LBMA’s Fear of Stoking the Russian Bear – From ETF Concerns to Monetary Mayhem

Final week on 24 February when the UK Authorities launched a raft of sanctions in opposition to Russian banks and Russian oligarchs, the cogs within the UK monetary system started transferring with British monetary establishments dashing to distance themselves from the Russian monetary sector.

Silence turns to Stalling

With gold as the last word reserve belongings of the Financial institution of Russia, and with London a crucial hub within the international gold market by way of the London Bullion Market Affiliation (LBMA) and its well-known London Good Supply lists of accredited gold and silver refiners, it due to this fact begged the query as to what would the LBMA do concerning the massive variety of Russian gold refineries on the LBMA Good Supply Lists, refiners that are embedded with the Russian banks within the Russian gold market.

Which was the explanation for the tweet as follows on 24 February:     

“Whereas as we speak the UK Gov imposed an enormous listing of sanctions in opposition to Russian banks, corporations & elites, the LBMA nonetheless has 6 Russian gold refineries on its LBMA Good Supply Checklist. That is odd on condition that in 2018, the LBMA suspended 1 Russian gold refinery on account of ‘possession points’.”

And which additionally, as a result of the LBMA by 28 February nonetheless hadn’t made any feedback about Russian refineries nor made any modifications to its Good Supply Lists, was the explanation for publishing the BullionStar article titled “LBMA a deer in headlights as Western Sanctions present up Russian Gold Refiners”.

That article raised numerous points, together with:

• summarised the US – EU – UK sanctions that are focusing on Russian banks (together with VTB, Financial institution Otkritie, Sovcombank, Sberbank, Gazprombank)

• recognized the 6 Russian refineries on the LBMA Good Supply Lists for gold and silver (that are Krastsvetmet, Prioksky, Novosibir, Moscow Particular Alloys Plant, Uralelectromed, and Shyolkovsky), 2 of that are additionally Russian refineries within the LPPM Good Supply Lists for Platinum and Palladium (particularly Krastsvetmet and Prioksky)

• defined that these 6 Russian refineries are both fully-owned by the Russian Federation or owned by Russian oligarchs

• highlighted that the LBMA had quietly and with out discover, revoked the LBMA membership of two Russian banks – VTB and Otkritie (replace – it was truly 3 Russian banks which had been faraway from the LBMA together with the very latest member Sovcombank – see under).

• defined that because of the nature of the Russian gold business the place the Russian business banks (particularly VTB, Sovcombank, Orkritie, Sberbank and Gazprombank), dominate the market and purchase home Russian gold after which ship the gold to be refined within the LBMA refineries earlier than promoting the gold (mainly) to the central financial institution of Russia, that the LBMA Russian refineries, by way of their very structural positioning and shopper base, are, by way of no fault of their very own, in breach of the LBMA Good Supply Guidelines as regards sanctions.

Why? As a result of the LBMA’s very personal Good Supply (GDL) Guidelines state that:

“Below LBMA Good Supply Guidelines, all GDL Refiners are required to adjust to UN, EU, US, UK, or every other related, financial and/or commerce sanction lists. Breach of any of the related Sanctions listing would result in removing from the GDL.”    

The BullionStar article additionally highlighted that the LBMA had launched a ‘sterilised’ discover on 24 February titled ‘Sanctions: Well timed Reminder’ which was bereft of any actions and actually a  damp squib. Because the conclusion to the article said:

Why did the LBMA situation an empty assertion on 24 February titled “Sanctions: Well timed Reminder” which didn’t even point out the phrase Russia, didn’t point out that VTB and Otkritie are not LBMA members, and didn’t point out any of the 6 LBMA Russian Good Supply refiners?

As a result of I appeared up all of that details about these Russian refineries in lower than an hour and matched it in opposition to the US – UK – EU sanctions, and if I can try this, so can the LBMA.”  

One thing near Nothing

As the times handed by from 01 March to 02 March to 03 March, the LBMA had nonetheless not addressed the problem of the Russian refiners on the Good Supply Lists, regardless of the BullionStar article getting picked up on ZeroHedge’s entrance web page and being learn by 45,000 folks, and regardless of (or perhaps due to) the truth that there are an enormous variety of Russian refiner gold and silver bars being held on the earth’s largest gold and silver ETFs equivalent to GLD, IAU and SLV within the JP Morgan and HSBC vaults in London.

Then on the afternoon of three March London time, a full week after we had highlighted the LBMA – Russian Refineries – Sanctions conundrum, Reuters revealed a narrative titled “LBMA asks Russian gold refineries if they’ve hyperlinks to sanctioned entities

Let’s have a look at the Reuters article, which is by the LBMA’s favoured reporter Peter Hobson:

 “The London Bullion Market Affiliation (LBMA) informed Reuters it has requested six Russian gold refiners it accredits if they’ve business hyperlinks with sanctioned Russian entities and that such hyperlinks, if discovered, may have an effect on their accreditation.

The affiliation is working with the refiners, in addition to with legal professionals and officers, to grasp what relationships they’ve and goals to decide on their accreditation within the coming days, the LBMA’s basic counsel, Sakhila Mirza mentioned.

“The great supply guidelines are very clear,” she mentioned. “We’ve requested for compliance with our guidelines.

Maintain on. Let that sink in. The LBMA has ‘requested’ the Russian refiners if they’ve business hyperlinks with sanctioned Russian entities? Merely ‘requested’. Can this be for actual?

The Canine Ate My Homework 

Does the LBMA significantly not know that your complete buyer base of those Russian refineries are the massive Russian banks equivalent to VTB, Sovcombank, Orkritie, and Sberbank? Does the LBMA not know that the Russian refiners are both owned by the Russian authorities or by Russian oligarchs, and that the primary shopping for shopper of Russian refinery bars is Russia’s central financial institution. Even the canines on the road know this. So why would the LBMA must ‘ask’ its personal accredited refiners something about their operations?

And bizarrely why does the LBMA have to work with “the refiners in addition to the legal professionals and officers to grasp what relationships they’ve”?  

Even Reuters in its article factors this out:

“In Russia, business banks purchase gold from miners and ship it to refineries earlier than exporting it. The Russian central financial institution can also be at occasions a giant purchaser and this week mentioned it could resume purchases of gold within the native market.

Refineries usually have relationships with banks that finance their actions. EU leaders have mentioned their sanctions goal 70% of the Russian banking market.”

This additionally is identical LBMA which claims that it’s the ‘“international authority for valuable metals” and states that:

Accreditation to LBMA’s Good Supply Checklist is globally recognised because the benchmark for the standard of gold and silver bars, because of the exacting standards that an applicant should fulfill.

Refiners in search of acceptance to the listing of accredited refiners should bear stringent checks relating to their historical past out there, their monetary standing and their capacity to supply bars that meet the exacting requirements of London Good Supply (LGD) Guidelines.

Moreover, they need to implement LBMA’s Accountable Gold and/or Silver Steerage previous to accreditation.”

Overwhelming Proof 

This is identical LBMA which in its accountable sourcing programme for valuable metals, requires every LBMA refinery to undergo annual third-party audits from accepted auditors. For Russia, this auditor is PwC Russia, which has a registered workplace at 10 Butyrsky Val Str. 125047 Moscow (, and whose contact level for the LBMA is Alexei Fomin, E:, T: +7 495 967 6000. Supply.  

If the LBMA ‘international authority’ is absolutely struggling about understanding the operations of the Russian refinery sector because it claims to be, couldn’t PwC Russia transient the LBMA on how the Russian gold market provide chain works and the way the Russian refiners match into the Russian gold market?

Krasnoyarsk – Dwelling of the huge Krastsvetmet refinery

In spite of everything, all of those accountable sourcing audits by PwC Russia for the LBMA accredited Russian refiners examine the whole lot from inner controls to account opening procedures to due diligence on potential valuable steel supplying counterparty to testing a pattern refiner transactions to checking counterparties within the Russian gold provide chains.

You’ll be able to see this from the newest audit experiences for the LBMA Russian refiners, which apart from one, had been all carried out by PwC Russia, will be seen for:

• Krastsvetmet right here 16 April 2021 by A.B Fomin (Alexei Fomin), PwC licensed auditor

• Prioksky right here 12 March 2021 by A.B Fomin. PwC licensed auditor

• Novosibirsk right here 29 March 2021 by Yuri Muravlev, PwC licensed auditor

• Uralelektromed right here 31 March 2021 by A.N. Rusanov PwC licensed auditor

•  Moscow Particular Alloys Processing Plant right here 27 Could 2021 by A.B Fomin. PwC licensed auditor

• Shyolkovsky right here 15 July 2020 (not by pwC) however by the Russian consultancy RBS

As well as, in late 2020 the LBMA, because the self-proclaimed international authority on valuable metals, contacted 12 Worldwide Bullion Centres (IBCs), together with Russia, and dictated to every of those 12 IBCs that they need to have:

– Efficient scrutiny and verification of native and regional provide chains;

– Efficient regulation of native and regional provide chains;

The 12 IBCs = China, Hong Kong SAR, India, Japan, Russia, Singapore, South Africa, Switzerland, Turkey, UAE, UK, USA.

Earlier than it may contact these 12 IBCs, the LBMA would intimately acquainted with the regional and native valuable metals provide chain of every, together with Russia.

We don’t know any Russian Banks

Moreover, how can the LBMA declare to not know concerning the operations and shopper base of the Russian refineries when up till final week (week of 21 -25 February), there have been nonetheless 3 Russian banks as members of the LBMA. These banks had been VTB, Financial institution Orkritie, and Sovcombank, and all 3 of those banks are closely concerned within the Russian gold market.

VTB Financial institution had been a member of the LBMA since March 2015, and Financial institution Otkritie Monetary Company (Financial institution FC Otkritie), which was previously generally known as Nomos Financial institution, had joined the LBMA in November 2011. How can the LBMA declare to not know concerning the shopper base of the Russian refiners on condition that these banks had been LBMA members?

Imagine it or not, the third Russian financial institution member of the LBMA, Sovcombank, truly solely joined the LBMA on 9 February 2022, simply two weeks earlier than it then received kicked out of the LBMA. The entry of Sovcombank to the LBMA would have additionally been an event for ‘Group’ LBMA to brush up on its Russian gold market data. For the Sovcombank press launch on 9 February 2022 said that:

“Sovcombank joined the London Affiliation of Treasured Metals Market Members (LBMA), changing into the third Russian financial institution member of the affiliation. The brand new standing will strengthen the Financial institution’s place within the promising valuable metals buying and selling markets..

Sovcombank entered the dear metals market in 2018 and is at the moment the biggest purchaser of gold in Russia.

In 2021, the Financial institution bought 80 tons of gold bullion, which is about 20% of the overall commerce quantity in Russia.

Sovcombank supplies providers for the acquisition, sale and export of valuable metals, financing of the gold mining season, leasing and factoring, hedging of value dangers, opening of steel financial institution accounts. Participates within the financing of gold mining initiatives. The Financial institution exports valuable metals to India, the USA, the UK and European nations.”

Within the press launch, Mikhail Autukhov, Deputy Chairman of the Administration Board and Head of the company funding enterprise of Sovcombank mentioned that:

 “LBMA is an authoritative and globally acknowledged group of valuable metals market contributors, which not solely regulates commerce, but in addition supplies sensible help to members of the affiliation.

I’m positive that membership in LBMA will enable us to strengthen our positions within the valuable metals market …within the present and subsequent years.”

Sadly for Mikhail, that wasn’t to be, because the LBMA unceremoniously revoked the LBMA membership of Sovcombank simply two weeks later, which by the best way needs to be a document for the shortest LBMA membership in historical past.


However to grant Sovcombank membership of the LBMA, the LBMA would have recognized that Sovcombank is “the biggest purchaser of gold in Russia” and that Sovcombank, in addition to VTB, Otkritie, Sberbank and Gazprombank and so on, all use the LBMA Russian refineries to refine the dear metals that they purchase from the Russian miners after which promote downstream (together with to the Financial institution of Russia), and that they finance mentioned refiners.

If 3 Russian financial institution members of the LBMA is just not sufficient, then its helpful to know that past VTB, Otkritie and Sovcombank, different huge title banks concerned within the Russian gold commerce have additionally held membership within the LBMA, particularly MDM which was an affiliate of the LBMA since 2010, and Sberbank, which was an affiliate of the LBMA since June 2014.

Don’t Point out the Moscow Discussion board

As way back as June 2004, the LBMA additionally held one among its “Bullion Market Boards” in Moscow. See the content material of that LBMA Moscow Bullion Market Discussion board right here.  And the opening handle to the Moscow convention by the then LBMA Chairman, Simon Weeks, right here. 

LBMA Bullion Market Discussion board, Moscow, June 2004

So sufficient of the LBMA disinformation.   

Given all the above, the LBMA properly is aware of whether or not “the six Russian gold refiners it accredits… have business hyperlinks with sanctioned Russian entities” or not? And the LBMA properly can “perceive what relationships” the six LBMA Russian refiners have.

The LBMA’s rationalization to Reuters is thus theatre and a stalling train, and a whole reluctance to deal with the sanctions head on. It truly is like some novice dramatics old skool theatre.

LBMA to Russian refiners: “I say chaps, if you happen to don’t thoughts terribly, do you chaps have a relationship with the sanctioned Russian banks?

Russian refiners: “Nyet!

LBMA: “Jolly good present then, keep on. Sorry to trouble you. I do know its frightfully imposing. However I’m positive we’ll see one another in Lisbon on the convention. Toodle pip.”    

From SLV to IAU to GLD

However then why the LBMA stalling? Might or not it’s as a result of there are such a lot of Russian 400 oz bars within the London gold and silver vaults that the LBMA banks equivalent to JP Morgan and HSBC need the problem to be swept underneath the carpet?

Peter Hobson’s Reuters article provides one other clue:       

“The lack of LBMA accreditation would make it tough for the refiners to promote gold and silver within the London market, the world’s largest, as main worldwide banks usually solely cope with LBMA-approved refiners.”

Whereas Reuters says that merchants assume that “Russian steel would nonetheless discover consumers in locations equivalent to China and the Center East”, that’s not true within the London market, and doesn’t clear up the issue of 1000s of Russian bars at the moment sitting within the London vaults.

Do you know that there are 1890 gold bars from the Russian refiners at the moment being held by the world’s largest gold-backed ETF, the SPDR Gold Belief (GLD)?

Sure, particularly, on the time of writing (4 March 2021), GLD holds1308 Krastsvetmet gold bars, 406 Prioksky gold bars, 55 Novosibir gold bars, 105 Uralelectromed gold bars, and 16 Shyolkovsky gold bars. With GLD at the moment claiming to carry 83,293 gold bars, that’s 2,2% of GLD holdings within the type of Russian refiner gold bars. The SPDR Gold Belief (GLD) vault custodian is HSBC in London.

Or do you know that there are 4354 Russian gold bars at the moment being held by the iShares Gold Belief (IAU)? The Russian gold bar holdings in IAU are much more concentrated than in GLD.

On the time of writing (4 March 2021), the iShares Gold Belief holds 3595 Krasnoyarsk gold bars, 598 Prioksky gold bars, 160 Novosibirsk gold bars, and 1 Uralelectromed gold bars, which involves a grand complete of 4354 Russian gold bars from these 4 LBMA accredited Russian refiners, all of that are held within the JP Morgan vault in London (as JP Morgan is custodian for IAU).

With iShares Gold Belief holding a complete of 40,333 gold bars, which means that the Russian gold bars comprise 10.8% of IAU’s complete gold bar holdings. Between them, IAU and GLD maintain 6244 gold bars from LBMA Russian refineries.

Should you assume that’s lots of Russian bars, wait till you see what’s in SLV, the iShares Silver Belief. On the time of writing (4 March 2022), the huge SLV holds a whopping 39451 Silver bars from LBMA Russian refiners, which is 7.07% of SLV’s complete silver bar holdings (SLV holds 557,730 silver bars in complete). These are the massive 1000 oz wholesale Good Supply Silver bars. The SLV holdings of Russian refiners, per refinery, are:

SLV holds 24024 Krastsvetmet sivler bars, 7044 Prioksky silver bars, 3996 Uralelectromed silver bars, 2198 Shyolkovsky silver bars, 630 Novosibir silver bars, and SLV even holds 1559 Ekaterinburg silver bars.

Ekaterinburg has been suspended from the LBMA Good Supply Checklist for Silver since 15 Could 2018 on account of sanctions in opposition to its controlling firm Renova Group and its controlling Russian oligarch and largest shareholder, Viktor Vekselberg.


It doesn’t matter that, as Reuters says, “Russian steel would nonetheless discover consumers in locations equivalent to China and the Center East”, if Russian refiners had been faraway from the Good Supply Lists, the purpose is that no dealer within the London market would wish to maintain or obtain Russian bars which weren’t on the present Good Supply Lists.

It additionally too doesn’t matter that the LBMA claims that “when the LBMA removes a refiner’s accreditation, the steel that refiner produced when it was accredited stays acceptable within the London market”, the purpose is that no London dealer needs these tainted bars.    

As Reuters wrote in Could 2018 after Ekaterinburg was suspended:

“Suspension from the listing makes it tougher for consumers and sellers to commerce bars within the mainstream valuable metals market, merchants mentioned.

‘”Our firm wouldn’t contact any bars that aren’t LBMA-accredited,’ one dealer at a significant valuable metals home mentioned. ‘Likely they’ll be in a secondary market.’

Quick ahead again to now, and Reuters, to its credit score, did contact the 6 LBMA accredited Russian refiners in query. However alas, “Shyolkovsky declined to remark. The others didn’t reply to requests for remark.

For the LBMA’s sake, we hope that the LBMA has higher luck in getting a solution from the 6 Russian refiners than Reuters had.

Past the truth that GLD, IAU, SLV and different valuable metals backed ETFs maintain a considerable amount of Russian bars, the reluctance of the LBMA to sanction any Russian refinery may conceivably be based mostly on a concern of triggering a response from the Financial institution of Russia and Kremlin.

For if you happen to ban Russian gold bars within the London market, this is able to absolutely speed up using Russian gold as the last word foreign money for non-Western commerce, and the deployment and use of this similar Russian gold in every single place else within the international market, from Shanghai to Mumbai, from Dubai to Minsk, from Islamabad to Riyadh, from Astana to Sao Paulo and from Pyongyang to Johannesburg. Possibly that’s the LBMA – HM Treasury – US Treasury’s worse case nightmare, and the true cause why the LBMA is stalling.


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