I wonder if Jason Statham can reprise his role in the remake?
In what’s becoming one of the longest running legal dramas in the global gold market, the saga of Venezuela’s ‘frozen’ gold in London continues to roll on, most recently reaching the UK Supreme Court in a 4 day court hearing between 19 – 22 July.
At the core of the legal drama is the question of who has the authority to withdraw Venezuela’s gold reserves which are stored in custody at the Bank of England. Is it the Banco Central de Venezuela (BCV) under the direction of de facto president of Venezuela, Nicolás Maduro, or is it a team directed by self-styled interim president of Venezuela Juan Guaidó, who is backed by the US and UK governments.
Given the multiple developments in this saga over the last few years and the complexity of the matter, a recap is in order.
50 tons at the Bank of England
Between late 2011 and early 2012, the BCV conducted a famous gold repatriation operation, flying 160 tonnes of gold bars that were held abroad, back to Caracas in Venezuela to be stored in the vaults of Venezuela’s central bank. Following the completion of that gold repatriation in January 2012, this still left 4,089 of BCV’s Good Delivery gold bars stored in the Bank of England’s vaults (about 50.8 tonnes).
Sometime after 2012 and until 2018, the BCV then began entering various gold swap transactions, including those with Deutsche Bank and Citibank as counterparts, and also with the Bank for International Settlements (BIS) as a counterpart. To do this, the BCV used most of the gold that it held in the Bank of England vaults in London as collateral for the gold swaps.
Deutsche and Citibank Gold Swaps
One such transaction was a $1.7 billion gold swap with Deutcshe Bank, which the BCV let lapse in 2017, thus allowing Deutsche Bank to keep the gold that had been put up as collateral. This was somewhere between 30-40 tonnes of gold.
Another was a gold swap transaction with Citibank, again with the BCV putting up gold as collateral. In April 2018, the BCV paid Citibank $172 million to recover some of that gold from Citi which had been put up as collateral. That then left the BCV, as of April 2018, with a net total of 14 tonnes of gold held at the Bank of England (about 1125 Good Delivery gold bars).
After the Citi gold swap was wound up in April 2018, the BCV then began asking for its gold back from the Bank of England. This is where it gets very interesting.
In November 2018, it became public knowledge that the Bank of England was stalling on the BCV’s request to withdraw 14 tonnes of Venezuela’s gold from London, with the Bank of England using bogus excuses such as transportation insurance costs and anti-money laundering concerns to not fulfill its withdrawal obligation on BCV’s gold custody contract.
However, the real reason for stalling the BCV’s gold withdrawal request was political – in the form of US State Department and US Treasury pressure that was put on the British Foreign office and HM Treasury to block Venezeula’s gold withdrawal and repatriation plan. This stalling was designed to allow time to roll out and critically, to move the goalposts and change the rules of the game by allowing time for the Guaidó team (backed by the US and UK) to enter the arena so as to try to win control of the remaining 14 tonnes of BCV gold at the Bank of England.
Things are truly a mess in Venezuela, once the most prosperous nation south of the USA-Mexico border.
Since the rise of Hugo Chavez and Nicolas Maduro, Venezuela has economically crashed and burned.
Venezuela defaulted on its debt (such as their 9.375% coupon, senior unsecured debt).
Venezuela’s sovereign debt was trading at par ($100) back when crude oil was at $100 per barrel. But then things went to into the dumpster when crude oil prices fell to $20 per barrel and Venezuela could not afford its economic and social policies.
Crude oil production has crashed since Venezuela let political appointee run their national oil operations.
Venezuela’s annual inflation rate is about 2,000% per year. In August 2018, Venezuela re-denominated the bolivar, lopping five zeros off it. Today’s price of 25.00 new bolivars is equal to 2,500,000 old bolivars. Converted into dollars, that comes to less than $0.50.
Venezuela is a total mess, much like a Cuba with incredible natural resources like crude oil and gold.
So, the Banco Central de Venezuela (BCV) (or Banco Central de Maduro (BCM)) is engaged in a tussle with the jolly old Bank of England over 31 tons of gold.
Thus, we need a remake of the Jason Statham flick nenamed “The Central Bank Job.”
At least Venezuelan Presidente Nicolas Maduro has “masked-up” following US President Joe Biden’s “advice.’