Venezuela has launched legal proceedings to try to force the Bank of England to hand over $1 billion worth of gold, claiming it needs the money to fund an appropriate response to the coronavirus pandemic.
The gold is being retained at the Bank of England as a result of U.K. and U.S. sanctions on the crisis-stricken South American country.
President Nicolas Maduro’s administration has claimed it wants the Bank of England to sell part of the reserves in order to help fund the country’s response to the coronavirus pandemic.
The legal document, which was filed in a commercial court and dated May 14, calls for the Bank of England to transfer the funds to the United Nations Development Program (UNDP).
The claim states the money would then be used to administer the purchase of food and medical supplies in order to fight the coronavirus outbreak.
Venezuela’s central bank was not immediately available to comment when contacted by CNBC on Wednesday, while the Bank of England said it does not comment on individual customer relationships.
What is happening in Venezuela?
The legal wrangling comes as Venezuela’s health system continues to collapse, with many hospitals in the country struggling to care for patients in the absence of reliable electricity or even running water.
A group of United Nations experts warned earlier this month that hospitals in the country had reported a shortage of medical supplies and protective equipment.
To date, Venezuela has recorded 749 cases of the coronavirus, with 10 deaths nationwide, according to data compiled by Johns Hopkins University.
“The foot-dragging by the Bank of England is critically hampering Venezuela and the UN’s efforts to combat Covid-19 in the country,” Sarosh Zaiwalla, a London-based lawyer representing Venezuela’s central bank, said in a statement.
“The Bank of England has a moral imperative to allow Venezuela to sell the country’s gold to allow the UNDP to effectively assist the Venezuelan population in the fight against Covid-19,” he added.
How did we get here?
The Bank of England is the second-largest custodian of gold in the world, second only to the New York Federal Reserve.
Central banks of many developing countries store their national gold reserves in the vaults at the U.K.’s central bank and Venezuela is one of them.
In January 2019, the Bank of England refused to allow Venezuela to take the gold out of its vaults and back to South America. It has since refused to comment publicly on this decision.
The announcement came just days after opposition leader Juan Guaido took to the streets of Caracas to declare himself as Venezuela’s rightful commander-in-chief, claiming the result of the 2018 election had been fraudulent.
The leader of the National Assembly was swiftly recognized as Venezuela’s legitimate interim president by more than 50 countries, including the U.S. and the U.K.
Nonetheless, Maduro’s government — with the broad support of the military — has refused to cede power.
It means the country remains locked in a political stalemate, whereby it has an internationally-recognized government, with no control over state functions, running parallel to Maduro’s regime.