Big consumer brands are leaving Russia in droves but for many Swiss companies untangling ties isn’t that easy.This content was published on March 16, 2022 - 14:00
Last week Swiss chocolate maker Lindt & Sprüngli joined a chorus of brands like McDonald’s closing shops and suspending deliveries to Russia after its invasion of Ukraine.
The decision by Lindt & Sprüngli took some by surprise. The company’s CEO, Dieter Weisskopf, had said during its annual results call a day before, that it was planning to keep operations running in Russia. “We’re not supplying arms or petrol, bear that in mind. But we’re monitoring the situation closely,” Weisskopf is quoted in the Financial Times.
Less than 1% of the company’s sales were in Russia so the temporary halt wasn’t a financial blow. Russia exports more chocolateExternal link than Switzerland these days.
Whether it’s sanctions, supply chains, solidarity or reputation, many companies are opting to leave rather than explain why they are staying in Russia. On Tuesday, Novartis joined several other pharma companies in scaling back operationsExternal link in Russia. Nestlé stopped advertising and new investments in the country but has been under pressure by some groups for continuing to supply essential goods.
While the optics of seeing Swiss chocolate on supermarket shelves in Russia aren’t good, these aren’t where the real problems lie for many Swiss companies. Many have been intertwined with Russian money for years. Russian billionaire Viktor Vekselberg, who is a resident of Switzerland and on the US and UK sanctions lists, is an investor in big Swiss machinery companiesExternal link.
Another exposed sector are the commodity traders that “thrive in times of conflict by keeping their heads down and capitalising on volatilityExternal link” the Economist wrote a few weeks ago. According to one statistic, Switzerland is responsible for over 80% of all trading contractsExternal link for supply of raw materials from Russia but there’s no breakdown of this anywhere – an illustration of how opaque the industry is. The Swiss government and NGOs have starkly different accounting of Switzerland's market share in commodities.
Big traders like Trafigura and Glencore condemned the attacks and said they comply with sanctions but are reportedly still loading oil productsExternal link in Russian ports. Companies told media agencies that they are fulfilling pre-invasion contractual obligations.
But there are many more companies under the radar. Bloomberg reported that trading houses with ties to Russian oligarchs are peppered all over the low tax canton of Zug. Local officials estimate that there are at least 40 companies connected to Russia that employ about 900 people in the canton. Twenty firms identified as Russian by the canton paid CHF31 million ($33 million) in cantonal and municipal taxes in 2020.
But the “the true scale of Russian operations in Zug is hard to determine because Swiss registration rules demand limited information from companies looking to do business there,” writes Bloomberg.
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