Venezuelan President Maduro's Claim for Gold Held in U.K. Is Rejected -- Update

By Jason Douglas in London and Kejal Vyas in Bogotá, Colombia

A British judge rejected a claim by Venezuelan President Nicolás Maduro for the release of $1 billion of the country's gold reserves held in a Bank of England vault, a decision that sustains U.S.-led efforts to cut off financing from the authoritarian leader's regime.

The court's decision is the latest twist in a power struggle between Mr. Maduro and opposition leader Juan Guaidó over who is in charge. The two sides are engaged in a series of legal battles, vying for everything from $5 billion in frozen government accounts abroad, to embassy properties, to U.S.-based refiner Citgo. The rival claims to legitimacy have put foreign governments and financial institutions in a tough spot.

Venezuela's central bank in May asked the BOE to release $1 billion of Venezuelan gold held in its vaults, saying cash from the sale of the bullion would be funneled to a United Nations program and used to finance coronavirus relief efforts.

The BOE refused because the U.K., like the U.S. and dozens of other allies, have since January 2019 deemed Mr. Maduro's leadership illegitimate because of alleged election fraud, corruption and rights abuses. They have recognized Juan Guaidó, who heads Venezuela's congress, as the oil-rich country's sole democratic leader.

Mr. Guaidó, court documents show, wrote on three occasions to former BOE Gov. Mark Carney urging him not to follow any instructions received from central-bank officials appointed by Mr. Maduro. He named his own central-bank appointees and asked the BOE only to accept instructions from them.

Mr. Maduro's representatives sued and the standoff came to a head in a British court in late June. Nigel Teare, the judge who heard the case, said in a written judgment published Thursday that because the U.K. government officially recognized Mr. Guaidó as Venezuela's legitimate president, the British courts must do the same.

The decision means Mr. Guaidó's appointees are entitled to instruct the BOE on what to do with Venezuelan reserves held in its vaults. The BOE has the second-largest store of official gold reserves after the Federal Reserve Bank of New York, according to its website.

The judgment also applies to $120 million of proceeds from a gold swap contract managed by Deutsche Bank AG, which asked the courts to step in after also receiving conflicting instructions from the rival camps on what to do with the cash.

Mr. Maduro's lawyers said they intend to appeal. The judgment "ignores the reality of the situation on the ground," Sarosh Zaiwalla, senior partner at Zaiwalla & Co., which is representing the Venezuelan central bank, said in a statement.

"Mr. Maduro's government is in complete control of Venezuela and its administrative institutions, and only it can ensure the distribution of the humanitarian relief and medical supplies needed to combat the coronavirus pandemic," Mr. Zaiwalla said.

Mr. Maduro argued his government needs access to the gold to pay for medical supplies to battle Covid-19. In its effort to convince the BOE to release it, the Maduro administration recently said it would administer proceeds from gold sales through the U.N. Development Program.

But Guaidó allies have cast doubt over the regime's intent, noting rampant corruption that has already bankrupted the resource-rich country. In 2018, Caracas sold some 73 tons of gold from its central bank with virtually no public accounting, according to the finance commission of the National Assembly.

"Once again thank you U.K. for standing up for Venezuelan Democracy," Mr. Guaidó's envoy to London, Vanessa Neumann, said on her Twitter account. Addressing Dominic Raab, the U.K. foreign secretary, she said, "You have been a true friend to the Venezuelan people."

The court ruling keeps intact U.S.-led efforts to isolate Mr. Maduro in the hope of forcing him from office. In his recent book on the Trump White House, former national security adviser John Bolton recounted a meeting in Washington in early 2019, where he said Jeremy Hunt, then the U.K.'s foreign minister, offered to contribute to the pressure campaign that the U.S. was preparing to ratchet up against Mr. Maduro.

Among the efforts noted by the U.K. envoy, according to Mr. Bolton, was the freezing of Venezuelan gold deposits in the BOE "so the regime could not sell the gold to keep itself going."

But regime change never materialized. Mr. Maduro, despite holding an approval rating of 13% in a recent poll by Caracas firm Datanalisis, has intensified a crackdown on political rivals. Mr. Guaidó, too, saw his approval rating fall to 25% in the same poll, down from 61% early last year.

The legal and political battles between the rival camps have impeded efforts to address the economic and humanitarian calamity faced by the South American country, said Venezuelan economist Francisco Rodríguez. He called the decision an important step in determining which government will be able to manage funds to provide much-needed aid to the country.

Venezuelan aid workers and public-health advocates say they are grappling not just with Covid-19 but spreading malnutrition and hospitals that lack power or running water. In the past, Mr. Maduro has snubbed most efforts to import humanitarian supplies, often calling them a Trojan horse for U.S.-led intervention.

"What's incomprehensible is that a country undergoing a humanitarian crisis cannot have access to the funds it needs," Mr. Rodríguez added. "That money belongs to the Venezuelan people."

Write to Jason Douglas at [e-mail] and Kejal Vyas at [e-mail]