Group of 7 leaders have announced they are restricting the Russian Central Bank's use of gold in transactions in order to further blunt Russia’s ability to prop up its economy and fund its war against Ukraine.  

Russia holds roughly $130 billion in gold reserves, and the Bank of Russia announced on Feb 28 that it would resume the purchase of gold on the domestic precious metals market.

The move will prevent Moscow from using gold to buy other foreign currencies which are not under sanctions and which would enable Russia to continue its global trade. Gold can also be directly used to purchase goods and services from willing sellers. Gold transactions have also been used to check the free-fall of the rouble.

The US has asked all its gold buyers and distributors to stop dealing in Russian gold as part of the move to implement the ban.

The move was unveiled on Thursday as G7 leaders—US, UK, France, Germany, Canada, Italy and Japan met at the NATO headquarters in Brussels to beef up the economic punishment inflicted on Russia.

The G-7 and the European Union also announced a new effort to share information and coordinate responses to prevent Russia from evading the impact of sanctions that western nations have levied since the Feb 24 invasion.

The decision to freeze Russian foreign exchange reserves last month was seen by officials as the most powerful sanction the allies have unveiled in response to the conflict in Ukraine.

Russia’s finance minister said this month that the country had lost access to around half its reserves as a result.

The rouble has nose-dived as a result and US President Joe Biden had remarked that it is “worth only a few pence now.”

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