But then the next question is why aren't those used as settlements mechanism?

They are? The issue here is simply that the country thinks there is an imbalance. They can request a in country transfer and do, but in this case it’s not enough.

Because international settlement is huge - something like a trillion dollars a day. (Or maybe that's just currency exchange, which might contain speculation in addition to settlement? Or is that a false distinction?)

Anyway, moving that much gold would be slow, inconvenient, and a significant risk.