SWITZERLAND

Neutral Swiss economy shaken by sanctions against Russia – world

  

ZURICH – Switzerland’s new tough stance on Russia has forced the Swiss economy to adjust to the sanctions and has blown a tinge of panic, particularly in the commodity markets.

Switzerland announced on Monday that it would follow sanctions imposed by the European Union, abandoning Bern’s traditional reluctance to order the immediate asset freeze of Russian companies and individuals blacklisted by the EU.

And on Friday it went even further, passing even tougher EU sanctions imposed in response to Moscow’s large-scale invasion of Ukraine on February 24.

The export of goods that could enhance Russia’s military capabilities is prohibited, as is the export of certain goods and services in the oil sector and aviation technology. “The implementation of these sanctions is compatible with Switzerland’s neutrality,” the government said in a statement.

The wealthy Alpine nation’s companies are complying with the sanctions but have also stressed that Russian money accounts for only a fraction of their sales in a bid to reassure investors.

The airline Swiss, a subsidiary of the German Lufthansa, has suspended its flights to Moscow and Saint Petersburg.

Global container shipping company MSC and freight logistics company Kuehne + Nagel have stopped accepting Russian freight orders, with the exception of food, medical and humanitarian supplies.

Business lobby Economiesuisse said the sanctions would have a “limited” direct impact on foreign trade.

Russia is only Switzerland’s 23rd largest trading partner. The Swiss mainly export medicines, medical products, watches and machines to Russia, while the main imports are gold, precious metals and aluminium.

In 2021, according to customs authorities, exports to Russia amounted to 3.2 billion Swiss francs (3.5 billion US dollars, 3.2 billion euros), while imports only 270 million francs.

However, the landlocked country is a major player in commodity trading with companies such as Glencore, Trafigura, Vitol and Gunvor.

Gennady Gatilov, Russia’s ambassador to the United Nations in Geneva, said on Friday that he was surprised by the sanctions because Switzerland had “always tried to maintain a certain level of neutrality”.

“We are disappointed with this because we have very good relations with Switzerland… and Switzerland’s accession to these unlawful sanctions… will (a) have certain negative effects,” he told reporters.

crisis mode

According to figures circulating in the Swiss press, 80 percent of Russian oil is traded in Switzerland, although Florence Schurch, secretary-general of the Swiss Trade and Shipping Association, could not confirm the figure.

The exact amount is “estimated,” she told AFP news agency, while still confirming that the sector carries a lot of weight in the economy.

Trade in energy, grain, metals and minerals represents about 10,000 direct and 35,000 indirect jobs in terms of employment.

“Everyone’s been in crisis cell mode a bit since Monday,” Schurch said. Some companies are already trying to “locate their cargo” along the way or “repatriate seafarers stranded in the Black Sea”.

“Many companies have censored themselves,” she said, not least because payments have become “complicated” since Russian banks are cut off from the SWIFT system and Swiss banks are reviewing their trade finance.

Switzerland-based Nord Stream 2 has gone under after Germany halted the gas pipeline following Moscow’s invasion of Ukraine.

The bankruptcy triggered panic in the industry. Trading giant Glencore has announced it is reviewing its business in Russia, while Trafigura is re-examining its stake in Vostok Oil – Rosneft’s largest oil project in Siberia.

Banks, watches and tourism

Swiss banks are a favorite place for wealthy Russians to hoard their money. According to the Bank for International Settlements, Swiss banks’ liabilities to Russian customers amounted to $23 billion in the third quarter of 2021.

The Swiss Bankers Association responded to the sanctions by stating that Russia was “not a priority” market and expelled the Swiss subsidiaries of Gazprombank and Sberbank from its ranks.

On the stock exchange, the Richemont Group and the Swiss watch giant Swatch were also shaken by investor fears about the luxury sector.

Russia represents only about “one percent of our exports,” said Jean-Daniel Pasche, chairman of the Swiss Watch Industry Federation.

But the ruble’s fall could affect watch sales and the conflict also threatens to delay the return of Russian customers who “haven’t come to Switzerland since the pandemic began,” he added.

In 2019, before the Covid-19 crisis, Russian tourists accounted for just 1.7 percent of hotel stays in Switzerland.

“However, it is a wealthy clientele” who prefer five-star hotels, said Veronique Kanel, spokeswoman for Switzerland Tourism.

Some large hotels with a loyal Russian customer base could be “more specifically affected”.