How Switzerland Is Helping Russia Avoid Sanctions

With gas and oil exports accounting for 30 to 40 percent of Russia’s budget, Switzerland’s position in this wartime equation cannot be underestimated. This is how Switzerland is helping Russia avoid sanctions.

How Switzerland Is Helping Russia Avoid Sanctions 1

Putin recently went on record by calling the Ukrainian conflict a “tragedy” and stating that economic sanctions against his nation had “failed.” He was not precisely bluffing, it turns out.

Russia’s economy has proven difficult to break three months after the most harsh and coordinated sanctions imposed by Western nations. Moscow has withstood the West’s sanctions significantly better than predicted thanks to continued oil and gas exports and a propped-up ruble.

JPMorgan Chase said in a note to clients last week that business sentiment polls in the nation “are signaling a not very deep recession in Russia, and therefore imply upside risks to our growth forecasts. The data at hand therefore do not point to an abrupt plunge in activity, at least for now.”

JPMorgan Chase has also reversed its original projections of a 35 percent drop in Russian GDP in the second quarter and a 7% drop for the entire year of 2022, now forecasting a much milder recession.

The bank did say, however, that existing and potential sanctions will undoubtedly affect Russia, and that the Russian economy would be in far healthier condition if the nation had not attacked Ukraine.

Rouble Recovers To Pre-War Levels

The speed with which Russia’s ruble has rebounded from its early-year meltdown is maybe an even more astonishing display of the country’s economic resiliency. The rouble, Russia’s national currency, has mounted a surprise comeback, even returning to pre-war levels, despite a slew of energy and banking sanctions.

The rouble plummeted in value against the dollar in the days following President Vladimir Putin’s authorization for a full-scale military operation in Ukraine, dropping as much as 30%. The ruble appeared doomed as Western countries blasted Moscow with a slew of new restrictions, including measures limiting the Russian Central Bank’s access to its enormous foreign reserve pool. As Russia ran out of currency, a number of commentators predicted that the country would default.

The rouble, on the other hand, did not stay down for long and began to recover just weeks after its worst drop. The rouble began to rebound by the end of March, and by mid-April, its value had reached 1 RUB = 0.013 USD, a level last seen on the eve of the incursion. The ruble is now trading at 0.016 USD, a level it last reached in January 2020.

What accounts for this resurgence?

Putin’s insistence that Russian gas consumers pay in rubles was brilliant. Following early opposition, western gas buyers are gradually following Moscow’s lead, with VNG, one of Germany’s top natural gas importers, recently opening an account with Gazprombank to pay for Russian gas on Moscow’s terms.

EU payments for Russian pipeline gas have been playing a large part in keeping up the currency, according to Maria Demertzis, deputy director at Bruegel, a Brussels-based economic think tank.

Despite the harsh rhetoric about forsaking Russian energy commodities, Russia continues to sell a significant percentage of its oil and gas, owing to the fact that some of the world’s largest commodity merchants have no qualms about funding Putin’s war machine.

Indeed, Oleg Ustenko, the economic adviser to Ukrainian President Volodymyr Zelensky, has written to the four companies, requesting that they immediately cease trading Russian hydrocarbons because export proceeds are used to finance Moscow’s arms and missile purchases.

Vitol, Glencore, and Gunvor, as well as Singapore’s Trafigura, have all persisted to raise huge volumes of Russian oil and products, including diesel, according to ship monitoring and port data.

Vitol has stated that it will cease purchasing Russian crude by the end of the year, but that is still a long way off. Trafigura said it will halt purchasing crude from Rosneft, Russia’s state-owned oil company, by May 15th, but that it would be free to buy Russian crude cargoes from other suppliers.

Glencore has stated that it will not engage in any “new” commerce with Russia. However, despite the fact that the G7 has pledged to prohibiting or phasing out Russian oil imports, and the United States, Canada, the United Kingdom, and Australia have enacted outright bans, the EU is unwilling to move further, with Hungary retaining a ban hostage. Meanwhile, India and China are compensating for much of Russia’s deficits.

Switzerland’s Golden Calf

Switzerland bears a large share of the blame. Switzerland and its almost 1,000 commodity enterprises trade the majority of Russian raw materials.

Despite being remote from all global trade routes, having no sea access, no former colonial territories, and no substantial raw materials of its own, Switzerland is a major worldwide financial hub with a strong commodities sector.

“This sector accounts for a much larger part of the GDP in Switzerland than tourism or the machinery industry,” says Oliver Classen, media officer of the Swiss NGO Public Eye. Commodity trade volume is nearly $1 trillion ($903.8 billion), according to a 2018 Swiss government data.

According to a report by the Swiss embassy in Moscow, 80 percent of Russian raw materials are sold through Switzerland, according to Deutsche Welle. Oil and gas make up about a third of the raw materials, whereas base metals like zinc, copper, and aluminum make up the other two-thirds. In other terms, agreements made on Swiss tables are effectively enabling the smooth running of Russian oil and gas.

With gas and oil exports accounting for 30 to 40 percent of Russia’s budget, Switzerland’s position in this wartime equation cannot be underestimated. Oil exports alone brought about $180 billion (€163 billion) to Russian state businesses in 2021.

Unfortunately, Switzerland has treated its commodities trade with kid gloves yet again.

Raw materials are frequently sold openly between governments and via commodities exchanges, according to DW. They can, however, be freely traded, and Swiss enterprises have excelled in direct sales as a result of their wealth.

Letters of credit, or L/Cs, have become the favored mechanism for raw materials transactions among Swiss commodity merchants. A bank will lend money to a trader in exchange for a paperwork proving ownership of the commodity. The document (and ownership of the commodity) is handed to the trader as soon as the buyer pays the bank. The approach allows merchants to get extra credit lines without having to prove their creditworthiness, and the bank can use the commodity’s value as collateral.

This is an excellent illustration of transit trade, in which just money passes through Switzerland but actual raw goods do not. As a result, no information about the transaction’s size reaches the Swiss customs officials, resulting in highly inaccurate data on raw material flow rates.

“The whole commodities trade is under-recorded and underregulated. You have to dig around to collect data and not all information is available,” Elisabeth Bürgi Bonanomi, a senior lecturer in law and sustainability at Bern University, has told DW.

Obviously, the lack of regulation appeals to commodities dealers, particularly those who deal with raw resources mined in non-democratic countries like the Democratic Republic of the Congo.

“Unlike the financial market, where there are rules for tackling money laundering and illegal or illegitimate financial flows, and a financial market supervisory authority, there is currently no such thing for commodity trading,” said David Mühlemann, a financial and legal specialist at Public Eye.

But do not hold your breath for things to change anytime soon.

So far, calls from Swiss NGO Public Eye and the Swiss Green Party for a commodities sector supervisory body modeled after the one for the financial industry have struggled to yield results. The Swiss People’s Party’s (SVP) Thomas Mattern has spoken out against such a measure, emphasizing that Switzerland should maintain its neutrality, saying, “We do not need even more regulation, and not in the commodities sector either.”

GreatGameIndia is being actively targeted by powerful forces who do not wish us to survive. Your contribution, however small help us keep afloat. We accept voluntary payment for the content available for free on this website via UPI, PayPal and Bitcoin.

Support GreatGameIndia


  1. Thank you Switzerland. The US would be a better place if it stopped being the warmonger and became a neutral free-market country similar to Switzerland. However, this will never happen as the US congress is more corrupt than Ukraine’s government. Who is John Galt?

  2. What better country to control ALL wars than “don’t shoot we’re neutral” Switzerland, capital of the Khazars and home of the bankers. We agreed generations back that ALL wars are bankers wars, this one being no different except it will be the bloodiest and the last for these minions of Satan.

Leave a Reply