Portugal’s counterinsurgency campaign in Angola was clearly the most successful of all its campaigns in the Colonial War

Portugal’s counterinsurgency campaign in Angola was clearly the most successful of all its campaigns in the Colonial War.

The Angolan War of Independence (1961–1974) began as an uprising against forced cotton cultivation, and it became a multi-faction struggle for the control of Portugal’s overseas province of Angola among three nationalist movements and a separatist movement. The war ended when a leftist military coup in Lisbon in April 1974 overthrew Portugal’s Estado Novo regime, and the new regime immediately stopped all military action in the African colonies, declaring its intention to grant them independence without delay.

The conflict is usually approached as a branch or a theater of the wider Portuguese Overseas War, which also included the independence wars of Guinea-Bissau and of Mozambique.

It was a guerrilla war in which the Portuguese armed and security forces waged a counter-insurgency campaign against armed groups mostly dispersed across sparsely populated areas of the vast Angolan countryside. Many atrocities were committed by all forces involved in the conflict. In the end, the Portuguese achieved overall military victory, and before the Carnation Revolution in Portugal most of Angola’s territory was under Portuguese control.

In Angola, after the Portuguese had stopped the war, an armed conflict broke out among the nationalist movements. This war formally came to an end in January 1975 when the Portuguese government, the National Union for the Total Independence of Angola (UNITA), the Popular Movement for the Liberation of Angola (MPLA), and the National Liberation Front of Angola (FNLA) signed the Alvor Agreement


In Angola, the rebellion of the ZSN was taken up by the União das Populações de Angola (UPA), which changed its name to National Liberation Front of Angola (Frente Nacional de Libertação de Angola (FNLA)) in 1962. On February 4, 1961, the Movimento Popular de Libertação de Angola took credit for the attack on the prison of Luanda, where seven policemen were killed.

On March 15, 1961, the UPA, in an attack, started the massacre of white populations and black workers. This region would be retaken by large military operations that, however, would not stop the spread of the guerrilla actions to other regions of Angola, such as Cabinda, the east, the southeast and the central plateaus.

By 1974, for a variety of reasons, it was clear that Portugal was winning the war in Angola.

Angola is a relatively large African nation, and the long distances from safe haven in neighboring countries supporting the rebel forces made it difficult for the latter to escape detection (the distance from the major Angolan urban centers to the neighboring Democratic Republic of the Congo and Zambia) were so far that the east part of the country was called Terras do Fim do Mundo (“Lands of the End of the World”) by the Portuguese. Another factor was that the three nationalist groups FNLA, the Popular Movement for the Liberation of Angogla (MPLA]], and the National Union for the Total Independence of Angola (UNITA), spent as much time fighting each other as they did fighting the Portuguese.


Ando a ler o site Guerra Colonial. Recentemente, entre amigos, ao som do FMI do José Mário Branco, iniciámos uma conversa acerca de armas. As armas que nos anos 70 e 80 abundavam nos lares.

Strategy also played a role; General Costa Gomes’s insistence that the war was to be fought not just by the military, but also involving civilian organizations led to a successful hearts and minds campaign against the influence of the various revolutionary movements. Finally, unlike other overseas departments, Portugal was able to receive support from South Africa in its Angolan campaign; Portuguese forces sometimes referred to their South African counter-insurgent counterparts as primos (cousins).

The campaign in Angola saw the development and initial deployment of several unique and successful counter-insurgency forces:

  • Batalhões de Caçadores Pára-quedistas (Paratrooper Hunter Battalions): Employed throughout the conflicts in Africa, were the first forces to arrive in Angola when the war began
  • Comandos (Commandos): Born out of the war in Angola, and later used in Guinea and Mozambique
  • Caçadores Especiais (Special Hunters): Were in Angola from the start of the conflict in 1961
  • Fiéis (Faithfuls): A force composed by Katanga exiles, black soldiers that opposed the rule of Mobutu Sese Seko
  • Leais (Loyals): A force composed by exiles from Zambia, black soldiers that were against Kenneth Kaunda
  • Grupos Especiais (Special Groups): Units of volunteer black soldiers that had commando training; also used in Mozambique
  • Tropas Especiais (Special Troops): The name of Special Forces Groups in Cabinda
  • Flechas (Arrows): A very successful unit, controlled by the Polícia Internacional e de Defesa do Estado (PIDE), composed by Bushmen, that specialized in tracking, reconnaissance and pseudo-terrorist operations. They were the basis for the RhodesianSelous Scouts. The Flechas were also employed in Mozambique.
  • Grupo de Cavalaria Nº1 (1st Cavalry Group): A mounted cavalry unit, armed with the Heckler & Koch G3 rifle and Walther P-38 pistol, tasked with reconnaissance and patrolling. The 1st was also known as the “Angolan Dragoons” (Dragões de Angola). The Rhodesians would also later develop the concept of horse-mounted counter-insurgency forces, forming the Grey’s Scouts.
  • Batalhão de Cavalaria 1927 (1927 Cavalry Battalion): A tank unit equipped with the M5A1 tank. The battalion was used for supporting infantry forces and as a rapid reaction force. Again the Rhodesians would copy this concept forming the Rhodesian Armored Car Regiment.

The Portuguese Navy forces were under the command of the Naval Command of Angola. These forces included the Zaire Flotilla (with patrol boats and landing craft operating in the river Zaire), naval assets (including frigates and corvettes deployed to Angola in rotation), Marines companies and Special Marines detachments. While the Marines companies served as regular naval infantry with the role of protecting the Navy’s installations and vessels, the Special Marines were special forces, serving as mobile intervention units, specialized in amphibious assaults. The initial focus of the Navy was mainly the river Zaire, with the mission of interdicting the infiltration of guerrillas in Northern Angola from the bordering Republic of Zaire. Later, the Navy also operated in the rivers of Eastern Angola, despite it being a remote interior region at around 1000 km distance from the Ocean.

The Portuguese air assets in Angola were under the command of the 2nd Air Region of the Portuguese Air Force, with headquarters in Luanda. They included a central air base (the Air Base 9 at Luanda) and two sector air bases (the Base-Aerodrome 3 at Negage, Uíge and the Base-Aerodrome 4 at Henrique de Carvalho, Lunda). A fourth air base was being built (Base-Aerodrome 10 at Serpa Pinto, Cuando-Cubando), but it was not completed before the end of the conflict. These bases controlled a number of satellite air fields, including maneuver and alternate aerodromes. Besides these, the Air Force also could count with a number of additional airfields, including those of some of the Army garrisons, in some of which air detachments were permanently deployed. The Air Force also maintained in Angola, the Paratrooper Battalion 21, which served as a mobile intervention unit, with its forces initially being deployed by parachute, but later being mainly used in air assaults by helicopter. The Air Force was supported by the voluntary air formations, composed of civil pilots, mainly from local flying clubs, who operated light aircraft mainly in air logistics support missions.




China is launching a fake, extra-bright moon to cut the cost of city lights

In a move that sounds straight out of a sci-fi paperback, China is planning to launch the first artificial ‘moon’ into orbit in order to replace street lights and reduce energy costs.

Chinese scientists say the man-made moon, which is essentially an illuminated satellite, will be in orbit by 2020. It will be eight times brighter than Earth’s moon and will shine down on the city of Chengdu, the capital of the southwestern Sichuan province.

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It’s hoped the innovation will replace the need for streetlights and will reduce annual electricity costs by up to 1.2 billion yuan ($173 million).

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Residents shouldn’t worry that it will “light up the entire night sky,” Wu Chunfeng, chief of the Tian Fu New Area Science Society, said to China Daily. “Its expected brightness, in the eyes of humans, is around one-fifth of normal streetlights,”he said, adding that it could even assist emergency services during blackouts and natural disasters.

The ‘moon’ will only illuminate a 50-square-kilometer area, as it’s much closer to Earth than our real moon. It will sit about 500km (310 miles) away, compared to the moon’s 380,000km (236,000 miles).

READ MORE: Lunar nuclear chase: India to search for futuristic trillion-dollar fuel on the Moon

If the project proves successful, China plans to launch three more moons around the country by 2022. “The first moon will be mostly experimental, but the three moons in 2022 will be the real deal with great civic and commercial potential,”Wu said.

Before it makes its city debut, however, the moon will have to be tested in an uninhabited desert so that its light beams don’t interfere with people or Earth-based space observation equipment.


Russia & China preparing to ditch dollar!

Russia’s Ministry of Economic Development said on Thursday that Moscow and Beijing are working on an inter-governmental agreement to boost the use of the ruble and yuan in mutual trade settlements.

“The document is currently being prepared, the process is not easy,” said Deputy Minister of Russia’s Economic Development Sergey Gorkov, as quoted by TASS. “Russia and China have had some experience of using national currencies in bilateral trade.”

Gorkov added that Russia and China have been successfully implementing the terms of ruble-yuan currency swap agreement, clinched in 2014 to boost trade using national currencies and eliminate dependence on the dollar and the euro. The deal was extended at the end of 2017.


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The deputy minister didn’t provide information about when the new document will be signed.

Trade turnover between Russia and China has grown significantly over the recent years. The volume of mutual trade between the nations rose by 30 percent, reaching $77 billion from January to September, according to the latest data from China’s General Administration of Customs.

China is Russia’s largest trading partner, accounting for 15 percent of Russian international trade in 2017. The countries expect bilateral trade to hit $100 billion this year and plan to steadily boost it to $200 billion by 2024.

Last year, nine percent of payments for supplies from Russia to China were made in rubles; Russian companies paid 15 percent of Chinese imports in yuan. Three years ago, those numbers were two and nine percent, respectively. Moreover, China and Russia also created a Russian-Chinese investment fund worth 68 billion yuan (some $10 billion) to develop trade, economic investment, and scientific cooperation.


Huge Iranian oil armada heads to China before US sanctions kick in

An unprecedented volume of Iranian crude oil is set to arrive at China’s northeast port of Dalian this month and in early November before US sanctions on Iran take effect.

More than 20 million barrels of oil have been shipped to Dalian by the National Iranian Tanker Company (NITC), Reuters reports, citing an unnamed Iranian shipping source.

“As our leaders have said, it will be impossible to stop Iran from selling its oil,” the source said, adding: “We have various ways of selling our oil and when the tankers reach Dalian, we will decide whether to sell it to other buyers or to China.”

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Dalian typically receives between one million and three million barrels of Iranian oil each month, according to statistics. The port has some of the biggest refineries and commercial oil storage facilities in China.

OPEC’s third-largest producer, Iran is finding fewer takers for its crude ahead of the sanctions on its oil exports that will take effect on November 4.

READ MORE: India to continue buying Iranian crude despite US sanctions threat

The Islamic Republic has previously stored oil at Dalian during the last round of sanctions in 2014. The oil was later sold to buyers in South Korea and India.

Earlier this week, Iran’s First Vice-President Eshaq Jahangiri said the country is ready to counter US sanctions and has already found new partners to buy its oil.

Exports of Iranian crude oil have been in jeopardy since the White House announced that it is re-imposing unilateral sanctions against the Islamic Republic. In May, US President Donald Trump pulled the US out of the 2015 nuclear deal between Tehran and a broad alliance of world powers.

Washington has also threatened secondary sanctions on any countries or companies that conduct transactions with Iran.



Russia liquidates holdings of US debt instead investing money in gold

The Central Bank of Russia has continued getting rid of US Treasury bonds in August. The share of Russian investments in American debt is getting close to zero.

Russian investments in US securities as of August have fallen to just $14 billion. Back in 2011, Russia was one of the largest holders of US debt with a $180 billion investment.

The reason is not only about politics and US sanctions against Russia, a broker at Otkritie bank Timur Nigmatullin told RIA Novosti. The US Federal Reserve is hiking interest rates, which makes American bonds cheaper, he said. “Russia has almost dropped out of the list of holders of US government debt, being the 54th largest holder.”

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“A further sale of US Treasury bonds by Russia will most likely be compensated by buying gold and opening short-term deposits at banks,” he said. The share of precious metals in the country’s foreign reserves has reached a record 18 percent, closely approaching the share of dollar investments.

The largest investors in US debt, China and Japan, have also cut their holdings. Chinese holdings of US sovereign debt dropped to $1.165 trillion in August, from $1.171 trillion in July, marking the third consecutive month of declines. Japan has slashed its holdings of US securities to $1.029 trillion in August, the lowest since October 2011.

The reason for holding money in US bonds is global trade, which is still dominated by the dollar, director of macroeconomic analysis at Expert RA Anton Tabah told Izvestia daily. So, countries are forced to have a lot of dollars in cash, and US bonds are the best option for that.

India and Turkey have followed Russia’s lead. Turkey has dropped out of the top-30 list of holders of American debt, while India has been liquidating its investment for five consecutive months to $140 billion in August.


China on notice as America’s next big enemy, right after Russia

One wonders what went on in Russian minds during last month’s spectacle of US President Trump raking Beijing over the coals on accusations of meddling, in the upcoming US midterm elections, to try to undermine his trade policies.

Certainly the Chinese, who evidently didn’t expect it, were shocked and outraged, but it was behavior to which Moscow was accustomed to being on the receiving end of – this time aimed at someone else for a change.

Geng Shuang, China’s Foreign Ministry spokesman, called Donald Trump’s claims “totally far-fetched and fictional,” and advised the “US side to stop its unwarranted accusations and slander against China and refrain from wrong words and deeds that might hurt our bilateral relations and fundamental interests.”






Undeterred, Vice President Mike Pence picked up the same theme earlier this month, even accusing Beijing of what amounts to an effort at regime change in the United States: “China has initiated an unprecedented effort to influence American public opinion, the 2018 elections, and the environment leading into the 2020 presidential elections,” said Trump’s No. 2. “To put it bluntly, President Trump’s leadership is working; and China wants a different American President.” Beijing called the charge “ridiculous” and “malicious slander.”

Some observers, such as Harry J. Kazianis of the Center for the National Interest (“The Coming American-Russian Alliance Against China”) and former Indian diplomat M. K. Bhadrakumar suggest his is part of a long term strategy (“Trump Has a Grand Strategy, He Wants to Do a ‘Reverse Nixon’ – Partner Russia for an Alliance vs China”) and see the new US verbal belligerence against Beijing as evidence that Washington intends a shift in “triangulation.” This, as they see it, would mean a flip of Nixon’s pivot to Beijing against Moscow, this time with the US cozying up to Russia to take on China.

Clearly, they’re at least half wrong. Washington can’t woo Moscow on the basis of the unremitting hostility, threats, sanctions, and provocations – always increasing, never decreasing. Also, given past broken promises, for example on NATO expansion, the Russians would have no reason to trust any American overtures, which aren’t being made in any case. Also, as neighbors with a 2,500-plus mile border and a lot to gain by cooperation, notably in Eurasian economic integration, Russia and China have more incentive to work with each other than either has with the US, plus every reason to avoid hostility at the behest of a power on the other side of the world.

But the “triangulationists” are also half right in their perception of the thinking of the US policy making class: China indeed is rapidly entering the category of prospective enmity of the sort with which Washington has long regarded Russia (and which in fact never really stopped with the end of the USSR).

Some analysts, such as Caitlin Talmadge, a security expert at Georgetown University in Washington DC, writes in Foreign Affairs that a war between the two countries is currently unlikely, but “no longer seems as implausible as it once did… The odds of such a confrontation going nuclear are higher than most policymakers and analysts think.


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While Secretary of Defense James Mattis’ recent trip to China may have been aimed at mitigating the risk of an inadvertent clash between US and Chinese forces, it can’t have done much to reduce the impact of deliberate policies designed to preserve US hegemony in the western Pacific – and globally.

Whether or not Trump himself inclines in this direction, there is no question that this is the vector of the US establishment. As described in the January 2018 National Defense Strategy, the pretense that combating Islamic terrorism is the guiding star of US policy is out, and what Mattis dubbed rivalry in a new “great power competition” is in. This means the US against Russia and China, in that order.

Nothing more needs be said here with regard to Russia’s effectively permanent adversary status. But with respect to China, this means treating Beijing as a potential enemy on a number of fronts, especially if it involves Chinese cooperation with Russia. (The counterproductive impact of pushing Russia and China even closer together is evidently lost on US planners.)

For example, in September, Washington slapped sanctions on the Central Military Commission of China because of its purchase of 10 Russian Su-35 and equipment for surface-to-air S-400 missiles. Ostensibly, the action was triggered by a Chinese violation of US sanctions against Russia for 2016 election meddling, but the real issue is China’s strategic relationship with Russia.

This does not mean there are not different priorities on China within the US establishment. Even within the Trump administration, the “trade hawks” are largely internally focused on the US economy and industrial base; what they mainly seek is a change in the US trade relationship with China. Conversely, the neoconservatives and national security hawks who dominate Trump’s national security team see China as a rising strategic foe (comparable to their view of Russia) but at a more distant future point.

The trade hawks are happy to support the security hawks’ anti-China initiatives not because they particularly care about them but because they see them as pressure to “soften up” Beijing on trade. These pressures include continual air and naval prodding in the South China Sea; trying to undercut the Belt and Road Initiative (BRI), which also likely includes covert proxy support for jihadists in Xinjiang and Myanmar’s Rakhine State; and finding an excuse to maintain a military presence on the Korean peninsula. Trump’s national security team is skeptical of his Korea policy, because of the fear that Pyongyang won’t denuclearize, and even worse that it might, depriving them of an excuse to keep US troops on the East Asian mainland as a counter to China and Russia and will link South Korea up with BRI.

READ MORE: Beijing slams US military ‘provocations’ after B-52 bombers fly over South & East China Seas

Conversely the security hawks care little about trade (except to the extent they see China’s surplus as a boon for military production) but welcome a tariff war as a way to squeeze Beijing’s economy and, hence, its military capacity – which is perceived as such by the Chinese.

While these factional perspectives diverge, they end up in the same place: continued pressure on China. While some productive “art of the deal” outcome might be Trump’s preference, it’s difficult to see how that can happen.

Beijing will also be a key target with the upcoming tightening of sanctions on a number of countries continuing to do business with Iran. This will mean not just China but also Turkey and possibly India. (India is a special case because of Washington policymakers’ efforts to woo New Delhi as the linchpin of the so-called “Indo-Pacific Quad” intended to contain China.) But the most important targets will be countries of the European Union. Much is being made of a so-called “clearing house,” or Special Purpose Vehicle (SPV) for conducting business with Iran to avoid the SWIFT system and US sanctions.

The SPV concept is supported by the European Union, the United Kingdom, France, and Germany, as well as China and Russia. Simply the suggestion of the SPV mechanism has infuriated Washington, because it not only signals a possible shift by Europe from Washington’s “Transatlantic” yoke, it means betting their economic future on cooperation with Russia and China. (It should also be kept in mind that the US Treasury Department can simply sanction the SPV clearing house itself, applying secondary sanctions to any European companies that interact with it.)

One of the telltale clues that a country is rising up Washington’s enemies list is when its leader is personally demonized as dictator, a thug, and ultimately Hitler. Russia’s Vladimir Putin has long received this treatment. While China’s Xi Jinping, until recently, has received respectful treatment, that is shifting into familiar, ugly territory. Xi is now a “dictator” and “the worst totalitarian since Mao”. Worse is no doubt to come.

© Sputnik / Aleksey Druzhinin


In his recent Valdai forum speech Putin pronounced the end of the US “monopoly from a unipolar world,” saying that “luckily, this monopoly is disappearing. It’s almost done.” Few people of any standing in Washington would agree with him.

Whatever the view from Sochi, in Washington all evidence still points to a dogged and dangerous insistence that the course laid down in the 1996 Foreign Affairs article by neoconservative ideologists William Kristol and Robert Kagan, misleadingly titledToward a Neo-Reaganite Foreign Policy,” in which they called for the US to establish and maintain indefinitely “benevolent global hegemony” – American world domination – remains the guiding vision, specifically over the objections of Russia and China.

‘The aspiration to benevolent hegemony might strike some as either hubristic or morally suspect. But a hegemon is nothing more or less than a leader with preponderant influence and authority over all others in its domain. That is America’s position in the world today. The leaders of Russia and China understand this. At their April summit meeting, Boris Yeltsin and Jiang Zemin joined in denouncing “hegemonism” in the post-Cold War world. They meant this as a complaint about the United States. It should be taken as a compliment and a guide to action.’

As scrutinized by this writer the following year, the 1996 Foreign Affairs manifesto described virtually all of the elements that have guided US foreign policy during the ensuing years, in Democratic and Republican administrations alike. What has changed since then? Moscow and Beijing are still not partners to be engaged, they are simply obstacles to be overcome. The fact that Russia and China are more powerful than they were two decades ago just spurs greater US efforts to thwart them.

Despite Trump’s railing against the failures of his predecessors during the 2016 campaign, nothing in the behavior of his administration indicates any departure from the pattern set before he took office. Indeed, there is reason to believe that inertial pattern has been consciously imported into the administration’s thinking, notably by National Security Advisor John Bolton, former director of the Project for a New American Century, founded by Kristol and Kagan in 1997, the year after their article appeared.

Viewed through this lens, while Russia may be the immediate hindrance, especially in Syria and Ukraine, China’s turn is approaching, perhaps faster than anyone anticipated. Despite a few voices of reason, a new Cold War in the east may be unavoidable. Whatever Trump’s personal opinion might happen to be seems not to matter one way or the other.



Hungary Announces 10-Fold Jump in Gold Reserves

In one of the most profound developments in the central bank gold market for a long time, the Hungarian National Bank, Hungary’s central bank, has just announced a 10 fold jump in its monetary gold holdings. The central bank, known as Magyar Nemzeti Bank (MNB) in Hungarian, made the announcement in Budapest, Hungary’s capital.

The details of Hungary’s dramatic new gold purchase are as follows:

  • Before this month, Hungary’s central bank held 3.10 tonnes of gold.

  • During the first two weeks of October, the Hungarian National Bank purchased 28.4 tonnes of gold.
  • This gold purchase raised the central bank’s gold holdings from 3.1 tonnes to 31.5 tonnes, i.e. a 1000% or 10-fold increase.

  • The Hungarian central bank had not altered its gold reserves since 1986, i.e. 32 years ago.
  • The 28.4 tonnes of gold was purchased in ‘physical form’, and ‘its repatriation has already taken place‘ to Hungary.
  • Interestingly, Hungary now holds the same amount of gold as it held 70 years ago.



Some of the newly purchased gold bars of the Hungarian central bank. This gold has also been repatriated to Hungary.

In conjunction with today’s announcement in Budapest, the Hungarian National Bank put together a very interesting press release on its website (in Hungarian), which I have translated and edited, and which I think is worth reading in its entirety. Therefore, I have replicated it below, adding some bold and underlining in places. The press release is as follows:

“Budapest, October 16, 2018 – In view of the long-term national and economic strategy goals, the Monetary Council of the National Bank of Hungary has decided to increase the gold reserves of the country.

As a result, in October 2018 the Bank’s precious metal holdings were raised from the previous 3.10 tonnes to 31.5 tonnes, a tenfold increase.

This is the first time that the Hungarian National Bank has bought gold since 1986.

Following the substantial increase in the Bank’s gold reserves in physical form, its repatriation has already taken place. The possession of precious metal within the country is in line with international trends, supports financial stability and strengthens market confidence in Hungary.

In keeping with the historical role of gold, gold remains one of the safest instruments in the world, and, even under normal market conditions, provides a stability and confidence-building function.

With current holdings of 31.5 tonnes gold reserves, valued at approximately $ 1.24 billion, this size of holdings approaches the historical level that was held by our country at the time of the “golden train”. Within the overall international reserves of the Bank, the share of gold reserves has now risen to 4.4%, which corresponds to the average of non-euro area Central and Eastern European countries.

The role of gold reserves in the nation and in the nation’s economy strategy is becoming more and more appreciated while both the possession and the increase of nations’ precious metals holdings appears to be decisive international trends.

This gold purchase process, based on the strategic decision of the Hungarian National Bank, has increased the domestic gold reserves to 31.5 tonnes. The raising of the gold reserve and the returning of the gold in physical form to Hungary took place in the first half of October 2018.

Increasing and repatriating gold reserves can be considered a significant step in economic history. Since the founding of the Hungarian National Bank in 1924, gold reserves have been maintained, but the stock of that gold has fluctuated considerably over the decades, depending on the purpose of why it was held.

At the end of World War II, Hungary received some 30 tonnes of gold bars and gold coins on the MNB’s legendary “gold train” in the Spital am Pyhrn in Austria. This amount was fully returned to the country after the war while providing cover for the introduction of the new currency of the country, the Forint, thus supporting financial consolidation and the stabilization of the post-war Hungarian economy.

At the end of the eighties, Hungary’s gold reserves, driven by short-term investment objectives, fluctuated between 40 and 50 tons and then, at the time of the change of regime (between 1989 and 1992), the ruling central bank executives decided to reduce to a minimum level of about 3.1 tons, which was the level at the end of September 2018.

With the decision of the MNB today in October 2018, the holdings of 31.5 tonnes of gold reserves is now the same as the level of the stabilization period of 1946.

Gold reserves are held for short-term investment and / or long-term stability purposes by national central banks. The current decision of the Hungarian National Bank was led by the goal of stability, and there are no investment concerns behind the holding of gold reserves.

Gold is not only for extreme market environments, structural changes in the international financial system, and deeper geopolitical crises. Gold also has a confidence-building effect in normal times, that is, gold can play a role in stabilizing and defending.  

Gold is still considered to be one of the world’s safest assets, whose characteristics can be attributed to gold’s unique properties such as finite supply of physical gold, and lack of credit and counterparty risk given that gold is not a claim against a specific partner or country.

Over the past few years, more and more countries have decided to continue to play a decisive role in the use of gold as a traditional reserve asset, and have raised their gold reserves. This course of action was followed by Poland [a neighbor of Hungary], in spite of the fact that Poland had already one of the highest gold reserves in the region.

When raising domestic gold reserves to 31.5 tonnes, the MNB also paid attention to the international and regional role played by gold in central bank reserves. As a result, the Hungarian gold reserve have now increased to 4.4% which is in line with average international reserve ratio for gold for the Central Eastern European region central banks. This move from the end of the international rankings to the middle of the rankings has progressed, both in terms of size and proportion of gold reserves.

On the occasion of the announcement, the National Bank of Hungary has also published a “Golden Book”, which gives an insight into decisive historical periods of Hungary’s gold, such as centuries of golden coins, the rescue of our national treasures by gold trains, and the recent homecoming of the country’s gold reserves.”  [end of press release]

Note that Hungary is a member of the European Union (EU), and therefore the Hungarian National Bank is a member of the European System of Central Banks (ESCB). However, as Hungary is not a member of the Eurozone and does not use the Euro, the Hungarian National Bank is not a member central bank of the European Central Bank (ECB). With Hungary recently under attack from the European Parliament in September, the timing of this new gold purchase by Hungary’s central bank in early October is very interesting, to say the least.

Magyar Nemzeti Bank (MNB)

Poland, Austria, Germany, Netherlands, and now Hungary

In addition to this new Hungarian gold purchase, Reuters is reporting that updated data from the IMF shows that Poland continued to increase its gold purchases in September 2018, raising its gold reserve holdings by 4.4 tonnes during the month to 117 tonnes. This follows similar gold purchases that the Polish central bank made in the summer, when the bank bought two tonnes of gold in July and seven tonnes of gold in August.

With almost all of Poland’s gold held at the Bank of England, a relevant question now is how long before Poland also sees fit to repatriate its gold in physical form away from the fractionally-backed LBMA controlled gold trading centre of London. Another of Hungary’s close neighbors, Austria, has itself spent the last 3 years repatriating 140 tonnes of its gold from the Bank of England in London and has nearly completed this repatriation operation now.

Add to this the high-profile Germany Bundesbank gold repatriation program in recent years, and a similar gold repatriation exercise from the Netherlands central bank, and the trend is clear: central banks in Europe have been flocking to shore up their international reserves with gold, because, as in the words of the Hungarian central bank “Gold is still considered to be one of the world’s safest assets”.

Source: Zero Hedge