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. Last Updated: 07/27/2016

State Eases Regulations on Gold Exports

Russian banks which just last month began receiving licenses to export gold, got a further shot in the arm last week, when Prime Minister Sergei Kiriyenko signed a decree establishing even more liberal regulations than had been expected.

Previously, the gold industry was forced to sell its product to the state, and exports of precious metals were heavily regulated. But the state often was late in paying for the gold, leaving mines struggling to survive.

In an effort to boost investment in the mining sector, the government last October gave commercial banks permission to export gold and silver bullion. A delay issuing the actual licenses, however, forced banks to stockpile the metals.

Last month, Uneximbank became the first Russian bank to receive a license to export gold and silver bullion, with bank Rossiisky Kredit and others quickly following suit.

The regulations for these exports were strict, allowing for one-year export licenses from the Foreign Trade Ministry and setting "tough limitations" on prices and quantities, according to Dmitry Ignatiev, head of the precious metals department at the Association of Russian Banks.

The new licensing rules, signed into force by Kiriyenko on May 8, will enable banks to export any amount of gold for three years without any restrictions, Ignatiev said.

"This is a big step in liberalizing the market," he said. "Obtaining a license has become a mere formality."

In anticipation of export licenses, Russian banks have accumulated about 45 tons of gold reserves meant for export. But Ignatiev cautiously predicted that actual gold exports for 1998 would be closer to 10 tons.The domestic market, he said, could draw much of the gold should the Central Bank offer competitive prices for the metal. Previously, the Central Bank had a lock on purchases, and so offered to buy at 2 percent below prices offered on London exchanges. Now, it may be forced to raise those prices.

"Now there is an element of competition for the Central Bank which has not been here at all before," Ignatiev said.

It is still unclear whether licenses will be issued by the Economics Ministry or the newly reorganized Trade and Industry Ministry, Ignatiev said. But he said the first exports under the new licenses should begin in June, after the government works out export mechanisms with customs officials.

The bank's newly acquired right to lend and sell gold and silver on the international market should help generate investments for the domestic precious metals industry, one analyst said.

"The steps taken by the Russian government have been positive for the Russian industry," said Grant Sinitsin, a metals analyst at Fleming United City Bank. "When gold prices recover -- perhaps by the end of the year -- you will see an improvement in the investment climate in Russia."