Switzerland made it clear from the start that it was not willing to circumvent the sanctions imposed against Russia. Now the consequences are being felt, not least in the commodities business.

Since the Federal Council decided that Switzerland will not only not tolerate circumvention deals, but will itself impose sanctions against aggressor Russia for invading Ukraine, the Swiss financial and trading center has come under pressure.

According to reports, significant assets have been moved to banks in the Gulf States, which do not support the sanctions and - not to be underestimated - where Russian oligarchs can still fly directly from their home country.

Moving to Dubai

More significantly for Switzerland, and Geneva in particular, as a business location is the departure of commodity traders to Dubai. The trading houses that do big business trading Russian raw materials have moved there in droves, according to a report from «Bloomberg» (behind paywall).

Russia's three largest oil producers, Rosneft, Lukoil, and Gazprom have all either begun initial explorations for trading activities in the Gulf or are planning to expand existing firms, according to «Bloomberg». Others, such as Solaris Commodities, a trader of Russian grain, have just opened offices in Dubai. 

Zug Facing Exodus

Zug, a mecca for trading houses, is also likely to lose some business to Dubai. Suek, a Russian coal trading house, and EuroChem, the world's largest fertilizer producer, have their eyes on Dubai as well.

To be sure, not all of these goods are subject to sanctions. But as the «Bloomberg» report illustrates, Swiss banks are increasingly reluctant to finance legal activities as well. At the same time, Russian banks, which supported the commodity trade with financing solutions, are also increasingly under pressure, as is the case of Russia's Sberbank.

End of a Bad Reputation?

Switzerland suffered for decades from a general suspicion of a lax attitude towards all kinds of trading activities, but there now seems to be a reversal of the trend. Switzerland, with its commodity centers of Geneva and Zug, will probably lose a good part of its lucrative business to foreign countries, but it may also lose its reputation as a morality-free business zone.