Why Venezuela can’t access $4 billion in gold that could help with earthquake recovery

By German Padinger, CNN

(CNN) — It’s a fight for control over a stash of gold locked away in one of the world’s largest and most secure vaults, but this is no 18th century pirate novel or bank heist movie.

It’s the situation facing the Venezuelan government as it attempts to navigate its way through political upheaval and the aftermath of last month’s devastating twin earthquakes.

Caracas wants the Bank of England to return the 31 tons of gold bars it deposited there in 2008, saying it needs the money to pay for recovery efforts following the disaster that killed thousands of people and caused an economic hit equivalent to 6% of the country’s GDP, according to the United Nations Development Programme.

While it’s not unusual for the UK’s central bank to hold the gold reserves of other countries – with one of the world’s largest vaults it holds some 400,000 gold bars, including those of dozens of other nations – in this case, there’s a problem.

The fate of Venezuela’s gold bars – worth up to an estimated US$4 billion in today’s money – has been in limbo for years amid a years-long dispute involving the British government and Venezuela’s former President Nicolas Maduro.

The bank froze the gold after the UK – along with the US and numerous other countries – refused to recognize Maduro as the winner of Venezuela’s disputed 2018 presidential election.

It has been the subject of a long-running legal battle ever since, but with Maduro now in custody in New York following his capture by US forces in January, Caracas sees an opportunity to get its money back.

Since Maduro’s capture, his former deputy Delcy Rodríguez has been made acting president and has set about restoring diplomatic relations with the US – opening up her country’s oil sector to US investment, releasing some political prisoners and aligning her government with Washington’s regional projects.

Now she’s hoping for a similar thaw in the stand-off with the UK.

“That gold belongs to our people and should be used to address the terrible, tragic consequences of this double earthquake,” Rodríguez said on state television this month. “Venezuela has the resources to recover, to get back on its feet,” she added.

It’s hard to know what percentage of Venezuela’s total gold reserves the 31 bars represent. Around 20 years ago, the country was known to have some 300 tons of gold, but that figure is now thought to be much lower. The World Gold Council has more recently put the figure at 161 tons.

Rodríguez has even written to King Charles III, asking for the gold to be released for use in reconstruction efforts, though as a constitutional monarch he does not get involved in political disputes.

Whether the UK government itself will listen is, as yet, unclear. In the days following Maduro’s ouster, the UK’s then-Foreign Secretary Yvette Cooper said the UK still did not recognize the Venezuelan government.

When asked by a UK lawmaker specifically about the release of the gold, Cooper said, “the Bank of England must make decisions independently, but our principles focus on maintaining and promoting stability and the transition to democracy.”

Cooper, however, has since been replaced as foreign minister following the UK’s appointment this week of a new prime minister, Andy Burnham, and it’s too early to know what position her successor – Ed Miliband – will take on the issue.

Still, Rodriguez has had some good news when it comes to winning over doubters, recently ending a seven-year freeze in relations with the International Monetary Fund. That move enabled Venezuela this month to secure $346 million from its own reserve resources to fund reconstruction efforts.

Whether she can have similar success with the Bank of England remains to be seen. At the time of publication, neither the Bank of England nor the Central Bank of Venezuela had responded to CNN’s enquiries on the state of the gold dispute.

At least for now, it seems, all that glitters … remains locked up overseas.

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