Far outweighing its geographic size, Switzerland is where three-quarters of Russian crude oil and oil products are managed and where Nord Stream 2, the controversial Russian gas pipeline project, has been headquartered - until recently. In a development on Tuesday, it was reported that Zug-based Nord Stream 2 had made over 140 of its employees redundant as a result of the sanctions. Switzerland is also a major hub for Russian and Ukrainian grain and vegetable oil trading. Specialised banking services here provide credit to traders, and shipping companies fill another important piece of the trading system. After Swiss President Ignazio Cassis announced that the country would immediately freeze Russian assets in reaction to the Russian invasion of Ukraine, many traders told SWI swissinfo.ch that they were assessing the situation and would comply with international sanctions. Nonetheless, the current situation means that their operations are being hit, including access to commodity sources and credit, as well as to insurance and shipping. “The problem is how can we continue to trade with them since we cannot make wire transfers with Russian banks that are no longer in the SWIFT system?” said Florence Schurch, secretary general of the Swiss Trading and Shipping Association, the sector’s lobby group.
Apart from Canada, which announced on Tuesday a ban on Russian oil, international sanctions have not specifically targeted commodities in a bid to limit the price impact for consumers. But recent measures taken to cut some Russian banks from SWIFT - the key global financial messaging system - and prevent the country’s central bank from deploying its reserves, are complicating transactions with Russian commodities suppliers. Société Générale and Credit Suisse, two key banks providing credit to commodities traders, announced on Monday that they would stop financing Russian trades. Traders depend on short-term credit lines to finance transactions before being paid back on delivery of the goods. Not being able to access such credit complicates trades, including shipment of commodities which can range from energy products to food supplies and metals. The big financial groups ING and Rabobank are also limiting access to credit for Russian commodities deals. The Russian banks Gazprombank and Sberbank, which have branches in Switzerland and were on the US sanctions list, also offered trade finance services ahead of the conflict. Amid the growing credit squeeze, increasing isolation of Russia and a tumbling rouble, which as of Tuesday had lost 30% of its value against the dollar, many commodities firms preferred not to comment.
Wartime responses
Trafigura is one of a number of Geneva-based firms trading in Urals crude oil, a staple for European refiners, which also include Glencore, Vitol and Gunvor. “We continue to closely monitor the situation and ensure any transactions we undertake comply with applicable regulatory requirements and sanctions," said Trafigura in an emailed statement. On Wednesday, Trafigura announced it had frozen its investments in Russia in the wake of Moscow's invasion of Ukraine and was reviewing its 10% stake in Rosneft's Vostok Oil project in the Arctic. Earlier this week, British oil major BP announced it was exiting its 19.75% voting stake in Rosneft, and Shell let go of its Russian stakes,External link ahead of Russia’s ban to sell national assets. Meanwhile, Glencore said mid-February that it had sold a minority share in Russneft, a smaller oil producer, after its founder was put on an EU sanction list in 2014, following Russia’s annexation of Crimea. It also holds a 10.55% stake in En+, a hydropower and metals group and another stake in Rosneft. In a statement on Tuesday evening, the company said: “We have no operational footprint in Russia and our trading exposure is no material for Glencore.” Gunvor’s co-founder Gennady Timchenko, Russia’s sixth wealthiest oligarch, exited the firm in 2016 after being placed on an earlier sanctions list. While some energy traders downplayed the impact of sanctions, with reportsExternal link on Tuesday signalling ongoing oil trading activity in Russia, the price of Brent crude, the international benchmark, has surged to above $112 a barrel, a level not seen since 2014.