The Gold Mining Industry of Magadan Oblast under Sanctions: Risks for the Region

Abstract

—The introduction of a new package of sanctions in connection with the start of a military operation in Ukraine in 2022 is particularly changing the conditions for functioning of Russia’s gold mining industry, which uses high-performance foreign equipment for mining and sells its output on the global market. The article considers the factors complicating the industry and which have triggered an increase in production costs and decrease in the sale price of gold: a ban on foreign trade operations for the largest partner banks of subsoil users, an embargo by foreign countries on the purchase of Russian gold and import of foreign equipment and spare parts, and the Russian Central Bank’s decrease in the dollar/ruble exchange rate from May 2022 to January 2023. The case of a specific enterprise in Magadan oblast was used to assess the efficiency of placer gold mining under the changed conditions as of July 2022 and the forecast for 2023. Federal and regional measures were proposed to help smooth the severity of emerging problems in the industry and consequences for the economy of this single-resource northern region.