Switzerland, a bastion of neutrality through two world wars, has decided to adopt wholesale swingeing EU sanctions against Russia, potentially freezing billions of dollars in assets and further increasing the pressure on the Russian economy. Swiss national bank data showed that Russian companies and individuals held assets worth more than $11bn in Swiss banks in 2020.
The Federal Council also announced it had banned five oligarchs close to Vladimir Putin from entering the country. Flights from Russia are being banned, although this will not apply to flights carrying diplomats.
Switzerland had until now adopted very limited measures, including barring Swiss companies from taking on new business with three Russian oligarchs named by the EU as sanctions targets last week. Switzerland is obliged by law to adopt UN sanctions but has a choice over how it responds to EU measures. Its refusal to do more last week was heavily criticised by the EU for letting neutrality and Swiss banking laws become complicity.
The Swiss president, Ignazio Cassis, said it was possible a precedent had been set, but added: “Never since the second world war has the rights of one country been so violated by another. You cannot stand aside. To play into the hands of an aggressor is not neutral.” He insisted it did not mean Switzerland’s role as an active mediator was over.
The government is not imposing a ban on commodity trading. Nearly 80% of Russian commodity trading takes place virtually via financial service centres in Switzerland. Russian energy and raw materials groups such as Gazprom and Russian state banks have major branches in Switzerland.
The new steps are qualitatively different from anything Switzerland has done previously to shackle Russia, partly because the measures adopted by the EU itself are so sweeping. It is not clear if Russia’s Central Bank holds large foreign reserves in Switzerland, but the country no longer becomes a haven for Russian cash.
The Bank for International Settlements (BIS), the Swiss-based global financial umbrella body nicknamed the “bank for central banks”, has said it will not be an avenue for any circumvention of western sanctions placed on Russia for invading Ukraine.
More than 20,000 people marched though Berne on Sunday in protest at the invasion, and the Swiss socialist party had urged the executive Federal Council to take stronger measures.
Last week, Ignazio Cassis condemned Russian aggression in a strongly worded statement, but he has been trying to balance calls for sanctions with the country’s traditional commitment to neutrality.
Formally, the measures do not undermine that widely supported neutrality principle, as Switzerland says it is acting in defence of international law, but Moscow is hardly likely to accept that explanation.
Meanwhile Finland has taken the “historic” decision to supply weapons to Ukraine, the country’s government announced. Finland is a member of the EU but not of Nato, although it does have partnership status with the US-led military alliance.
Switzerland did not adopt the EU’s sanctions after the Russian invasion of Ukraine in 2014, citing the work it was doing through the Organization for Security and Cooperation in Europe (OSCE) to help bring about a ceasefire.
Germany and Sweden have similarly found longstanding political shibboleths challenged by Russia’s actions.
Switzerland, alongside London, is probably the single biggest home for Russian oligarchs seeking to house their cash. Attracted to the country’s strict banking secrecy laws, Russians held nearly 10.4bn Swiss francs ($11.24bn) in Switzerland in 2020, Swiss National Bank data shows.
The government said on Friday that financial “intermediaries” in Switzerland were now banned from starting new business relationships with 363 Russian people and four Russian companies. Any existing business must be reported to the Swiss economic affairs secretariat. Further steps are under consideration.
The Swiss embassy in Moscow reported last year that “Switzerland has for years been by far the most important destination worldwide for rich Russians to manage their wealth,” and that net transfers by Russian taxpayers to Switzerland totalled $2.5bn in 2020.
The Swiss government represents the interests of the former Soviet republic of Georgia in Moscow and Russia’s interests in Tbilisi, the Georgian capital, under an arrangement set up after those two countries broke off bilateral ties during their conflict in 2008.
On Sunday the Ukrainian president, Volodymyr Zelenskiy, asked his Swiss counterpart to act as a neutral mediator between Ukraine and Russia and help work towards a ceasefire, notably in the context of a Human Rights Council meeting in Geneva opening on Monday.