Venezuela’s $4B gold stash closer to leaving London

Venezuela’s government and a faction of the opposition are nearing an agreement that could move about $4 billion of the country’s gold from the Bank of England to U.S. custody, potentially breaking a years-long legal deadlock over the bullion.

The proposal covers about 31 tonnes of gold and could see the metal transferred to the Federal Reserve Bank of New York, although the U.S. Treasury is another option under discussion, Reuters reported Friday. Acting President Delcy Rodríguez’s government would gain legal control of the assets but would face restrictions on selling or using them.

Instead, the gold could be pledged as collateral to raise financing, including money for reconstruction after earthquakes struck Venezuela in June. Opposition representatives involved in the negotiations are seeking U.S. oversight and project-by-project approval for use of the assets, Reuters reported.

The talks advance an August agreement between Venezuela’s government and opposition representatives to jointly pursue the return of the bullion. The Northern Miner reported at the time that the gold could help finance rebuilding after the earthquakes.

US oversight

The proposed transfer forms part of wider U.S.-backed negotiations covering Venezuela’s political and economic transition, oil arrangements and debt restructuring, Reuters reported. The agreement hasn’t been finalized and several legal and technical issues remain unresolved.

Washington has separately eased restrictions on parts of Venezuela’s economy this year. The U.S. Treasury has issued and amended licences permitting certain transactions involving Venezuelan oil, banking and minerals, including gold. Its latest minerals licence was amended Sept. 2. OFAC records show the measures also permit negotiations for some new investment in the country’s minerals sector.

The International Monetary Fund also resumed dealings with Venezuela in April after relations had been paused since March 2019 over government recognition. The IMF now deals with the administration headed by Rodríguez and has resumed regular discussions with Venezuela’s finance ministry and central bank. Venezuela hadn’t requested IMF financing as of May.

Court barrier

Any transfer still faces a British court process that has kept Caracas from gaining access to the bullion.

The dispute dates to 2019, when rival boards of Venezuela’s central bank claimed authority over the reserves after Britain recognized opposition leader Juan Guaidó as the country’s interim president. The competing boards issued conflicting instructions over the gold, sending the dispute through the British courts.

The case reached the UK Supreme Court, which ruled in 2021 that British courts were bound by the UK government’s recognition of Guaidó. It sent unresolved questions over the validity of his central bank appointments back to a lower court.

The political circumstances underpinning the case have since changed. Nicolás Maduro was seized in a U.S. raid in January and Rodríguez became acting president. Lawyers representing the opposition-appointed central bank board have since withdrawn from the British proceedings, Reuters reported.

Britain and Venezuela have also moved to upgrade diplomatic relations, with the countries working towards restoring ambassador-level representation, Reuters reported. That shift could affect the recognition issues underlying the gold dispute.

The British government, however, says it doesn’t control the outcome. In a Sept. 7 parliamentary response, the Foreign Office said the government isn’t a party to the case and that the UK courts and Bank of England operate independently of it. The response came after a lawmaker asked whether returning the gold could support Venezuela’s earthquake recovery.

The Bank of England also requires a British court determination of who has legal authority over the account before it can act on new instructions, Reuters reported.

A completed agreement would therefore resolve only part of the seven-year dispute. Venezuela and the opposition would still need the British legal process to clear the way before the bullion could leave London for U.S. custody.