Locked out of London after the invasion of Ukraine, Russian gold trading moved to Dubai. Now it’s moving again, to the bullion hub of Hong Kong.
The city has long been a major conduit for bullion to mainland China – the world’s biggest consumer market – but since April Russian shipments have surged. Hong Kong has imported 68 tonnes of Russian gold this year, four times more than in the whole of 2022.
The shift to Hong Kong has been driven by US sanctions on Russia’s top gold miners, as well as a crackdown by the United Arab Emirates on illicit activity in its bullion market, according to people familiar with the matter. The move east underlines the challenge the West faces in curbing the flow of resources that funds the Kremlin’s war machine.
Before the invasion of Ukraine, almost all the gold exported from Russia – the world’s second-largest miner – was shipped to vaults in London, the centre of the global bullion trade. But the Kremlin’s attack made Russian gold taboo in the mainstream industry, even before a formal ban blocked imports to the Group of Seven nations and the European Union.
When Russian gold was locked out of London, Dubai – a key transit hub for bullion shipped to Middle Eastern and Asian markets – was the first beneficiary. The UAE maintained its neutral stance this year, refusing to take formal action against Russian gold despite lobbying from the US and UK, people familiar with the discussions said.
Russia shipped 96.4 tonnes of gold bullion to the UAE in 2022, making it the country’s biggest supplier. This was more than five times the volume exported via Hong Kong.
While there’s still no UAE ban on Russian gold imports, volumes have fallen significantly. That’s partly due to a regulatory clean-up after the Middle Eastern nation was placed on a watch list by the Financial Action Task Force, a global money-laundering watchdog.
Bank transfers in the UAE have been subject to increased scrutiny, while cash payments are monitored through a mandatory government database, making it more difficult to pay Russian exporters, people familiar with the matter said. US sanctions in May against Russia’s biggest gold miners – Polyus JSC and the local unit of Polymetal International Plc – have also had a chilling effect, with UAE traders and banks more reluctant to deal with designated entities, the people said.
Some Dubai-based gold buyers began diverting shipments to Hong Kong, according to preliminary data from trade tracking firm ImportGenius, based on Russian customs figures for the six months to August.
Other UAE firms pulled out altogether. State-owned logistics company Transguard, part of the Emirates Group airline, said in May it had stopped transporting Russian gold.
“The UAE operates with clear and robust processes against illicit goods, money laundering and sanctioned entities, and implements the highest international governance standards across the gold trade,” the government-led Gold Bullion Committee wrote in a statement to Bloomberg. The UAE will continue to trade “in accordance with all applicable international standards as set out by the United Nations”.
Last Wednesday, the UK issued a fresh round of sanctions against companies linked to the Russian gold trade, including Dubai-based Paloma Precious DMCC, which it said had imported $300 million from the country. The company was formerly a shareholder in Emirates Gold DMCC, the refinery suspended from the UAE’s approved list over concerns about its ownership.
At the same time, China has made it clear that it wants to boost trade with Russia, underlining the close relationship between leaders Xi Jinping and Vladimir Putin since the invasion of Ukraine. Beijing’s diplomatic and economic support for Moscow has helped blunt the impact of Western sanctions, while China is now the largest importer of fossil fuels from Russia.
The shift to Hong Kong was also helped by a surge in Chinese gold prices above international levels in September. That drew bullion into the country, creating profitable arbitrage opportunities for banks with import licences.
