A little-known British financier has been wooing Venezuelan officials with a plan to liberate $1.5 billion of Venezuelan gold retained in the Bank of England, highlighting the Maduro government’s struggle to bypass international sanctions on its foreign reserves.
Charles Vincent, of the Geneva-based firm Pipaud and Partners Saul, presented the proposal to Venezuelan central bank officials in August, Bloomberg reported. The plan centered on the firm lobbying the British government to sell the gold to an Austrian bank at a 30 percent discount on its market value – with Vincent presumably collecting a portion of the difference.
Vincent’s proposal also contained alternative schemes, such as issuing a $5 billion bond underwritten by a bank in Singapore whose primary clients are waste disposal companies.
Despite international analysts dismissing the ideas as far-fetched, Maduro government officials are reportedly still considering the proposal.
Maduro has been struggling to repatriate $550 million of gold held in the Bank of England since 2018, when US sanctions first hit Venezuelan gold. The British holdings jumped to nearly $1.5 billion in January 2019, after Venezuela repaid a loan from Deutsche Bank that had used gold held in London as collateral.
But under lobbying from the US government, the Bank of England has refused to return the gold, citing compliance with international sanctions, and concern that the funds could be used to finance corruption.
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The fact that Maduro’s government is prepared to contemplate such opportunistic schemes as Vincent’s is testament to the cash-strapped regime’s desperation to free up its foreign-held assets.
Venezuela has an estimated $8 billion in foreign reserves, plus extensive shares in external accounts that are now frozen by international sanctions. These include $7 billion of assets owned by the state oil company PDVSA’s US subsidiary Citgo, $1.4 billion in Belgian financial services company Euroclear, and $1.2 billion in Portugal-based Novo Bank.
Vincent’s scheme is not the first time Venezuelan officials have considered unconventional manoeuvres to access these foreign holdings. In February 2019, a plan to use Uruguayan banks to channel the $1.2 billion of assets held by Novo Bank back to Venezuela was blocked by pressure from the Venezuelan opposition.
While Maduro claims that foreign reserves are needed to buy food and medicines, the opposition insists that releasing them would feed the systems of corruption that prop up the failing administration, and drain state resources ahead of a potential transition.
Maduro is particularly keen to access the country’s foreign gold reserves, given his administration’s reliance on the metal to maintain liquidity since international sanctions were applied to PDVSA. The value of the central bank’s gold reserves fell by $1 billion in the first six months of 2019, with Turkey and the United Arab Emirates being major international buyers.
An estimated 80-90 percent of Venezuelan gold is produced illegally, much of it in small mines controlled by irregular armed groups.
However, it is dubious whether the Bank of England’s stance will prevent the loss of Venezuela’s gold.
Following the UK’s refusal to release its holdings, including those related to the Deutsche Bank swap, Venezuela has lost any incentive to honor other gold-backed loans. In March, Citigroup announced its intention to sell off over $1.3 billion of Venezuelan gold held as collateral, after the country defaulted on loan repayments.