In a break from its past, neutral Switzerland on Monday announced to adopt the European Union’s sanctions against Russians involved in the invasion of Ukraine and freeze their assets.
"In view of Russia’s continuing military intervention in Ukraine, the Federal Council took the decision on February 28 to adopt the packages of sanctions imposed by the EU on 23 and 25 February," the government said in a statement on Monday.
As per a Reuters report, the Alpine country has also adopted financial sanctions against Russian president Vladimir Putin, Prime Minister Mikhail Mishustin and Foreign Minister Sergei Lavrov, effective immediately.
Earlier on Thursday last week, Swiss president Ignazio Cassio announced that the country would adopt EU travel bans for 367 Russian individuals and companies. However, it refrained from freezing financial assets, saying it would instead stop its banks from accepting any more money from those on the sanctions list.
The Federal Council pledged that Russian individuals and companies hit with EU sanctions won’t be able to evade them in Switzerland, which is not one of the EU’s 27 member states.
Also read: What are sanctions and can they stop Russia’s invasion of Ukraine?
The decision of issuing sanctions against Russia is radical as the Swiss have relished their role and reputation as a skilled and neutral mediator for international conflicts.
So let's find out why Switzerland’s sanctions against Russia is a big deal:
According to a report compiled by the Swiss Embassy in Moscow, Switzerland has been the biggest recipient of transactions by Russian private individuals – ahead of Britain, Spain, Luxembourg and the United States.
“Switzerland has for years been by far the most important destination worldwide for rich Russians to manage their wealth,” the report said, adding that net transfers of Russian taxpayers to Switzerland totaled $2.5 billion in 2020.
The Swiss news agency SDA-ATS reported net transfers of $1.8 billion in the first half of 2021.
Swiss finance minister Ueli Maurer said that Switzerland would support the international decision to cut Russian banks off from the global SWIFT bank messaging system.
The global financial artery that stands for Society for Worldwide Interbank Financial Telecommunication {SWIFT} allows a smooth and rapid transfer of money across borders.
Cutting Russian banks off from SWIFT renders them virtually incapable of operating outside of Russian borders.
The statement from EU, the US, the UK and others said the move would "ensure that these banks are disconnected from the international financial system and harm their ability to operate globally".
Banks would be likely to have to deal directly with one another, adding delays and extra costs, and ultimately cutting off revenues for the Russian government.
Switzerland is also home to many commodity firms that have strong financial involvement with Russia, or such firms that are in active trade relations with Russia for oil and gas.
According to swissinfo, about 80 per cent of Russia’s commodity trading goes through Switzerland.
Commodity traders like Vitol and Trafigura have stakes in projects by Russian oil giants Rosneft and trade in Russian oil.
According to the Russian embassy in Bern, Russian banks like Sberbank and Gazprombank have branches in Switzerland.
Frozen private money and suspended trade relations with one of its biggest trade partners can really hurt Russia economically, especially when strict sanctions from the US, the UK and the EU are already in effect.
By putting sanctions on individuals and companies, who could have otherwise helped Russia in the time of emergency, Switzerland has effectively kicked them out of the Swiss banking system and frozen their assets.
On Monday, Switzerland also closed off its space to Russian flights, taking the lead from several other European countries.
According to USA Today, the effects of crippling Western sanctions is being felt in Russia as the country’s Central Bank sharply raised its key borrowing rate from 9.5 per cent to 20 per cent in a desperate attempt to shore up the plummeting ruble.
With inputs from agencies
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