Handelsblatt (Germany): for the first time Russia is exporting more gold than gas

Traditionally dollar revenues of the country have gas for export. In the first quarter of this year, everything changed — for two reasons.

Enough for two months only April and may, the Kremlin power earned $ 3.6 billion on the export of gold. These are the data of the Federal customs service and the Central Bank of the Russian Federation.

According to the Federal customs service, Gazprom is a monopolist in the export of pipeline gas for these two months has exported gas worth $ 2.4 billion. According to preliminary estimates of the Central Bank, the export of gas in the second quarter brought Russia 3.5 billion dollars — that is less than the export of gold in just two months.

For this there are two main reasons, one of which is devastating for public finances of Russia.

On the one hand, the rapidly increased exports of gold. In April and may last year, Russia exported precious metal worth 247 million dollars. The current jump is associated, first, with a significant increase in price of gold and secondly with the volume of exports, which increased to 66.4 tonnes in the fourth and fifth months of the current year.

“This situation has arisen for the first time in the history of our country”, — said Maxim Hudalov Moscow rating Agency of ACRE. According to him, gas exports at least since 1994, brings the largest country in the world more revenue than gold.

The growth of gold exports is associated with coronarica and Western sanctions against Russia. Both, according to experts, has led to the fact that the Russian budget came under pressure, and the Central Bank, which traditionally invests heavily in the expansion of state reserves, was forced to soften its policy.

The Central Bank stops buying gold for official reserves

Therefore, the Central Bank decided to stop purchasing gold for the state foreign exchange reserves of the country. In addition, most gold mining companies because of the credit agreements are required to sell gold to the banks that Fund them, says Hudalov.

Complete failure from Central Bank purchases of gold domestic producers and started a full season gold after snowmelt in Siberia — the main reasons of sharp growth of gold exports, says the Vice-President of Bank “Opening” Alexey Zaitsev. To compensate for the departure of the Central Bank as a buyer of gold mines and refineries were first equal export rights with the banks.

Previously, they could not take the gold abroad and the banks had to coordinate with the Central Bank of a foreign transaction. But now, the Central Bank drops out of the chain as a source of demand.

Rising exports of gold — the first cause, but the gas aspect also plays a crucial role in the new export reality in Russia. According to estimates of the Central Bank, Gazprom’s revenues from gas exports in the second quarter of 2020 compared with the first quarter decreased by half, compared to the same period of 2019 — in 2.6 times, i.e. to 3.5 billion dollars.

Gas prices in free fall

In April and may, Gazprom put foreign clients 24 billion cubic meters of gas is 21% less than in the same period last year. Thus, the export price of Russian gas in may fell to 94.4 per dollar for 1000 “cubes” that was below the level of profitability. In may 2019 the price of gas exports amounted to 183,87 dollar. The reasons for the collapse of gas prices followed oil analysts see the reduction of energy demand in connection with the pandemic coronavirus, in a crowded gas storage facilities in the West due to the relatively warm winter and global warming.

“We expect that the export of gas to Europe in 2020 will be reduced to 163 billion cubic meters — compared to about 200 billion in 2018 and 2019,” — said the Director of the natural resources Agency Fitch Dmitry marinchenko. According to him, the average export price in 2020 will establish a record of the last 15 years.

“We expect that it will be about $ 120 per 1000 cubic meters”, — predicts marinchenko. In 2006-2009, the average price stood at 294 USD. According to the Director of research for the company Vygon Consulting Maria Belova, the record was set in the midst of the ruble crisis in 1999: 57,5 USD per 1,000 cubic meters. But then the price of oil was $ 12.72 per barrel.

Suddenly: where does most of Russia’s gold?

It is interesting to note, where does most of Russia’s gold. The main importer in the UK, which accounts for about 80% of Russian exports are “yellow metal”.

In 2019, Russia increased its exports to the United Kingdom in 12 — fold to $ 5.3 billion, despite the worsening of bilateral relations after the attempted assassination of former double agent Sergei Skripal and his daughter. From January to may 2020, the UK had about 4 of $ 5.1 billion.

One of the reasons was, of course, the fact that London is the global centre of gold trading. In addition, there are the largest repository of physical metal. Located there is the headquarters of many international investment funds specializing in gold. The influx of “yellow metal” these funds in the first half of the year reached, according to the world gold Council, a record level of 734 tons 39.5 billion.

The growth of gold exports from Russia, however, will not be able to compensate for falling revenues from exports of oil and gas, warned Egor Susin of “Gazprombank”. According to him, the export of gold this year will amount to less than 10% of the lost profits due to the export of oil and gas.

“In any case, it will increase trade and balance of payments”, — said the expert. But in the best years, Russia has earned on export of gas to 60-70 billion dollars, and the export of gold (even at current high prices) will not exceed $ 13 billion.