RIO DE JANEIRO, BRAZIL – Lacking financial resources to spur the country’s largest (and virtually its only) oil extraction industry, Venezuela swapped some 9 tons of gold with Iran in late April for Iranian technical assistance to its depleted refineries. As a result, Venezuela virtually scraped the bottom of its reserves, which had already been dwindling.
Now, the Venezuelan government is pressing the Central Bank of England to release €930 million in gold bars deposited in the institution’s vaults. With a GDP drop of more than 60 percent in the past seven years since President Nicolás Maduro took office, Venezuela is experiencing its worst crisis in history and desperately needs resources.
This year, with the oil industry at its most critical moment, with a shortage of investment, the country’s GDP is expected to drop by 15 percent, a record. “There is no more gasoline, electricity is failing and we have no medicines,” says José Martin, a 38-year-old Venezuelan oil analyst who lives in a city in the country’s hinterland.
“Another problem is the coronavirus. We don’t know for sure how many people have been infected, and anyway there is no equipment to treat the sick,” he says. Officially, Venezuela has just over 880 confirmed cases of covid-19.
For the Venezuelan government, the last lifeline for the economic and health crisis is to recover the gold bars deposited in the British coffers. But apparently, this will not be easy. The British government, like 60 other nations, does not recognize the legitimacy of the Maduro government, which is accused of defrauding the 2018 elections,. Concurrently, US sanctions prevent countries from doing business with Venezuela.
Faced with the British refusal to return the gold, the Venezuelan government decided to sue the Central Bank of England for some US$1 billion. The financial institution does not comment on the matter.
The Venezuelan government decided not to spare on efforts to get its gold back. The well-known (and expensive) British law firm Tim Lord and Zaiwalla & Co was selected to pursue the case. The firm settled with the British government in 2019 in a complex £1.3 billion dispute over economic sanctions imposed by the UK on Tehran, which were eventually found to be illegal.
The global impact of the pandemic is also helping to further compound the situation in Venezuela. In addition to Iran, one of the Venezuelan government’s main allies is Russia, which is facing an unprecedented crisis, with dramatic growth in the number of confirmed cases of coronavirus. There are now more than 335,800 people infected. Russia ranks second among the countries with the highest number of cases, just behind the United States.
With the world amid a pandemic and a severe economic crisis, the last available option for Venezuela is to try to raise funds through its gold reserves deposited in the United Kingdom. But at the moment, even this does not seem to be progressing very far.
Source: Exame