The British government underlined on Monday that it recognizes opposition leader Juan Guaido as Venezuela’s president, in an effort to derail a bid by Venezuela’s central bank, which is backed by Nicolas Maduro, to repatriate about $1 billion in gold held in London.
On Monday, legal teams representing Maduro and Guaido will appear before the UK Supreme Court in the latest round of a long-running legal battle over around 15% of Venezuela’s foreign currency reserves.
The central bank’s lawyers claim that selling the gold will help pay the response to the coronavirus outbreak and strengthen a health system that has been ravaged by more than six years of economic turmoil.
The gold is held in the vaults of the Bank of England, which has refused to release it since the British government joined dozens of other countries in backing Guaido in early 2019 on the grounds that Maduro’s presidential election victory the previous year was rigged.
“The UK government is clear that Juan Guaido has been recognized as the only legitimate President of Venezuela by Her Majesty’s Government since February 2019,” the British Foreign Office stated in a statement after being asked by the Supreme Court to clarify its position ahead of Monday’s case.
“He (Guaido) is the only individual recognized to have the authority to act on behalf of Venezuela as its head of state,” a Foreign Office spokesperson added, saying the South American country needed “a peaceful transition to democracy”.
The dispute over the gold began in May 2018 when Maduro secured re-election in a vote that the main opposition coalition boycotted and called a sham. Afterwards, Boris Johnson, then the British foreign minister, said: “We may have to tighten the economic screw on Venezuela.”
Concerned by mounting sanctions against the Maduro government, the Venezuelan central bank (BCV) told the Bank of England (BoE) it wanted to bring home 14 tones of gold it had stored there.
Around the end of 2018, Calixto Ortega, the BCV president, traveled to London to discuss the matter with BoE officials, according to Sarosh Zaiwalla, a London-based lawyer representing the BCV, but they told Ortega there was an issue with his authority.
The following February, Britain joined dozens of other nations in backing Guaido’s claim to be the legitimate president. In April, the U.S. Treasury imposed sanctions on the BCV, alleging Maduro was using it to “plunder” Venezuelan assets to “enrich corrupt insiders.”
Before the sanctions, Venezuela paid off several gold swap transactions the BCV had agreed with Deutsche Bank in previous years, people familiar with the deal said. That resulted in 17 tonnes of gold held in the BOE’s vaults being returned to the control of the BCV, bringing its holdings there to 31 tones, about a quarter of Venezuela’s total gold reserves.
The sanctions then triggered the early termination of other gold swaps made between BCV and Deutsche Bank, releasing more gold to the BCV, according to a chronology filed in previous court cases by Guaido’s legal team.
Guaido’s team requested that the UK courts identify who had the power to represent the BCV and accept the gold.
The European Union, which Britain formally left at the start of the year, declared in January that it could no longer legally recognize Guaido as Venezuela’s president after he lost his post as leader of parliament in December following legislative elections that the EU did not recognize.