WESTERN leaders have agreed to tighten sanctions on Russia’s gold reserves, cutting off one of Vladimir Putin’s key lifelines that could help Moscow avoid sanctions imposed in response to the Ukraine war.

On Thursday, G7 leaders met at NATO headquarters in Brussels to tighten economic sanctions against Putin’s regime in retaliation for Russia’s invasion of Ukraine four weeks ago. The Group of Seven leaders and the EU announced restrictions on Russia’s ability to sell its gold reserves, a “last resort” that experts say could provide a lifeline for Moscow and allow Putin to avoid Western financial sanctions.

Prime Minister Johnson stated ahead of the G7 meeting that the UK and the West must “tighten the economic vice” around Putin, including preventing the Russian leader from selling his gold elsewhere.

US Vice President Joe Biden has also stated that Russian gold is off-limits to the West, supporting sanctions that limit Putin’s ability to use his gold reserves to support the war in Ukraine, where Kremlin forces have been accused of targeting civilians and committing war crimes.

“G7 leaders and the EU will continue to work collaboratively to blunt Russia’s ability to deploy its international reserves to prop up Russia’s economy and fund Putin’s war, including by making clear that any transaction involving gold related to the Central Bank will be prohibited,” the White House said in a statement.

Russia has approximately $132 billion (£100 billion) in gold reserves, which Putin is said to have been stockpiling since 2014 in anticipation of Western sanctions in response to Russia’s aggression against Ukraine.

Existing Western sanctions, particularly those imposed on Russia’s Central Bank, prevent Russia from trading gold with Western countries.

The sanctions imposed on Moscow apply to all transactions involving Russia’s Central Bank, Ministry of Finance, and National Wealth Fund, including those involving Russian gold.

According to Edoardo Saravalle, a sanctions expert at Columbia University in New York, the Russian leader has been stockpiling gold since the United States imposed sanctions on Russia in 2014 following the annexation of Crimea.

He claimed that Putin has long planned to use gold to prop up the economy as it becomes increasingly isolated from global financial systems, thereby creating a “fortress Russia.”

“Putin had spent the time between 2014 and the invasion preparing himself to withstand Western sanctions,” he told Express.co.uk.

“And one of the things he did was limit his exposure to the dollar and build up foreign exchange reserves, which included gold.”

“Russia was a major buyer of gold for many years, but it wasn’t just about accumulating gold; it was also about finding gold in Russia.”

“All of this was done to get Russia ready for some kind of sanction.”

However, Western sanctions, particularly those targeting the central bank, have already thwarted his plans to some extent.

“The way the United States, the United Kingdom, and the European Union have imposed sanctions, including limiting transactions with the central bank, has basically made it so that many of these preparations did not turn out to be as helpful in cushioning the blow for Russia as they might have expected,” Mr Saravalle said.

However, existing sanctions do not apply to all of Russia’s gold reserves, such as gold held in a non-sanctioned Russian bank or transferred to a non-sanctioned individual.

These gold reserves could still be used to launder money or for foreign exchange in unregulated markets where countries can buy Russian gold for cash by Russian government officials and oligarchs.

Mr Saravalle explained that, while sanctions have ensured that US, EU, and UK entities will not deal with Russian gold, the “rest of the world” remains a potential buyer.

“While the US, EU, and UK aren’t markets, that leaves potentially the rest of the world as buyers, so there is potentially a broad market,” he explained.

“Right now, what the sanctions do is ensure that a large portion of the global potential ecosystem of buyers is not allowed to buy gold because they cannot deal with a central bank,” he added.

“As a result, the demand for gold suffers.” So it isn’t frozen, but there are fewer potential buyers. However, countries such as India and China could purchase gold, preserving some potential.”

However, he noted that many countries will likely avoid Russian gold as Western countries tighten sanctions on the commodity, even if they did not necessarily avoid sanctions.

“I’m sure some are probably going to stay away from it because they don’t want to risk running afoul of Western sanctions,” he explained.

“There’s also a reputational concern about providing a lifeline to Russia – many companies have refrained from dealing with Russia even though they are technically permitted simply because they don’t want to appear to be appeasing or assisting the Russian invasion.”

As G7 leaders consider how to ensure Putin cannot use the precious metal to fund his war, new legislation making its way through the US Congress seeks to impose an even tighter lockdown on Russia’s gold reserves.

Senator Angus King, one of the bill’s sponsors, said in a statement: “Russia’s massive gold supply is one of the few remaining assets that Putin can use to keep his country’s economy from collapsing even further.”

“By sanctioning these reserves, we can further isolate Russia from the global economy and make Putin’s increasingly costly military campaign more difficult.”

Mr Saravalle explained that the bill would bar US entities from doing business with foreigners who transacted in gold with Russia, forcing countries to choose between doing business with the US and buying Russian gold.

“This will be a very aggressive and targeted way of cutting off a potential lifeline for the Russian government,” he added.

Even with the new Western restrictions, Putin could still sell his gold in “illicit” markets, following in the footsteps of Venezuelan President Maduro, who shipped gold to unregulated markets around the world to sell.

Maduro’s gold sales have given the stuttering economy a lifeline, though Mr Saravelle noted that selling gold on illegal markets would not be enough to support Russia’s much larger economy.

“There is definitely potential interest from these extra legal gold buyers, but it’s really a last-ditch effort to raise funds.” And once you’ve done that, you won’t be able to get the full price of the item.

“It’s helpful as a last resort means of obtaining currency but it’s not something you can do day in and day out to manage an economy.”