Sovereign Assets

Venezuela gold sits under Threadneedle Street in London, thirty-one tonnes of it, and the country that owns it cannot touch a bar. This week its acting president wrote to the King to ask why.

Delcy Rodríguez sent the letter on Wednesday. The bullion, she said on state television, belongs to the Venezuelan people and is needed to deal with the consequences of the earthquakes.

Two quakes of magnitude seven point two and seven point five struck the north-central coast on the twenty-fourth of June, thirty-nine seconds apart. The confirmed dead now stand at three thousand eight hundred and eleven.

That number has more than doubled in the past week and is still climbing. Nearly seventeen thousand people were injured, and almost eighteen thousand have lost their homes.

Venezuela’s bullion has sat frozen in the Bank of England since 2019. (Photo internet reproduction)

Why the Venezuela gold is frozen at all

The metal has been in London since 2008 and out of reach since Britain recognised a rival claimant to the presidency in 2019. The reason is not a sanction in the ordinary sense but a question of who Britain thinks runs Venezuela.

When the United Kingdom recognised the opposition figure Juan Guaidó as head of state, it also recognised the central bank board he appointed. The board actually operating in Caracas was left with no claim on the vault.

Nicolás Maduro’s side went to court in 2020, and two rival central bank boards fought over the vault. The case ran through the High Court and the Court of Appeal to the Supreme Court, which settled the principle in 2021 against him.

That ruling is the whole story. Access to the reserves follows whichever government London recognises, regardless of who controls the institution on the ground.

The government changed, the answer did not

Maduro is gone. American forces seized him in Caracas in early January, and on the third of that month Venezuela’s supreme court installed Rodríguez, his former deputy, as interim leader.

Washington has embraced the change. The Trump administration backs Rodríguez and has been steadily unwinding sanctions, especially those blocking foreign oil companies.

Britain has not followed. Foreign Secretary Yvette Cooper told Parliament in January that the government would keep withholding recognition, because pressure should stay in place until there is a transition to democracy.

This produces an unusual alignment. A government Washington supports is being refused its own reserves by a British court doctrine designed to punish the government Washington removed.

What the money would and would not buy

Both sides of this argument overstate their case, and the arithmetic settles it. The United Nations disaster agency puts direct physical damage at thirty-seven billion dollars.

Against that, the gold is worth about one point nine five billion. It amounts to roughly five percent of the reconstruction bill, though Rodríguez has said the money would fund rebuilding, jobs and schooling.

The emergency response is a different matter. The UN’s humanitarian chief Tom Fletcher says the appeal has raised three hundred million dollars and still faces a shortfall of six hundred and twenty-seven million.

The bullion would cover that gap three times over. It is far too little to rebuild a country and more than enough to feed and shelter the people who survived, which is precisely why the argument is bitter.

What Venezuela gold means for other central banks

The American position is more flexible than the British one. According to the State Department’s own account of the response, the Treasury issued a general licence on the twenty-fifth of June authorising transactions tied to earthquake relief, valid until October.

That licence does not unfreeze the gold, which is a British matter. It does show that a sanctions regime can be bent quickly when a government decides to bend it.

The wider signal reaches well beyond Caracas. The Bank of England runs one of the largest gold vaults on earth and holds reserves for many developing economies, on the understanding that a vault is a vault.

The Venezuelan case establishes that a custodian’s own foreign policy can override that understanding indefinitely. Every finance ministry deciding where to store its bullion has now watched what happens when recognition is withdrawn.

Why can Venezuela not access its own gold?

Because Britain does not recognise the government in Caracas as legitimate. A 2021 Supreme Court ruling established that access to the reserves follows whichever administration London recognises, rather than whoever controls Venezuela‘s central bank in practice.

Would the gold pay for reconstruction?

No, because United Nations assessors put direct physical damage at thirty-seven billion dollars while the bullion is worth under two billion. It would, however, cover the six hundred and twenty-seven million dollar shortfall in the emergency relief appeal several times over.

Have American sanctions been eased?

Partly and temporarily. The US Treasury issued a general licence on June 25 permitting transactions connected to earthquake relief until late October, while the underlying sanctions framework remains in force and does not affect the gold held in London.