As tensions rise between Russia and the West, Switzerland announced last week that it has added 26 Russian and Ukrainian individuals and 18 organizations to its sanctions list, bringing the total number of individuals affected to 87 and the number of entities to 20.
Switzerland is not part of the European Union and is not required to support the full package of restrictive measures imposed by the EU on Russia. However, since Switzerland belongs to the Schengen zone, it will have to enforce sanctions on the movement of people into its territory.
Yet these actions are of little importance, and the country’s reticence to follow the EU in implementing a wide range of sanctions against Russia has already attracted criticism from EU members. This week, Estonia’s President Toomas Hendrik Ilves censured Swiss authorities for acting in their own interests and refusing to introduce sanctions against Russia. “Switzerland must live with the criticism that it has only dispensed with its own sanctions to gain an advantage for its banking sector,” he told Sonntags Zeitung.
Some Swiss politicians say they are concerned about the effect the EU sanctions against Russia may have on the country. Others are unapologetic, with Alfred Heer, a Swiss People’s Party (UDC) representative, telling Sonntags Zeitung, “Sanctions punish Russian citizens and businesses. Nonetheless, it is often forgotten that such sanctions have a negative effect on Swiss companies.” The sentiment was echoed by Geri Müller, Green Party member of the National Council, who told the paper, “Such foreign policy does not suit Switzerland.”
The United States, the EU and other countries have introduced several rounds of targeted sanctions against Russian companies and individuals since Crimea’s reunification with Russia at the beginning of the year and the escalation of violence in the Ukraine. Recently sanctions were extended to Russia’s defence, energy and banking sectors.
Moscow has denied military involvement in the Ukraine and has repeatedly denounced the sanctions as counterproductive, saying they could backfire on Europe’s economy. Then last week, Russia stepped up its retaliation by introducing a 12-month ban on agricultural and food product imports from countries that have implemented sanctions against Moscow including Australia, Canada, Norway, the EU and the US. The list includes meat, poultry, fish, seafood, milk, dairy products, and fruit and vegetables.
The ban on foodstuffs will hit EU food producers. Russia imports about 35% of its food from abroad (10% from the EU), making it an important market for processed food from France, Germany and Italy in particular. The damage to EU producers, however, could last longer than the 12 months stated in the ban as Russian politicians are calling for Russian companies to embark on a crash import substitution campaign. Even if they are unsuccessful in manufacturing most produce domestically, Russia has plenty of alternative trading partners to choose from around the world. Not least of which is Switzerland.
Swiss food manufacturers are not affected by the ban, and it is likely that the country’s suppliers of meat, chocolate and dairy products (especially cheese) will benefit if they market their products as quality substitutes for EU fare. The country’s producers are well placed to fill the gaps. Swiss food processing is world leading, with companies such as Nestlé, Hero, Emmi, Lindt and Wernli setting standards globally. These companies are massive exporters already, with established brands and the ability to scale up production throughout their international networks. Switzerland’s well-developed infrastructure and proximity to European Russia also provide the country with competitive advantages over Asian and South American competitors. Indeed, these advantages may outweigh the downside of high Swiss production costs.
It only remains to be seen whether the government will stay committed to the principle of Swiss neutrality. And that in turn begs the question of whether Swiss neutrality claims will prove robust and convincing enough to stem the criticism and ire that has already started to flow from the EU.