US worried Swiss leaving loophole in Russia sanctions

The US ambassador to Switzerland criticised the Alpine country’s latest sanctions on Russia, saying he was disappointed by a “loophole” which could see them circumvented, newspapers reported Friday.

On Wednesday, Switzerland matched most of the European Union’s 14th package of sanctions against Russia over its war in Ukraine.

However, it made some exceptions, notably deciding not to take up a measure requiring companies to ensure that their subsidiaries based in third countries do not undermine the sanctions.

Scott Miller, the US ambassador in Bern, told Tamedia group newspapers that the move was “disappointing”, with the embassy confirming the quotes to AFP.

“We hope it will work to close the loophole that enables overseas subsidiaries to evade sanctions,” he said.

“It is essential we target sanctions circumvention to deny Russia the finances and material it needs to continue its brutal war” in Ukraine.

“None of our companies should be complicit.”

While militarily a neutral country, Switzerland, which is not in the EU, has followed the bloc’s lead in imposing sanctions on Russia following its full-scale invasion of Ukraine in February 2022.

But the Alpine nation has regularly come under criticism from the United States as well as its European partners, who have accused it of not doing enough to track down the assets of Russian oligarchs in the vaults of Swiss banks.

In a statement Wednesday, the Swiss government justified its decision not to adopt the part of the 14th round of EU sanctions relating to third-country subsidiaries.

“Switzerland already has the means to prosecute companies for circumventing sanctions by using their subsidiaries, and is actively doing so,” it said.

The economic affairs ministry “is currently examining a number of cases in which Swiss companies are suspected of violating sanctions through their subsidiaries abroad”, the government added.

Yet Switzerland’s centre-left Social Democratic Party called the decision “scandalous”, seeing it as a way of protecting the interests of commodity traders in the country.

It “leaves the door wide open to circumvention transactions”, the country’s second-biggest party said in a statement.

Many commodity trading firms are based in the Swiss cantons of Geneva and Zug, though some have transferred part of their activities abroad since the beginning of the conflict.

Targets of the latest sanctions package include liquefied natural gas, ships carrying raw materials and Russian diamond imports.