Neutral Switzerland’s economy shaken by sanctions on Russia

Switzerland's newly adopted tough stance on Russia has forced the Swiss economy to readjust to sanctions, blowing a wind of panic through the raw materials market in particular.

Neutral Switzerland's economy shaken by sanctions on Russia
This picture taken on September 24, 2019 from the top of the Saleve mountain shows the public lighting of the Greater Geneva. (Photo by FABRICE COFFRINI / AFP)

Switzerland announced Monday it would follow the sanctions being imposed by the European Union, abandoning Bern’s traditional reserve by ordering the immediate freezing of assets belonging to Russian companies and individuals appearing on the EU blacklist.

And it went further on Friday, adopting even stricter EU sanctions applied in response to Moscow’s February 24 full-scale invasion of Ukraine.

Exporting goods that could enhance Russia’s military capabilities is prohibited, as is the exportation of certain goods and services in the oil sector, and aviation technology.

“The implementation of these sanctions is compatible with Switzerland’s neutrality,” the government insisted in a statement.

The wealthy Alpine nation’s businesses are complying with the sanctions but have also stressed that Russian money accounts for only a fraction of their turnover, in an attempt to reassure investors.

The airline Swiss, a subsidiary of Germany’s Lufthansa, has suspended its flights to Moscow and Saint Petersburg.

Global container shipping company MSC and freight logistics firm Kuehne + Nagel have stopped taking Russian orders for cargo, except for food, medical and humanitarian goods.

Business lobby Economiesuisse said the sanctions would have “limited” direct consequences on foreign trade.

Russia is only Switzerland’s 23rd-biggest trading partner. The Swiss mainly export medicines, medical products, watches and machinery to Russia, while the chief imports are gold, precious metals and aluminium.

In 2021, exports to Russia amounted to 3.2 billion Swiss francs ($3.5 billion, 3.2 billion euros), with imports as low as 270 million francs, according to the customs authorities.

However, the landlocked state is an important player in raw materials trading, through companies such as Glencore, Trafigura, Vitol and Gunvor.

Gennady Gatilov, Russia’s ambassador to the United Nations in Geneva, said Friday he was surprised by the sanctions, because Switzerland had always “tried to maintain a certain neutrality”.

 “We are disappointed with this, because we have very good relations with Switzerland… and the joining of Switzerland to these unlawful sanctions… will have (a) certain negative impact,” he told reporters.

Crisis mode

According to figures circulating in the Swiss press, 80 percent of Russian oil is traded in Switzerland, though Florence Schurch, secretary general of the Swiss Trading and Shipping Association, could not confirm the figure.

The exact amount is “being assessed”, she told AFP, nonetheless confirming that the sector weighs heavily in the economy.

In employment terms, energy, grains, metals and minerals trading represents some 10,000 direct and 35,000 indirect jobs.

 “Since Monday, everyone has been in a bit of a crisis cell mode,” Schurch explained. Some companies are already trying to “locate their cargoes” on the move, or “repatriate sailors stranded in the Black Sea”.

“A lot of companies have censored themselves,” she said, not least because payments are becoming “complicated” now that Russian banks are cut off from the SWIFT system and Swiss banks are reviewing their trade financing.

The Swiss-based Nord Stream 2 company has gone under after Germany halted the gas pipeline following Moscow’s invasion of Ukraine.The bankruptcy has caused panic in the sector.

Trading giant Glencore has announced it is reviewing its business in Russia while Trafigura is revisiting its stake in Vostok Oil — Rosneft’s major oil project in Siberia.

Banks, watches and tourism

Swiss banks are a popular place for wealthy Russians to stash their money. According to the Bank for International Settlements, Swiss banks’ liabilities to Russian customers amounted to $23 billion in the third quarter of 2021. 

The Swiss Bankers Association reacted to the sanctions by saying that Russia was “not a priority” market, and excluded the Swiss subsidiaries of Gazprombank and Sberbank from its ranks.  

On the stock market, the Richemont group and the Swiss watch giant Swatch were also shaken by investor fears for the luxury sector.  

Russia represents only about “one percent of our exports”, said Jean-Daniel Pasche, head of the Federation of the Swiss Watch Industry. 

But the fall of the ruble could affect watch sales and the conflict also threatens to delay the return of Russian customers who “have not come to Switzerland since the start of the pandemic”, he added.  

In 2019, before the Covid-19 crisis, Russian tourists accounted for only 1.7 percent of hotel nights in Switzerland.  

“However, it is a wealthy clientele” favouring five-star hotels, said Switzerland Tourism spokeswoman Veronique Kanel.  

Some large hotels with a loyal Russian client base could therefore be “more specifically impacted”.

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Rapping, breakdancing Ukrainians win Eurovision in musical morale boost

Ukraine won the Eurovision Song Contest Sunday with an infectious hip-hop folk melody, boosting spirits in the embattled nation fighting off a Russian invasion that has killed thousands and displaced millions of people.

Rapping, breakdancing Ukrainians win Eurovision in musical morale boost

Riding a huge wave of public support, Kalush Orchestra beat 24 competitors in the finale of the world’s biggest live music event with “Stefania”, a rap lullaby combining Ukrainian folk and modern hip-hop rhythms.

“Please help Ukraine and Mariupol! Help Azovstal right now,” implored frontman Oleh Psiuk in English from the stage after their performance was met by a cheering audience.

In the Ukrainian capital Kyiv, the triumph was met with smiles and visible relief.

“It’s a small ray of happiness. It’s very important now for us,” said Iryna Vorobey, a 35-year-old businesswoman, adding that the support from Europe was “incredible”.

Following the win, Psiuk — whose bubblegum-pink bucket hat has made him instantly recognisable — thanked everyone who voted for his country in the contest, which is watched by millions of viewers.

“The victory is very important for Ukraine, especially this year. Thank you from the bottom of our hearts. Glory to Ukraine,” Psiuk told journalists.

Music conquers Europe

The win provided a much-needed morale boost for the embattled nation in its third month of battling much-larger Russian forces.

Mahmood & BLANCO  performing for Italy at Eurovision 2022

Mahmood & BLANCO perform on behalf of Italy during the final of the Eurovision Song contest 2022 in Turin, Italy. (Photo by Marco BERTORELLO / AFP)

“Our courage impresses the world, our music conquers Europe!” he wrote on Facebook.

“This win is so very good for our mood,” Andriy Nemkovych, a 28 year-old project manager, told AFP in Kyiv.

The victory drew praise in unlikely corners, as the deputy chief of the NATO military alliance said it showed just how much public support ex-Soviet Ukraine has in fighting off Moscow.

“I would like to congratulate Ukraine for winning the Eurovision contest,” Mircea Geoana said as he arrived in Berlin for talks that will tackle the alliance’s expansion in the wake of the Kremlin’s war.

“And this is not something I’m making in a light way because we have seen yesterday the immense public support all over Europe and Australia for the bravery of” Ukraine, Geoana said.

British Prime Minister Boris Johnson called the win “a clear reflection of not just your talent, but of the unwavering support for your fight for freedom”.

And European Council President Charles Michel said he hoped next year’s contest “can be hosted in Kyiv in a free and united Ukraine”.

‘Ready to fight’
Despite the joyous theatrics that are a hallmark of the song contest, the war in Ukraine hung heavily over the festivities this year.
The European Broadcasting Union, which organises the event, banned Russia on February 25, the day after Moscow invaded its neighbour.
“Stefania”, written by Psiuk as a tribute to his mother before the war, mixes traditional Ukrainian folk music played on flute-like instruments with an invigorating hip-hop beat. The band donned richly embroidered ethnic garb
to perform their act.
Nostalgic lyrics such as “I’ll always find my way home even if all the roads are destroyed” resonated all the more as millions of Ukrainians have been displaced by war.

Kalush Orchestra received special authorisation from Ukraine’s government to attend Eurovision, since men of fighting age are prohibited from leaving the country, but that permit expires in two days.

Psiuk said he was not sure what awaited the band as war rages back home.

“Like every Ukrainian, we are ready to fight as much as we can and go until the end.

Britain’s ‘Space Man’

Ukraine beat a host of over-the-top acts at the kitschy, quirky annual musical event, including Norway’s Subwoolfer, who sang about bananas while dressed in yellow wolf masks, and Serbia’s Konstrakta, who questioned national healthcare while meticulously scrubbing her hands onstage.

Coming in second place was Britain with Sam Ryder’s “Space Man” and its stratospheric notes, followed by Spain with the reggaeton “SloMo” from Chanel.

After a quarter-century of being shut out from the top spot, Britain had hoped to have a winner in “Space Man” and its high notes belted by the affable, long-haired Ryder.

Britain had been ahead after votes were counted from the national juries, but a jaw-dropping 439 points awarded to Ukraine from the public pushed it to the top spot.

Eurovision’s winner is chosen by a cast of music industry professionals — and members of the public — from each country, with votes for one’s home nation not allowed.

Eurovision is a hit among fans not only for the music, but for the looks on display and this year was no exception. Lithuania’s Monika Liu generated as much social media buzz for her bowl cut hairdo as her sensual and elegant

Other offerings included Greece’s “Die Together” by Amanda Georgiadi Tenfjord and “Brividi” (Shivers), a duet from Italy’s Mahmood and Blanco.

Italy had hoped the gay-themed love song would bring it a second consecutive Eurovision win after last year’s “Zitti e Buoni” (Shut up and Behave) from high-octane glam rockers Maneskin.