
Russia’s central bank has bought nearly 2,000 tonnes of gold over the last 20 years — more than any other country. The state regularly adds to a vault controlled by the Ministry of Finance, which holds an undisclosed amount of gold and precious stones that can be used at President Putin’s discretion.
It’s clear that Russia is already using gold to pay for goods it cannot buy conventionally or for transactions it wants to keep secret. An open-source investigation showed unsanctioned banks trading gold for cash in Turkey. Russia also partly paid Iranian drone manufacturer Sahara Thunder in gold for 6,000 drones and related equipment.
**China’s Role**
While it’s unclear how much Chinese gold reserves are involved with Russian trade, China is clearly supporting Russia’s workaround trade. The pressure on Beijing to assist Moscow is unlikely to subside, and gold offers a range of possibilities to extend and obfuscate their cooperation.
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