Sanctions against neutrality: the Swiss response to Russia

The Swiss executive refrained from announcing unilateral sanctions against Russian interests after Moscow’s meteoric military action in Ukraine. Instead, the Federal Council has chosen to align itself with the European Union and to commit that Russian individuals and companies hit by EU sanctions cannot escape them in Switzerland, which is not one of the 27 EU Member States.

The government said on Friday that financial “intermediaries” in Switzerland were now barred from entering into new business relationships with 363 Russians and four Russian companies. Any pending business must be reported to the Swiss Secretariat for Economic Affairs. Other steps are under study.

While hardly a crackdown compared to other Western sanctions aimed at punishing Moscow for its invasion of Ukraine, the impact could be felt. The wealthy Alpine nation was the largest recipient of transactions by Russian individuals – ahead of Britain, Spain, Luxembourg and the United States, according to a report compiled by the Swiss Embassy in Moscow.

“Switzerland has for years been by far the most important destination in the world for wealthy Russians to manage their wealth,” the report said, adding that net transfers from Russian taxpayers to Switzerland totaled $2.5 billion in 2020. The Swiss news agency SDA-ATS reported a net transfer of $1.8 billion in the first half of 2021.

Federal Councilor Guy Parmelin, head of the Federal Department of Economic Affairs, noted that Switzerland was required to follow UN sanctions but could decide to follow EU sanctions based on criteria such as foreign policy and legal aspects – including the legislation that enshrined “neutrality” in Swiss law.

Swiss authorities are essentially extending the measures put in place in 2014 after the Russian takeover of Crimea, in which they also sought to ensure that EU sanctions were not dodged in Switzerland, to hundreds of people and additional companies, but they go further.

“Switzerland is thus taking a harder line on Russia,” Parmelin told reporters in the capital Bern.

German government spokesman Steffen Hebestreit said on Friday that “every country is sovereign in deciding what to do…If you asked me if I would be happy if Switzerland supported (EU) sanctions, then I would definitely say ‘yes’.”

But Switzerland is also keen to preserve its role as a diplomatic intermediary for certain countries, including Russia. The Swiss government represents the interests of the former Soviet republic of Georgia in Moscow and the interests of Russia in Tbilisi, the Georgian capital, under an agreement put in place after these two countries broke off their bilateral relations during of their conflict in 2008.

“It is important for the Federal Council that the implementation of these measures does not interrupt discussions between Switzerland and the countries concerned,” Parmelin said. “Switzerland wants to be able to offer its services to countries in conflict if these countries so wish.”

“If Switzerland were to automatically adopt the sanctions imposed by the EU or other countries, it would no longer be able to credibly play the traditional role for which it is appreciated around the world,” he added.

The respected Swiss daily Tages Anzeiger reported that Ukrainian President Volodymyr Zelensky on Saturday asked his Swiss counterpart to act as a neutral mediator between Ukraine and Russia and to help work towards a ceasefire between both countries, in particular within the framework of a Human Rights Council. meeting in Geneva opening Monday. The Swiss Foreign Ministry has not confirmed any of these communications.

Geneva hosted a summit between Russian President Vladimir Putin and US President Joe Biden in June, as well as a few bilateral meetings in recent weeks as tensions rose in Ukraine. The Swiss appreciate their role and reputation as a qualified and neutral host for such international gatherings and as a hub for international organizations such as the United Nations and the International Red Cross in Geneva.

The push-and-pull felt by the Swiss could grow. Some Western countries have announced or were preparing individual sanctions against Putin and his Foreign Minister Sergei Lavrov, including possible travel bans. Switzerland is unlikely to go that far: Lavrov himself is expected to be in Geneva on Tuesday for a session of the Human Rights Council.

Economic concerns – not just political neutrality enshrined in Swiss law – could also figure into Swiss calculations.

Geneva is a major trading hub for commodities like oil and wheat that matter to Russia and Ukraine, and is said to be a breeding ground for Russian oligarchs and other economic elites drawn to banks and corporations. low-tax and privacy-conscious policies in Switzerland.

The June report from the Swiss Embassy in Moscow indicates that about 80% of Russian commodity trade passes through the Swiss financial services centers of Geneva, Zug, Lugano and Zurich. Major Russian energy and commodity companies have offices in Switzerland.

According to the Bank for International Settlements, Russian deposits in Swiss financial institutions totaled the equivalent of almost $11 billion at the end of the third quarter of last year. This accounted for about 30% of total Russian deposits abroad of nearly $36 billion, according to BIS figures.

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Frank Jordans in Berlin and Emily Schultheis in Vienna contributed to this report.

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