Mystery of the missing Russian gold

Posted in Business, Current Affairs, European History, Gold Reserves, History, India, politics by Anuraag Sanghi on January 18, 2010

As the Soviet Empire crashed

In November 1991, the head of Gosbank the Central Bank of USSR, Viktor Geraschenko confirmed that USSR had less than 400 tons of gold reserves – and not the 1000-1500 tons as estimated. Russia, which has been one of the world’s Top 10 gold producers for the last 100 years, to have a paltry less than 400 tons of gold as reserves created a flutter in the IMF, World Bank, and the Western world. Where did this ‘estimated’ 1000 ‘extra’ gold go?

The declared gold reserves of Gosbank in mid-1937 were 374.6 tons. No additions were made after that, and the reserves were turned over to the People’s Commisariat of Finance. The size of of the reserve had been kept secret since the late 1930s. Geraschenko wrote to Gorbachev on November 15, 1991: “It was reported in October of this year that the official gold reserves of the country are only 240 tons. The declared level of official gold reserves, which is one of the most important indicators of a country’s solvency, is not commensurate with the status of a superpower and leading gold producer, according to experts. Reports of the size of the USSR gold created confusion among specialist on the gold market, who had previously estimated them to be 1,000-1,300 tons”. (via Collapse of an empire: lessons for modern Russia By Egor Timurovich Gaĭdar, page 238).

A preachy and superior writer about the Soviet implosion

A preachy and superior writer on the Soviet implosion

After Gorbachev’s ‘perestroika’ and ‘glasnost’, as the Russian economy was loosening the grip of the CCCP, the Russian Central Bank set-up an

“offshore firm, Financial Management Co., known as Fimaco, based in Jersey, the Channel Islands, to handle Russia’s foreign currency reserves. By one estimate, the offshore fund managed $37 billion between 1993 and 1998. The firm was a subsidiary of Eurobank of Paris, which is 78 percent owned by the Central Bank.”

The Washington Post revealed in another report how Russia,

funneled billions of dollars in Russia’s hard currency reserves through… Fimaco … Documents disclosed by The Washington Post showed that some of the money was then pumped back into Russia’s high-flying government bond market in 1996, in the months before President Boris Yeltsin’s reelection.

One of the few journals to get this story right was Businessweek – based ‘on-the-ground’ whispers.

Managing the Russian Central Bank during the mayhem

Described by Jeffery Sachs, repeated many times by Western bankers, as “the worst banker in the world”, Viktor Gerashchenko was chairman of the Russian Central Bank. Twice: the first time from 1992 to 1994, and the second time was after the default crisis of 1998 – upto 2002; resigning after “expressing opposition to proposed legislation that aimed to make the Central Bank subordinate to a new government led body, The National Banking Council.”

Without any conspiracy theories

For Russia, as one of the Top 10 producers of gold, to have 1000-1500 tons of gold would not be excessive. But between 1971, after the Nixon Chop, in little time, dollar value depreciated from US$35 per ounce of gold to US$800 in 1980. Over the next 20 years, through various clandestine methods (check out the Edmond Safra and the Yamashita stories below), gold prices were ‘managed’ and brought down to US$225 per ounce. Co-incidentally, along with oil prices. This reduction in gold and oil prices simultaneously, severely undermined the health of USSR’s economy – these two being the most valuable ‘hard currency’ exports from USSR.

A simple explanation may be that the central bankers of the erstwhile USSR used a lot of that gold to ‘support’ alliances. Much in the manner of the USA, which does the same with its USCAP system. To this add the possibility that Soviet apparatchiks did not want to divvy up Soviet gold with members of the CIS and the subsequent splinter countries of the USSR, or lose it to ‘impatient’ and ‘opportunistic’ Western creditors.

This ‘unexplained’ reduction in gold reserves, was done according to Gosbank head, Gerashchenko, to “to avoid the seizure of assets during talks with foreign governments and private creditors on the restructuring of Moscow’s Soviet-era debts.” Russian authorities also “questioned the $50 billion figure reported by Skuratov. They said $1.4 billion was the most FIMACO ever managed at one time, in 1994”. After his stint at Gosbank, Geraschenko became chairman of the Yukos board. Yukos is the company that belonged to the jailed billionaire, Mikhail B. Khodorkovsky.

 La Leopolda  at Villefranche sur Mer, France, the former home of King Leopold, Gianni Agnelli and Edmond Safra.

La Leopolda at Villefranche sur Mer, France, the former home of King Leopold, Gianni Agnelli and Edmond Safra.

Death Of Edmond Safra

Friday. December 3rd, 1999. TV channels (in India too) announced that Edmond Safra died in mysterious circumstances – at his villa in Monaco.

Based out of Monaco, a known off shore finance centre, Edmond Safra was reputed to have been in the know and arranged numerous gold dealings. His claim to fame was to ‘arrange’ the evacuation of Sephardic Jews, with their wealth from various West-Asian and Middle East countries between the 1920-1960s. He was ‘whispered’ to be behind the George Soros run-in with the Bank Of England gold sale and physical delivery.

The US FBI was conducting investigations about money laundering through Safra’s bank by the Russian ‘mafiya’, based on information given by Edmond Safra. Behind many of these money transfer and manipulation operations through Safra’s Bank, was the Russian ‘mafiya’ – and lubricating these transactions, were hundreds of tons of Russian-Soviet gold. Sold through Edmond Safra? Was it this investigation or a ‘double-cross’, that triggered Safra’s killing?

At the time of Edmond Safra’s death, he was negotiating the sale of his bank to The Hong Kong & Shanghai Banking Corporation.

Yamashita Gold – Underground gold from Japan

Korea claims that Japan plundered Korea of hundreds of tons of gold from 1937-1944. Philipines, Indonesia have all raised claims against Japan for war time gold loot.

Regardless, one American writer had definitely hit a jackpotGold Warriors: America’s Secret Recovery of Yamashita’s Gold (By Sterling Seagrave, Peggy Seagrave). Ian Fleming is supposed to have based his story on the Yamashita chapter of WW2.

Japan’s top underworld crime boss, Taisho (Admiral) Yoshio Kodama, (ranked as an admiral at 34 years) a major figure in the Japanese underworld was in charge of Project “Golden Lilly” – after one of Hirohito’s poems! Objective – looting gangsters in Japanese occupied territories. Supervising the operations was Emperor’s Hirohito’s brother, Prince Chicubi. Management – Japan’s top financial figures.

Central Bank - Gold Sales
Central Bank – Gold Sales

Subsequently, allegedly, a lot of this gold landed with Ferdinand Marcos; the Filipino dictator. Swiss banks, Macao criminals, American generals and politicians – all involved.

Glen Yeadon, writer of “The Nazi Hydra in America: Suppressed History of a Century” writes how Presscott Bush (grand-father of George Bush), Douglas MacArthur were involved in various launderings, diversions and subterfuge involving Nazi gold and Japanese gold after WW2.

After the Japanese surrender, Tomoyuki Yamashita, was tried by a kangaroo court, convicted of vague crimes and hung to death – which added to the rumours of Yamashita’s gold.

Recovery of Boticelli’s Venus

Sandro Botticelli’s Venus Rising, a ‘priceless’ renaissance period painting, now in the Ufizzi gallery, stolen and hidden, was ‘discovered’ by Indian soldiers, during WWII. This ‘discovery’ of Botticelli’s Venus was a highlight of the mopping up operations – and the role of the Indians soldiers has been wiped clean. No book review of a hagiographic account, The Venus Fixers: The Remarkable Story of the Allied Soldiers Who Saved Italy’s Art During World War II By Ilaria Dagnini Brey mentions this contribution by Indian soldiers. I wonder what would have happened if ‘others’ had found this painting. Blame the Nazis for the loot! The painting would never have been recovered, I presume!

Central Bank Gold Sales

Between 1999-2009, European Central Banks have sold more than 4000 tons of gold under the Central Bank Gold Agreement (CBGA).

Switzerland, which had held the most gold reserves per capita in Europe in 1999, has sold more than 1,300 tons of its gold reserves. Other major sellers in the past 10 years included France, the Netherlands, and the U.K.

Countries like France, where monetary policy is now set by the European Central Bank, still maintains its own central bank. The U.S. hasn’t sold gold.

In the past, abrupt selling has sometimes depressed gold prices. The Bank of England’s announcement in early 1999 that it was selling part of its reserves helped gold prices slump to a 20-year low. Gold traded at just above $250 an ounce by the summer of that year.

But efforts to coordinate those sales have reduced those shocks. On Sept. 26, 1999, 15 European central banks, led by the ECB, signed the first CBGA to take concerted moves on gold sales.

The banks agreed that in a five-year period, they will cap their total gold sales at around 400 tons a year, with sales in five years not exceeding 2,000 tons. The CBGA was renewed in 2004 for another five-year period. The second CBGA raised annual ceiling to 500 tons and the five-year limit to 2,500 tons.

The interesting bit was where did the European Central Banks get so much gold from! Was it the various gold hoards, that had disappeared from 1900-200o, making a re-appearance!

For long, these calls for accountability from ‘conspiracy theorists’ have been ignored. The good news. These ‘conspiracy theorists’ have not been able to locate any more of such extra sources of gold, which may disturb the market in the next few years.

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  1. […] records show that the central bank was in possession of just over 370 tons of gold in 1937, the latest […]

  2. […] records show that the central bank was in possession of just over 370 tons of gold in 1937, the latest recorded […]

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