Venezuela, opposition faction weighing deal to move $4 bln in gold to US from UK, sources say

The Venezuelan government and a faction of its opposition are nearing ‌a ​deal to move some $4 billion in gold from the Bank of England to the United States, which would control access to the funds, seven people familiar with the negotiations told Reuters on Friday. Members of an opposition-led legislature from 2015 are holding talks in Caracas with the acting government headed by Delcy Rodriguez, in a bid to remake ‌the country's political system and reopen the economy with oil deals and a major debt restructuring.

The Bank of England has withheld about 31 metric tons of Venezuelan gold for years because Britain does not recognize the legitimacy of President Nicolas Maduro, who was ousted in a US raid on Caracas in January and is now facing drug trafficking charges in New York. The Venezuelan government and opposition are moving to free the funds, which could help with reconstruction efforts following June's twin earthquakes.

Two people ‌close to the opposition said it has already backed off a UK court dispute it had launched over the bullion, with lawyers for a parallel opposition-led central bank board withdrawing from the case ahead of the latest ‌round of negotiations in Caracas. The opposition has demanded a transparency protocol, US oversight and a clear mechanism for approving the use of funds on a project-by-project basis, one of those sources said. Britain's move to upgrade its diplomatic relationship with Caracas this week should accelerate things, the source added.

US TRANSFER PLAN Two of the sources close to the talks said the unfrozen gold would move to the Federal Reserve Bank of New York under the proposed deal, while another source said the US Treasury would administer it.

The Financial Times had earlier reported details of the proposed plan, which would ⁠give the Rodriguez ​government legal control of the gold but not enable it ⁠to sell the holdings immediately. Instead, it could be used as collateral for government borrowing including for quake reconstruction. The Venezuelan communications ministry, which handles all press queries for the government, did not immediately respond to a request for comment, nor did the opposition faction involved in the talks.

The New ⁠York Fed did not immediately respond to a request for comment. Two other opposition sources familiar with the talks told Reuters last month that the United States had been in discussions with the UK about possible ways to free access to the gold.

One of the sources ​said the UK's upgrade of relations with Venezuela could lead to a recognition of the central bank board associated with the acting government. Another source said that the ad hoc opposition board, which functioned for ⁠seven years, has been told its duties have come to an end. The sources requested anonymity to speak due to safety concerns and the sensitivity of the issue.

GOLD TO FIGHT INFLATION The BoE's refusal to release the gold goes back to early 2019 when the British government joined dozens of nations ⁠in backing ​then Venezuelan opposition leader Juan Guaido after saying that Maduro's election win the year before had been rigged.

Since becoming acting president this year, Rodriguez, backed by US President Donald Trump, has asked King Charles to help release the gold. Last month, her brother Jorge Rodriguez, head of the national assembly, said the country was working to recover the reserves for reconstruction efforts. Straining the efforts, Venezuela's inflation rate was more than 530% in the 12 months to August due primarily ⁠to currency depreciation.

In response to a query, the Bank of England said it is not in a position to act on the gold until there is a further order from the court on who has legal authority ⁠over the account. "This requires the parties involved in the case ⁠to approach the UK Court to settle the dispute," the BoE said.

A spokesperson for the British foreign office said the government was not a party in the legal case but that the UK maintains its "longstanding position of support for a democratic transition of power in Venezuela which reflects the will of the Venezuelan people." UK Courts and the Bank of ‌England are independent of government, the spokesperson ‌added.