Swiss economy forced to adapt to sanctions against Russia

Switzerland has stepped out of its traditional neutrality by sticking to European sanctions against Russia.

Switzerland has hardened its line on Russia, forcing its economy to adapt to forced march sanctions, in particular in the commodity trading sector, where the wind of panic is blowing. On Monday, Switzerland stuck to EU sanctions, abandoning its traditional restraint, in particular by ordering an immediate freeze on the assets of Russian individuals and entities blacklisted by the EU.

Accustomed to neutrality, Swiss companies have since ditheredly unveiled the measures they need to take to comply with the sanctions, while insisting on Russia’s low share of their turnover in an attempt to reassure their investors. The Swiss airline suspended flights to Moscow and St. Petersburg. MSC Mediterranean Shipping Company and logistics company Kuehne + Nagel have stopped accepting orders for cargo other than food, medical and humanitarian goods.

commodity trade

For foreign trade, the “direct consequences” are “limited,” the employers’ organization Economiesuisse reacted to the announcement of the sanctions.

Russia is only its 23rd trading partner. Switzerland mainly exports medicines, medical products, watches and equipment there, and imports mainly gold, precious metals and aluminum. In 2021, its exports there amounted to 3.2 billion Swiss francs (3.1 billion euros), while imports are capped at 270 million francs, according to the Federal Customs Office. By comparison, its exports to Germany, its largest trading partner in Europe, amounted to 44 billion francs.

But Switzerland is also an important player in commodities trading through companies such as Glencore, Trafigura, Vitol and Gunvor, which are concentrated in Geneva and the canton of Zug.

According to a figure circulating in the Swiss press, 80% of Russian oil is traded in Switzerland, even if Florence Schurch, secretary general of the Swiss Association for Commodity Trading and Maritime Transport, “does not confirm” this figure. The exact weight of Russian oil sold in Switzerland is “estimated,” she told AFP, confirming, however, that the sector is important to the economy. In terms of employment alone, trade in energy, grains, metals and minerals provides about 10,000 direct and 35,000 indirect jobs.

$23 billion

“Everyone has been in crisis chamber mode since Monday,” she explains. Some companies already have to “find their cargo” or “repatriate sailors stranded in the Black Sea.” “Many companies have self-censored themselves,” she notes, not least because the issue of payments is getting “complicated” now that Russian banks are off the Swift system and Swiss banks are rethinking their trade finance.

The bankruptcy of the operator of the German-Russian gas pipeline Nord Stream 2 caused a panic in the industry. Trading giant Glencore also announced that it is reviewing its business in Russia, while Trafigura is reviewing its stake in Vostok Oil, Rosneft’s major oil project in Siberia.

Swiss banks are also very popular with large Russian investors looking to invest their money. According to the statistics of the Bank for International Settlements, the obligations of Swiss banks to Russian clients in the third quarter of 2021 amounted to $23 billion. The Association of Swiss Bankers reacted to the sanctions by saying that “Russia is an interesting market, but not a priority.” “and expelled the Swiss subsidiaries of Gazprombank and Sberbank from its ranks.

1% luxury exports

In the stock market, Richemont and Swatch were also shaken by investor concerns about the luxury goods sector. Russia accounts for only “1% of our exports,” calculated Jean-Daniel Pache, president of the federation of watchmakers. But the fall of the ruble could weigh on watch sales, and the conflict also risks, he said, delaying the return of Russian buyers who “have not been to Switzerland since the start of the pandemic.”

In 2019, before the pandemic, Russian tourists accounted for only 1.7% of hotel nights. “Nevertheless, it’s a wealthy clientele,” says Véronique Kanel, spokesperson for Swiss Tourism, who visits 5-star hotels more than other tourists. Thus, some large hotels with a loyal Russian clientele may be affected “more specifically”.

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