Historical Relationship: The End of Neutrality
On June 3rd, the European Union (EU) adopted the Sixth Package officializing, the Russian oil embargo, along with a variety of other sanctions and political promises. Switzerland, while not a member of the EU, is an important external trading partner. Historically, the EU and Switzerland’s relationship remained extensively market-oriented. The treaties demonstrating this intricate economic relationship include the Bilateral I Agreements signed in 1999, and the seven sectoral agreements passed on May 21st 2000 in a referendum.
As mainstream pressure mounts to sanction Russia, Switzerland’s neutrality ceased with its adoption of the Sixth Package on June 10th, 2022. The Sixth Package, similarly to the bilateral agreements, instructs mandatory sanctions to all package signees. It implies that all sanctions must be mirrored homogeneously amongst the treaty participants. Now the EU’s ongoing sanctions against Russia and Belarus, and their military personnel guilty of war crimes in Bucha and Mariupol extends to Switzerland.
Swiss-Russian Economic and Financial Controversies
Switzerland helps bolster the financial pressure on Russia with the seizure of Sberbank from the SWIFT banking transaction system, said to be officialized on Friday June 17, 2022.
Controversies arose with Russian billionaire Andrey Melnichenko transferring his assets to his wife, Aleksandra Melnichenko, the day before the adoption of sanctions. Andrey Melnichenko was sanctioned on the grounds of his involvement with Kremlin officials and the EU’s sanctioning of Putin’s oligarchs and elites liaisons.
EuroChem is a global fertilizer producing company, based in Switzerland, with Russian board directors and beneficiaries, namely Andrey Melnichenko. By transferring the assets to his wife, Swiss financial officials allowed for the billionaire’s companies to operate, since it no longer involves a direct link to Kremlin officials, as did the German and British officials.
The Swiss government’s back and forth decisions on whether to sanction EuroChem, one of Melnichenko’s companies and the biggest fertilizer company in Europe, sparked controversy as Swiss officials remain indecisive. A statement made on June 10 by the State Secretary for Economic Affairs (SECO) states that:
“EuroChem, as a Swiss company, is legally bound to comply with Swiss law, including sanctions. It is up to EuroChem to take the necessary measures within the Swiss legal system to allow the company to continue to exist.”
Although Reuters reported the blacklisting of Aleksandra Melnichenko, their companies continue to operate and are at risk of legal violations. Despite statements made by EuroChem assuring the EU of its compliance, the efficacy of their measures remain disputed.
“No funds or economic resources will be made available, directly or indirectly, to sanctioned persons”– EUROCHEM ON JUNE 10, 2022
The Complexities of Past Agreements
The essence of the dispute between Switzerland and the EU goes back to the Swiss’ rejection of the EU membership, in 1992 and 2016, specifically over joining the European Economic Area (EEA) in 1992. It laid the foundations to Switzerland’s neutrality within EU decisions.
Further, complexities arise with the 120 bilateral agreements, managed multi-dimensionally by 20 bodies, whereby any legislations covering the agreed upon bilateral sectors must be adhered to by Switzerland.
In the Customs Union legislation, the clause on free movement in harmonized and non-harmonized sectors becomes problematic with the implications of the oil embargo. The importance lies within the trade relations on the economic and political relationships of both parties, and on the assurance within the clause of:
“The principle of free movement of goods ensur[ing] that these provisions do not lead to the creation of unjustified barriers to trade.”
Commentaries made, namely by Sophie Michaud Gigon, concerning Switzerland’s fraudulent behavior following the Sixth Package’s adoption originate from the clauses within the Free Trade Agreement signed in 1972. The Free Trade Agreement grants the private sector access to all of the EU markets, thereby directly targeting over half a billion European consumers. It separates the public from the private sector, meaning that the private sector has the right to invest in the EU internal markets under the European Free Trade Association (EFTA) agreement.
“Switzerland, as a hub for commodity trading, participates in the financing of the Russian war machine. It is thus responsible for corruption, pollution and human rights violations. The National Council now has the possibility of creating more transparency in this important business for Switzerland in the long term: by creating a supervisory authority for commodity trading.”– SOPHIE MICHAUD GIGON, JUNE 9, 2022.
EU-Russia Bilateral Agreements
The Sixth Package immediately suspended all bilateral agreements between the EU and Russia targeting the energy sector and its technical and expert infrastructures. The EU’s ban on Sberbank, a Russian financial service industry, handicaps Russia’s banking transaction system as it freezes its services.
On June 15 Nasdaq reported that Russia’s Sberbank is expected to sell, by July, its subsidiary companies in Kazakhstan and Switzerland following the Sixth Package. The implications for Russia are two fold, and mostly financial.
The first implication posits the closure of the companies in Kazakhstan. This severely halts Sberbank’s local operations as Kazakhstan is, as Nasdaq reports, the primary contender. A second implication involves the European markets following the sanctions. The EU sanctions forced the European branch of Sberbank, Sberbank Europe AG, to cease its operation, namely in Vienna and Austria, leading to failed deposits.
The Green’s Solution to Controversy
The Swiss Greens request for the creation of a commodity trading supervisory authority (ROHMA) revealed a further attempt to ensure an anti-corruption transition between EU members. The reason is that Switzerland’s Golden Calf, as Alex Kimani labels the relationship between Russia and Switzerland’s raw resource exchange, holds severe economic implications for both nations. As Oliver Classen discloses on Russian-Swiss trading relations:
“This sector accounts for a much larger part of the GDP in Switzerland than tourism or the machinery industry”.
Therefore, a body overseeing transactions, especially given Switzerland’s fraud-experienced history, for the Greens, ensures efficient sanctioning.
Moving Forward, a Personal Note
Questioning the EU and Swiss decision-makers actions with the prospects of economic relations post-War implies a rebuttal of foreign security and energy sectors’ relations. Namely, questions pertaining to national sovereignty, ethics and morality, trade and business relations between the private and public sectors remain unthought of by officials.