By Mayela Armas and Corina Pons
CARACAS (Reuters) – Venezuela’s gold holdings in the Bank of England have jumped after it closed out a gold swap deal with Deutsche Bank , according to two sources, as Britain remains reluctant to release gold held for the troubled OPEC nation.
The government of Nicolas Maduro has since last year been seeking to repatriate about $550 million in gold from the Bank of England on fears it could be caught up in international sanctions on the country.
Its holdings at the bank more than doubled in December to 31 tonnes, or around $1.3 billion, after Venezuela returned funds it had borrowed from Deutsche Bank AG (DE:) through a financing arrangement that uses gold as collateral, known as a swap, one of the sources said.
Under the deal struck with Deutsche Bank in 2015, Venezuela put up 17 tonnes of gold in exchange for a loan, according to one of the sources who asked not to be identified because they are not authorized to speak publicly about the issue.
The country’s gold holdings fell to 134 tonnes in November compared with 150 tonnes at the start of 2018, according to central bank statistics.
This is in part because Venezuela last year started carrying out gold barter operations with Turkey to import food following U.S. sanctions that have made international banks reluctant to handle Venezuelan transactions.
The motivation for paying back the funds from the Deutsche swap was not immediately evident. But redeeming the swap would give Venezuela more gold for barter operations with Turkey.
Deutsche Bank declined to comment. Venezuela’s Central Bank did not reply to an email seeking comment.
The Bank of England said in a statement that it does not comment on customer relationships.
“In all its operations, the Bank observes the highest standards of risk management and abides by all relevant legislation, including applicable financial sanctions,” the statement added.
The Bank of England is facing political pressure from Venezuela’s opposition and from members of British parliament to not assist Maduro, whose just-begun second term has been widely described as illegitimate.
Losing the gold would be a significant blow to the country’s finances by undermining Venezuela’s ability to obtain hard currency crucial to importing items ranging from food and medicine to auto parts and consumer electronics.
But refusing to hand over the gold, which belongs to Venezuela’s central bank, could cause alarm among countries that store their own bullion in the Bank of England’s coffers.
Maduro’s government is struggling under hyperinflation now approaching 2 million percent annually, and a broad economic collapse has fueled an exodus of some three million people since 2015.
Opposition critics, including exiled leader Julio Borges, have argued that the gold should not be repatriated because it could be used to finance corruption.
Calixto Ortega, president of Venezuela’s central bank, met with Bank of England officials in December to discuss repatriating the gold but was unable to convince them, according to sources familiar with the situation.
Venezuela for decades stored gold that makes up its central bank reserves in foreign bank vaults, which is common among developing nations.
The country’s late socialist leader Hugo Chavez, citing the need for Venezuela to have physical control of central bank assets, in 2011 repatriated around 160 tonnes of gold from banks in the United States and Europe to the central bank in Caracas.
Maduro says his government is victim of an “economic war” led by the opposition and fueled by Washington’s sanctions. His critics blame the country’s struggles on a state-led economic model, stringent exchange controls and nationalization of private companies.