The Russian government plans to introduce a limit on gold bullion exports for individuals, setting the maximum volume at 100 grams. Experts have analyzed the potential consequences of this decision.
Deputy Finance Minister Alexey Moiseev announced the imminent introduction of restrictions on gold exports from the country. Contrary to initial plans for a $10,000 limit, the new decree will set a maximum weight of 100 grams for gold bullion. The draft document is nearly complete and will soon be submitted to the government, with implementation expected this year. This decision raises several questions: why was a weight-based limit chosen instead of a monetary equivalent? What is the urgency behind this measure? Who will benefit and who will lose? Financial analysts were consulted to provide answers to these questions.
The Russian government intends to soon introduce restrictions on the export of gold bullion for private individuals, setting a limit of 100 grams. Initially, a value-based restriction equivalent to $10,000 was considered, similar to rules for foreign currency. However, as stated by Moiseev, a weight-based restriction will now apply. He also emphasized that these rules apply exclusively to gold bullion and not to jewelry, for which different regulations are in effect.
The Deputy Finance Minister clarified that relevant departments are finalizing the decree. It is expected that the document will be submitted to the government for consideration within a few weeks, and then to the presidential administration. Alexey Moiseev confirmed that the gold export restrictions will be implemented this year.
To analyze the reasons and potential consequences of this innovation, we consulted experts.
From the state`s perspective, what is the necessity of introducing these gold export restrictions?
Vladimir Chernov, analyst at Freedom Finance Global:
The government`s primary motivation is to block capital outflow channels that citizens began actively using after stricter currency controls were imposed. Since March 2022, there has been a ban on exporting more than $10,000 in foreign cash and instruments without special permission, making gold an attractive alternative for moving funds abroad. Given the increase in bullion exports, particularly through EAEU countries, the Ministry of Finance has developed new rules to complement the existing currency restrictions.
Alexander Potavin, analyst at FG Finam:
Gold export restrictions serve as a tool to protect gold and foreign exchange reserves, regulate the domestic market, and counter external economic pressure. However, they can have potential negative side effects, such as complicating operations for private investors and businesses, an increase in illegal transactions, and a potential reduction in export revenues.
Why did the government ultimately decide to limit gold exports by weight instead of by value, as initially planned?
Alexander Potavin:
The choice of a weight-based restriction is due to the instability of market gold prices, whereas grams represent a fixed physical measure independent of currency fluctuations and price changes. Setting limits in monetary equivalents could create loopholes for unscrupulous individuals, allowing them to export gold in varying volumes to reach an equivalent value. Furthermore, checking the weight of bullion at customs is significantly easier.
Is there international experience with such export restrictions on gold?
Alexander Potavin:
In the mid-20th century, many socialist countries, including the USSR, restricted or completely banned gold exports to preserve foreign exchange reserves and prevent capital flight. In India, since 2018, quotas and taxes on gold imports have been introduced, aimed at reducing the trade deficit and stabilizing the domestic market. China also applies strict customs controls and limits on cash gold transactions to maintain state control over its gold resources.
What are the advantages and disadvantages of these restrictions for the state and for citizens?
Vladimir Chernov:
For the state, this limit is a way to curb capital outflow and strengthen financial stability within the country. It also encourages citizens to store gold in Russia, using bank vaults, unallocated metal accounts, and other domestic instruments. However, for private individuals, such rules may lead to additional difficulties related to the need for more thorough declarations and intensified border control. There is also a risk that overly stringent official measures could push some demand into the illegal sector.
Alexander Potavin:
Among the advantages: increased control over capital outflow (preventing the export of large volumes of gold) and a reduction in the shortage of physical gold for the domestic jewelry and industrial sectors, ensuring them stable access to raw materials. However, this could lead to increased import costs and a potential shortage of certain gold products. Disadvantages include: complicating operations for collectors and investors wishing to move significant amounts of gold; reduced legal exports to international markets, negatively impacting trade activity; and, consequently, an increased risk of illegal precious metal exports and the growth of shadow schemes.
What is the potential impact of this decision on the Russian and global gold markets?
Vladimir Chernov:
This measure is a logical continuation of current currency restriction policies. The limit on exporting small volumes of gold represents a compromise, allowing citizens to move the metal for personal needs while excluding large transactions used for capital outflow. In the future, additional criteria regarding the value or number of operations per person might be introduced, which would strengthen control over gold circulation, stimulate domestic investment, and fortify the Russian financial market`s position amid ongoing external sanctions.
Alexander Potavin:
In terms of price dynamics, these restrictions should not have a significant impact. Reduced bullion exports will decrease liquidity for sellers in international markets. Prolonged export restrictions will eventually increase the supply of gold on the domestic market, which could negatively affect domestic prices. However, the weight limit on exports could exacerbate the gold deficit in global markets, potentially leading to a further rise in its prices on international exchanges.
