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The mystery of Switzerland’s surging imports of Uzbek and Kazakh gold
Switzerland’s imports of gold originating in Uzbekistan and Kazakhstan have boomed since Russian President Vladimir Putin launched his invasion of Ukraine. Trade data and expert analyses suggest some could be surreptitiously coming from Russia in violation of international sanctions. SWI swissinfo.ch unravels the gold route from the two Central Asian nations to Switzerland via the United Kingdom.
Swiss purchases of the precious metal from the two post-Soviet states took off in late 2021, just before Russia began its assault on Ukraine, an analysis of customs and related data by SWI swissinfo.ch shows. The trend has accelerated since then, raising concerns that Uzbekistan and Kazakhstan are being used to evade sanctions intended to punish Moscow and helping Putin finance his war machine.
“Now that Russia cannot freely export gold, there is a high risk that these two countries are being used to send gold to the UK and to Switzerland in order to be then sent out into the world market,” Mark Pieth, professor of criminal law at the University of Basel and a prominent anti-corruption expert, told SWI swissinfo.ch.
Pieth is not alone in that assessment. SWI swissinfo.ch spent six months crunching trade figures and consulted two dozen national and international gold industry experts, including data providers, financial institutions, risk analysts, gold refining professionals and regulators. Many said they believe these imports carry legal and ethical risks for buyers because they could be breaking international sanctions and exposing themselves to reputational damage.
Global gold trade data is notoriously flawed. Poor transparency, shortcomings in customs and other data, divergent definitions of industry terms, lack of systematic tracking of the gold trade, and the inability to trace the source of the precious metal once it’s been melted, make it almost impossible to know for sure the origins of Switzerland’s imports. Despite these shortcomings, the data is widely used by industry players and regulators to support due diligence assessments.
Trade and customs data shows that Kazakhstan and Uzbekistan shipped more gold than they produced and sold from their reserves last year. So where did the excess gold come from? For many experts, the most logical explanation is that at least some originated in Russia, the world’s second-largest producer of the precious metal.
“The hypothesis is that they have imported gold beyond what they have produced, and they are reexporting that gold,” said Pieth, noting that Russian gold could account for the difference. “Whether the gold goes to banks in Switzerland or to be refined, the risk is that gold from both countries does originate from Russia.”
In Switzerland, the financial sector is the biggest buyer of imported gold from these two nations, according to Swiss customs data. Our findings and conversations with industry insiders suggest that Swiss bank UBS is probably the main buyer, while among the Switzerland-based refineries Valcambi accounts for some of the demand. Both companies say they have done their due diligence.
Gold prices at record highs
The spikes in shipments of gold originating from Kazakhstan and Uzbekistan are significant. In 2023, a total of 130 tonnes of Uzbek gold (valued at CHF7.3 billion, $8.54 billion) – 100 tonnes imported directly from Uzbekistan and 30 tonnes shipped via the United Kingdom – entered in the form of highly refined gold bars, according to data from the Federal Office for Customs and Border Security (FOCBS). That’s almost as much as was shipped in from the United Arab Emirates (UAE) (150 tonnes), one of the world’s top gold trading hubs. The same year, 59 tonnes of gold bars (valued at CHF3.3 billion) came from Kazakhstan – 58 tonnes via the UK and one via Kyrgyzstan.
This meteoric growth began in late 2021. Swiss imports of Uzbek gold picked up in October that year after a gap of two years, while those originating from Kazakhstan restarted in January 2022, monthly data shows. The momentum accelerated at the beginning of the war in Ukraine and rose to record highs at the end of 2023. Imports have remained at high levels this year. In the first six months, more than 82 tonnes of Uzbek gold and 21 tonnes of Kazakh gold were imported either directly or indirectly. That compares with 85 tonnes of Uzbek gold and 19 tonnes of Kazakh gold in the same period last year.
Although Switzerland’s imports of Russian gold also rose during the same period – to 63 tonnes in both 2022 and 2023 from 18 tonnes in 2021, this was gold sent from Russia to vaults in London before the war began and thus not subject to the sanctions imposed on Moscow at the beginning of August 2022, the FOCBS told SWI swissinfo.ch.
The FOCBS does not provide explanations or analysis of the spike in imports of gold originating in Uzbekistan and Kazakhstan, which are both members of the nine-nation Commonwealth of Independent States (CIS) that includes Russia. When approached for comment by SWI swissinfo.ch, the head of media relations, Simon Erny, said the FOCBS collects statistical data and leaves the analysis and interpretation of the data to third parties.
“CIS countries appear to be facilitating a massive spike in trade – very unusual and likely a rerouting of trade to bypass sanctions,” a wealth manager working for a Swiss bank, who did not want to be identified, told SWI swissinfo.ch.
The UK and Switzerland have traditionally been the biggest single markets for Russian gold, which has a reputation for high quality. Swiss imports of gold bars from the country peaked in 2013 at 82 tonnes and have declined since then as London took an increasing share of the market for refined gold. By 2021, the lion’s share of Russia’s gold exports went to the UK (88%), with Switzerland and Kazakhstan trailing a distant second at 2.5%, according to Comtrade, the United Nations’ global trade statistics database.
These traditional export destinations have been severely disrupted since Western countries imposed a ban on the purchase, import and transfer of the precious metal from Russia in 2022. That created an opportunity for other gold-producing nations to fill the gap – and Uzbekistan and Kazakhstan were two countries that benefited because, like Russia, they had the capacity to produce highly refined gold.
Gold exports from the two CIS countries to the UK, a key global trading hub, soared. While minimal before May 2021, its imports of Kazakh gold bars have almost doubled year on year since then, reaching 220 tonnes in 2023, British customs data show. The UK started importing gold bars from Uzbekistan in April 2019. Switzerland and the UK account for virtually all imports of gold originating in Kazakhstan and Uzbekistan.
Source: https://www.swissinfo.ch/