Caracas Chronicles

Photo: Bloomberg retrieved

The United Kingdom’s Central Bank has refused to comply with demands by the Maduro government to repatriate USD 1.2Bn in gold holdings for the second time in less than two months. Last December, Calixto Ortega (Venezuela’s Central Bank president) led a delegation to London, seeking access to part of the reserves; it was rejected by the BoE, due to “compliance-related reasons” short for: “we’re confident you’re gonna steal the gold reserves, so you won’t have any.”

The gold pile held at the BoE grew substantially a couple days ago (from around USD 550mm before), as Deutsche Bank released some 16 tonnes of gold held as collateral in a loan to the Republic, issued back in 2015. However, as expected, the second request, made the day the gold from DB landed on the BoE account, was denied, again on compliance-related grounds.

“In all its operations, the Bank observes the highest standards of risk management and abides by all relevant legislation, including applicable financial sanctions,” according to a statement by BoE’s officials on the rationale behind yesterday’s decision.

Last December, Calixto Ortega (Venezuela’s Central Bank president) led a delegation to London, seeking access to part of the reserves; it was rejected by the BoE, due to “compliance-related reasons”.

The denial came alongside calls by top U.S. officials, including Secretary of State Michael Pompeo and National Security Adviser John Bolton, to their UK counterparts for help blocking any attempts by Maduro & Co. to access Venezuela’s offshore assets. This is the latest result of the sanctions regime that started in earnest on July 2017, when the Trump administration first prohibited new debt issues by Venezuela and its affiliates, and has since broadened its scope to include, among others, the nation’s booming gold mining industry.

During 2018 and as oil revenues cratered, Maduro grew increasingly reliant on Turkey, a key diplomatic ally, to skirt the sanctions regime by selling the nation’s domestically-held gold reserves and proceeds from illegal mining activity. However, according to Turkey customs data, gold exports from Venezuela went down almost to zero in the last quarter of 2018, which suggests, to me, that the gold stash held in Caracas was probably tapped out; hence the desperation to get the pile held in the BoE.

Regarding the fate of Venezuelan assets abroad, the U.S. Treasury department released a statement shortly after the BoE’s own communique, saying that the U.S. “will use its economic and diplomatic tools to ensure that commercial transactions by the Venezuelan government, including those involving its state-owned enterprises and international reserves, are consistent with its recognition of Juan Guaidó as the caretaker president of Venezuela.”

The U.S. “will use its economic and diplomatic tools to ensure that commercial transactions by the Venezuelan government are consistent with its recognition of Juan Guaidó as the caretaker president of Venezuela.”

These news imply that Maduro’s survival game has changed, for good. The desperation to get hold of the USD 1.2Bn gold stash held abroad (only a fraction of BCV’s USD 8Bn in reported reserves), knowing that a recent attempt failed due to the same compliance-related issues, and facing a growing mass of foreign governments openly endorsing opposition deputy-turned-caretaker-president Juan Guaidó, suggests that Maduro is now acting under the assumption that its days controlling the nation’s finances are numbered. The endgame is nearer than ever, now that one of the last sources of foreign currency (essential to finance the government’s patronage networks that sustain the status quo within chavismo) is out of Maduro’s reach.

For all us Venezuelans, long accustomed to a corrupt government plundering the nation’s riches at will to finance a system of political domination, this latest refusal by the BoE brings a ray of hope. Hope that the international community won’t enable the pillaging of the country’s reserves any more. And hope that the ever-closer transition government will have something to help finance the rebuilding of our nation.