Venezuela files le­gal claim with BoE over gold

The Pak Banker - - FRONT PAGE - LONDON -AFP

Venezuela has launched le­gal pro­ceed­ings against the Bank of Eng­land to try to force it to re­lease €930m ($1bn; £820m) worth of Venezue­lan gold. The gold is be­ing re­tained fol­low­ing Bri­tish and US sanc­tions on Venezuela.

Venezuela says it wants the Bank of Eng­land to sell part of the Venezue­lan gold re­serves to use the funds to fight the spread of coronaviru­s. It says it has agreed for the money to be sent di­rectly to the UN to en­sure it is not used for other pur­poses.

It is call­ing for the funds to be trans­ferred to the United Na­tions Devel­op­ment Pro­gramme (UNDP) to ad­min­is­ter the pur­chase of sup­plies like med­i­cal equip­ment to fight Covid-19. The le­gal wran­gling comes amid fears about the abil­ity of Venezuela's crum­bling health­care sys­tem to han­dle the out­break.

Le­gal doc­u­ments say the bank wants the trans­fer made "as a mat­ter of ur­gency" and it filed a le­gal claim to that ef­fect in a London court on 14 May. "With lives on the line, now is not the time to at­tempt to score po­lit­i­cal points," Sarosh Zai­walla, a Lon­don­based lawyer rep­re­sent­ing Venezuela's cen­tral bank, said in a state­ment.

The UN told the BBC in an emailed state­ment only that it had been ap­proached by the Venezue­lan bank to ex­plore such mech­a­nisms.

The Bank of Eng­land de­clined to com­ment when asked about the case by Reuters news agency. The BoE is the se­cond largest keeper of gold in the world, with ap­prox­i­mately 400,000 gold bars - only the New York Fed­eral Re­serve has more. It has one of the largest gold vaults in the world and prides it­self on never hav­ing had any gold stolen in its more than 320-year his­tory.

Cen­tral banks of a num­ber of na­tions use it to store their na­tional gold re­serves and Venezuela is one of them. De­spite the coun­try's oil riches, Venezuela's econ­omy has been in freefall for years due to a com­bi­na­tion of gov­ern­ment mis­man­age­ment and cor­rup­tion, fur­ther ex­ac­er­bated by in­ter­na­tional sanc­tions.

As Venezuela pro­duces very lit­tle apart from oil, it needs to im­port goods from abroad, for which it needs ac­cess to for­eign cur­rency. But with oil pro­duc­tion a frac­tion of what it once was, Venezuela's for­eign cur­rency re­serves have been dwin­dling.

The gov­ern­ment of Pres­i­dent Ni­colás Maduro turned to sell­ing off some of the gold re­serves kept at the cen­tral bank in Venezuela to its al­lies in Turkey, Rus­sia and the United Arab Emi­rates. But the US, which does not recog­nise Mr Maduro's gov­ern­ment, last year warned "bankers, bro­kers, traders and fa­cil­i­ta­tors" not to deal in "gold, oil, or other Venezue­lan com­modi­ties stolen from the Venezue­lan people by the Maduro mafia".

Venezuela has re­port­edly con­tin­ued to sell gold to its ally Iran, which is also un­der US sanc­tions, but even so its in­ter­na­tional re­serves reached a 30year low at the be­gin­ning of this year, Venezue­lan Cen­tral Bank fig­ures re­vealed. It badly needs hard cur­rency and sees the gold stored in the vaults of the Bank of Eng­land as the so­lu­tion.

Venezuela first ap­proached the Bank of Eng­land at the end of 2018. Fi­nance Min­is­ter Simón Zerpa and Cen­tral Bank Pres­i­dent Cal­ixto

Ortega trav­elled to London to de­mand that Venezuela be al­lowed to take the gold back to Venezuela.

In Jan­uary 2019, the Bank of Eng­land re­fused the re­quest. All it said pub­licly was that it did not com­ment on cus­tomer re­la­tion­ships.

The de­ci­sion, how­ever, came just days after Mr Maduro's ri­val, Juan Guaidó, had de­clared him­self pres­i­dent, ar­gu­ing that the 2018 elec­tion which re­turned Mr Maduro to power had been fraud­u­lent. Mr Guaidó, who was quickly recog­nised as the le­git­i­mate leader by more than 50 na­tions - in­clud­ing the UK and the US, asked the BoE not to hand the gold over to the Maduro govt.

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