How would an embargo on Russian energy impact Switzerland?
Russia’s retreat from Kyiv has revealed horrific acts against civilians, with pressure growing for further sanctions including a ban on Russian oil and gas. How would a Swiss embargo work and what the impact be?
On Monday, February 28th, Switzerland announced support for international sanctions on Russia as a result of the Ukraine invasion.
The move, which drew some criticism domestically and abroad about a perceived lack of Swiss neutrality, included partial bans on banking finance and trade.
Sanctions on Russia: Is Switzerland still a neutral nation?
The sanctions did not however include a ban on Russian oil and gas imports, which Ukrainian authorities argue is necessary to ensure that sanctions have any meaningful impact to discourage Russia.
How effective would an embargo be?
While sanctions are already biting into the Russian economy, they are expected to only result in an overall decrease of around ten percent of the country’s economy.
Stopping imports of Russian oil and gas – for instance on a widespread basis like a EU-wide ban – would result in far more significant damage to the Russian economy, placing greater pressure on Russian President Vladimir Putin.
Credit Suisse estimates that four million francs flows from Switzerland into Russia daily for oil and gas. Half of the money which flows to the Russian state comes from oil and gas.
Swiss authorities are reluctant however, given the importance of Russian oil and gas in Swiss energy production.
Swiss news outlet Watson reports that it is difficult to determine exactly how much of the refined petrol originally comes from Russia, although approximately 25 percent of the European Union’s crude imports are of Russian origin.
While the reliance on Russian oil is comparatively minimal, Switzerland has a heavier reliance on Russian gas.
Natural gas provides around an eighth of Switzerland’s total energy supply.
Problematically, Switzerland does not have any capacity to store gas in order to prevent insecurity of supply. This is despite a federally mandated store of a variety of other things, including foodstuffs and medication.
Coffee, opiates and nuclear fuel: What are Switzerland’s ‘strategic stockpiles’?
Switzerland buys most of its gas through various European distribution centres, although an estimated 47 percent of this is of Russian origin.
What would a boycott mean for the war?
Matthias Geissbühler, Head of Investments at Raiffeisen Switzerland, told Swiss news outlet 20 Minutes that he felt a boycott would not have the desired impact of shortening the war.
If Europe and allied nations such as the United States, Japan and Australia decided to boycott Russian oil and gas, some of the slack would be picked up by India and China, who have already indicated a willingness to purchase more Russian minerals.
Geissbühler said Russia would likely reapportion money from social welfare funds to continue the fight, meaning that the boycott would take some time to be felt.
One possible approach which has been floated by Swiss economist Matthias Keupp is to flood the markets with oil and gas, thereby significantly reducing the price - and the profit - that Russia can charge.
Geissbühler however indicated that such an approach would require the cooperation of wealthy energy producing nations like Saudi Arabia and Norway, along with developing countries like Angola and Nigeria, and was therefore unlikely.
What would a boycott mean for Switzerland?
While the weather is gradually getting warmer, Switzerland would still need to find a replacement source for Russian oil and gas should an embargo be imposed.
Experts are split on the extent of the impact a ban or boycott would have.
While there are other oil and gas sources such as in the Gulf, currently Europe does not have adequate infrastructure to import it, whether that be through pipelines or docking stations and storage tanks.
Former president and current Federal Council member Ueli Maurer travelled to Qatar in March to negotiate LNG deliveries to Switzerland, with the Gulf country emerging as a likely replacement for Russian energy sources.
Geissbühler notes that the most likely source for oil would be Norway and Saudi Arabia, however replacing Russian gas would be more problematic.
Tresch said "Switzerland would face a real problem" if a stop on Russian energy was imposed, as one in five Swiss houses uses gas for heating.
“As soon as the demand for heating returns, at the beginning of October 2022, the existing gas flows and storage levels will no longer be sufficient.”
Tresch argues that the impact would be minimal on Russia while being significant for Switzerland.
"Russian gas is more important for us than for the Kremlin" Tresch noted.
Geissbühler told 20 Minutes there would be shortages for heating homes across Switzerland, while several companies would likely need to stop production, primarily those in the chemical industry.
"Almost all products contain petrochemicals, if there aren't any, the products become rare and expensive," he said.
Ukraine invasion: How reliant is Switzerland on Russia for energy?
Former Federal Councilor and Energy Minister Doris Leuthard agrees that Swiss industry stands to be hard hit by a lack of gas supply, which would see it lose international competitiveness, although Switzerland is in a better place than other nations, primarily Germany.
Klaus Abberger from the Economic Research Center at ETH Zurich agreed, saying "the Swiss economy would be significantly less exposed to a Russian natural gas supply freeze than the German economy".
Swiss industrial production relies less heavily on gas than it does on oil, while Swiss industry is twice as energy efficient as German or American industry, meaning the impacts would be relatively muted.
Imports however would become more expensive, as Switzerland relies heavily on imported goods from Germany and other neighbouring EU countries.
Switzerland is also hampered by a lack of gas terminals, meaning its capacity to store and save gas is relatively minimal.
"Unfortunately, few LNG terminals have been built because of the higher costs and various pipeline projects in other countries are blocked" Leuthard said.
What about an EU boycott - or a boycott by some EU countries?
Switzerland could unilaterally decide to boycott Russian oil and gas, or it could be subject to an EU boycott.
Several large European countries including Germany and France have indicated a desire to embrace a full or partial oil and gas embargo.
While Switzerland is not an EU member, it receives much of its refined and unrefined energy through the EU, meaning that if the EU decided to boycott Russian oil and gas, Switzerland would also receive very little gas and oil.
Andreas Tresch, a Swiss energy expert, told Blick that Switzerland's gas stocks would take a hit even if only Germany decided to impose an embargo, due to the interconnected gas networks between the two countries.
"Switzerland could expect to no longer receive any gas" in the event of a Germany boycott.
As landlocked Switzerland receives gas from other EU countries rather than direct from gas producing nations, Tresch said other countries facing their own supply issues would likely stop gas exports to Switzerland and other 'third countries'.
"It is to be expected that EU states will decide on a halt to exports with the introduction of an embargo and that third states such as Switzerland will no longer receive gas deliveries."
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On Monday, February 28th, Switzerland announced support for international sanctions on Russia as a result of the Ukraine invasion.
The move, which drew some criticism domestically and abroad about a perceived lack of Swiss neutrality, included partial bans on banking finance and trade.
Sanctions on Russia: Is Switzerland still a neutral nation?
The sanctions did not however include a ban on Russian oil and gas imports, which Ukrainian authorities argue is necessary to ensure that sanctions have any meaningful impact to discourage Russia.
How effective would an embargo be?
While sanctions are already biting into the Russian economy, they are expected to only result in an overall decrease of around ten percent of the country’s economy.
Stopping imports of Russian oil and gas – for instance on a widespread basis like a EU-wide ban – would result in far more significant damage to the Russian economy, placing greater pressure on Russian President Vladimir Putin.
Credit Suisse estimates that four million francs flows from Switzerland into Russia daily for oil and gas. Half of the money which flows to the Russian state comes from oil and gas.
Swiss authorities are reluctant however, given the importance of Russian oil and gas in Swiss energy production.
Swiss news outlet Watson reports that it is difficult to determine exactly how much of the refined petrol originally comes from Russia, although approximately 25 percent of the European Union’s crude imports are of Russian origin.
While the reliance on Russian oil is comparatively minimal, Switzerland has a heavier reliance on Russian gas.
Natural gas provides around an eighth of Switzerland’s total energy supply.
Problematically, Switzerland does not have any capacity to store gas in order to prevent insecurity of supply. This is despite a federally mandated store of a variety of other things, including foodstuffs and medication.
Coffee, opiates and nuclear fuel: What are Switzerland’s ‘strategic stockpiles’?
Switzerland buys most of its gas through various European distribution centres, although an estimated 47 percent of this is of Russian origin.
What would a boycott mean for the war?
Matthias Geissbühler, Head of Investments at Raiffeisen Switzerland, told Swiss news outlet 20 Minutes that he felt a boycott would not have the desired impact of shortening the war.
If Europe and allied nations such as the United States, Japan and Australia decided to boycott Russian oil and gas, some of the slack would be picked up by India and China, who have already indicated a willingness to purchase more Russian minerals.
Geissbühler said Russia would likely reapportion money from social welfare funds to continue the fight, meaning that the boycott would take some time to be felt.
One possible approach which has been floated by Swiss economist Matthias Keupp is to flood the markets with oil and gas, thereby significantly reducing the price - and the profit - that Russia can charge.
Geissbühler however indicated that such an approach would require the cooperation of wealthy energy producing nations like Saudi Arabia and Norway, along with developing countries like Angola and Nigeria, and was therefore unlikely.
What would a boycott mean for Switzerland?
While the weather is gradually getting warmer, Switzerland would still need to find a replacement source for Russian oil and gas should an embargo be imposed.
Experts are split on the extent of the impact a ban or boycott would have.
While there are other oil and gas sources such as in the Gulf, currently Europe does not have adequate infrastructure to import it, whether that be through pipelines or docking stations and storage tanks.
Former president and current Federal Council member Ueli Maurer travelled to Qatar in March to negotiate LNG deliveries to Switzerland, with the Gulf country emerging as a likely replacement for Russian energy sources.
Geissbühler notes that the most likely source for oil would be Norway and Saudi Arabia, however replacing Russian gas would be more problematic.
Tresch said "Switzerland would face a real problem" if a stop on Russian energy was imposed, as one in five Swiss houses uses gas for heating.
“As soon as the demand for heating returns, at the beginning of October 2022, the existing gas flows and storage levels will no longer be sufficient.”
Tresch argues that the impact would be minimal on Russia while being significant for Switzerland.
"Russian gas is more important for us than for the Kremlin" Tresch noted.
Geissbühler told 20 Minutes there would be shortages for heating homes across Switzerland, while several companies would likely need to stop production, primarily those in the chemical industry.
"Almost all products contain petrochemicals, if there aren't any, the products become rare and expensive," he said.
Ukraine invasion: How reliant is Switzerland on Russia for energy?
Former Federal Councilor and Energy Minister Doris Leuthard agrees that Swiss industry stands to be hard hit by a lack of gas supply, which would see it lose international competitiveness, although Switzerland is in a better place than other nations, primarily Germany.
Klaus Abberger from the Economic Research Center at ETH Zurich agreed, saying "the Swiss economy would be significantly less exposed to a Russian natural gas supply freeze than the German economy".
Swiss industrial production relies less heavily on gas than it does on oil, while Swiss industry is twice as energy efficient as German or American industry, meaning the impacts would be relatively muted.
Imports however would become more expensive, as Switzerland relies heavily on imported goods from Germany and other neighbouring EU countries.
Switzerland is also hampered by a lack of gas terminals, meaning its capacity to store and save gas is relatively minimal.
"Unfortunately, few LNG terminals have been built because of the higher costs and various pipeline projects in other countries are blocked" Leuthard said.
What about an EU boycott - or a boycott by some EU countries?
Switzerland could unilaterally decide to boycott Russian oil and gas, or it could be subject to an EU boycott.
Several large European countries including Germany and France have indicated a desire to embrace a full or partial oil and gas embargo.
While Switzerland is not an EU member, it receives much of its refined and unrefined energy through the EU, meaning that if the EU decided to boycott Russian oil and gas, Switzerland would also receive very little gas and oil.
Andreas Tresch, a Swiss energy expert, told Blick that Switzerland's gas stocks would take a hit even if only Germany decided to impose an embargo, due to the interconnected gas networks between the two countries.
"Switzerland could expect to no longer receive any gas" in the event of a Germany boycott.
As landlocked Switzerland receives gas from other EU countries rather than direct from gas producing nations, Tresch said other countries facing their own supply issues would likely stop gas exports to Switzerland and other 'third countries'.
"It is to be expected that EU states will decide on a halt to exports with the introduction of an embargo and that third states such as Switzerland will no longer receive gas deliveries."
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