By deciding on February 29 to join the sanctions imposed on Moscow by the West in response to the open conflict with Ukraine, and thus suspend its sacred neutrality, the Swiss Confederation passed a decision reported by the Swiss press . In 2014, after Russia’s annexation of Crimea, Bern dressed in the same neutrality and its tradition of “good offices” to waive sanctions against the oligarchs close to Vladimir Putin, in the wake of the United States, the United and the European Union.
“The Federal Council had no choice this time, given the pressure that was being exerted from all sides, both from the outside and from within,” recalls a Geneva editorial board member. The sound of boots in Eastern Europe caused huge swings in the price of energy and food commodities in a matter of days, which in turn placed the Confederation, stronghold of international trade, at the center of all attention.
General disapproval of the behavior of traders
Bern has tried to delay it a bit, Guy Parmelin, the economy minister, calling for “prudence on any sanction that would endanger the world’s food supply”. The argument soon became obsolete as the threat of food insecurity in certain countries of the South increased from the early days of the war.
The sector has no problem following international decisions
The disclosure, at the same time, of the initial elements of the investigation showing a booming trade between Russian crude oil exporters and traders in Geneva, and the widespread disapproval that followed, “certainly contributed to the government’s action,” our editor resumed.
Without any impact on trading itself, which, without more regulation, “stays in line with the law of supply and demand” as one trader sums it up. “The sector has no problem following international decisions. He is used to crises and in the recent past has once again proven that he can adapt in all circumstances,” assures Florence Schurch, General Secretary of the Swiss Trading & Shipping Association (STSA), the industry’s professional association based in Geneva.
Find a way out
The record results, in billions of dollars, announced by the big houses of the place in 2021, after the results already recorded in the wake of the 2008 financial crisis, the Arab Spring of 2011 or the fall in commodity prices, in 2014 , indeed show all their commercial agility. However, having been creative during the pandemic both to find the necessary funds for trades and to conduct physical operations in times of Covid, traders are once again having to find new solutions.
New grain routes are emerging from Argentina or Australia
Especially since, according to the Swiss themselves, so far almost 80% of Russia’s natural energy and food resources have been brought onto the international market from Geneva, Zug or Lugano. Caught between the supply agreements already made that have yet to be fulfilled and the oft-repeated promise not to sign new contracts place with companies affiliated with the Kremlin, the traders therefore look for a way out, which will be imposed on them if the hostilities last. “It is difficult in the short or medium term to divert a pipeline or build a gas pipeline, but if the conflict arises, new supply chains will emerge,” says Florence Schurch.
This has been the case for the past few weeks, in particular to compensate for the absence of 33% of wheat tonnages in international markets after the blockage of Russian and Ukrainian production in the ports. New grain routes are taking shape from Argentina or Australia, particularly towards Africa and the Middle East, where certain countries, such as Tunisia, Libya, Lebanon, Benin or Rwanda, have reduced their supplies almost exclusively to Ukrainian or Russian wheat, or even both in the case of Egypt.
New wells coming soon
Discussions have also started in the area of hydrocarbons, in particular with regard to so-called alternative producing countries, such as in Africa. “The first step is to bring investment to the continent and new wells can come into production within a year and a half,” our trader wants to believe. And African crude oil, estimated today at 5% of the world’s supply, could double in international trade in the longer term…
For the foreseeable future, the continent will see a slight increase in its energy bills in the coming weeks, while according to the FAO the prices of grains, diesel and agricultural products have already risen by 48%, 85% and 35% respectively worldwide since 2019.
“This crisis demonstrates once again the urgency for Africa to ensure its food and energy independence,” the trader continued. And thus determine its own trade routes, without necessarily passing through Geneva.