The conflict in Ukraine will “reshuffle the trading cards in Switzerland”

In the world of Swiss commodities trade, the war in Ukraine, the closure of traffic on the Sea of ​​Azov and the impending sanctions are creating fears for the worst. The companies we contacted have ceased operations in Ukraine and some are already talking about a “before and after” conflict. They are also leading the way. Switzerland is a bastion of Russian and Ukrainian raw materials, where 80% of Russia’s hydrocarbons are traded, according to the Confederation.

“I don’t know if 80% of Russian oil is actually traded in Switzerland, but it’s true that the volumes there are huge,” said Florence Schurch, general secretary of the Swiss Trading and Shipping Association. “For Russian and Ukrainian metals and agricultural commodities, the proportions are at least comparable.”

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Switzerland’s Glencore, Trafigura and Vitol are at risk of their operations being affected by sanctions in Russia. Gunvor manages Russia’s oil and gas, and Zug-based company Glencore owns shares in energy companies in both countries, including state-owned Russian company Rosneft. Glencore owns 49% of Viterra, a Dutch agricultural group operating north of the Black Sea. Trafigura and Vitol have shares in a Rosneft oil project in the Arctic. Cofco International and LDC also have a strong presence in Ukraine. Most of these companies declined to respond.

Big impact in Geneva

The sector has been under sanctions since the annexation of Crimea in 2014. Rosneft’s trading division, Rosneft Trading, was liquidated and its employees were made redundant after being pinned down in 2020 by the United States for the export of crude oil from Venezuela, a country under sanction. On Wednesday, Nord Stream 2 AG, the Zug firm that will operate the gas pipeline of the same name, and its boss (a close associate of Putin, according to Tamedia) were sanctioned by the United States.

“The first step will be to know what the sanctions will be and then to see their impact,” said Paul Guéry, Black Sea grain specialist at the Bank of Geneva BIC – BRED. “The war and the sanctions to come will really affect Geneva’s place, in grains and hydrocarbons, there will be a before and an after, the maps will be redefined.” According to him, the sector will no longer be able to cooperate with companies under sanctions and will have to look for new partners. Romania or Bulgaria could compensate for some of the shortcomings. “Sanctions are long-term. None of those dating back to the annexation of Crimea has so far been lifted,” notes Paul Guéry.

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“I am not in a position at this point to tell you whether an Egyptian should be concerned about what he has on his plate,” said Emmanuel Lemoigne, BIC-BRED general manager. Ukraine and Russia, two grain heavyweights, normally export a significant proportion of their grain products from the ports of the Sea of ​​Azov. In recent months, the shipments mainly went to Turkey, Egypt, Indonesia, Bangladesh and Pakistan. According to the FAO, most of the grains stored in Ukraine had already left when traffic was shut down.

“We told our 480 employees in our crushing plant [elle transforme des graines de tournesol, de soja ou de colza en huile ou en matière sèche, ndlr], near Odessa, to stay at home”, says Cornelis Vrins, the boss of Allseeds, a trader based in Thônex (GE). A measure taken by almost all other Swiss groups in Ukraine, from Cargill to Kernel. The carriers MSC and CMA CGM told their customer that none of their container ships would be going to Ukraine before the end of March. Nestlé closed its factories in Ukraine and advised its 5,000 employees to stay at home.

Also read: Wheat prices are rising, but not only because of the crisis in Ukraine

“Whether peace returns soon or not, people will lose their jobs in Switzerland because sanctions threaten to affect business in Ukraine, bankers risk much less funding in the short term, traders will be inactive,” adds Cornelis Vrins.

Low taxes, political stability and Switzerland’s central position have made it a bastion of Russian commodity trading. In 1992, Lia Oil sold Chechen oil from Switzerland. Then the Yukos group, owned by billionaire Mikhail Khodorkovsky, the metal giant Norilsk Nickel, Gunvor and Litasco came to Geneva. In 2002 Yukos said to sell $3 billion gross per year in Geneva. According to those who are speaking, a page in this Swiss history is being turned with the conflict in Ukraine.

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