The five largest firms in Switzerland according to annual turnover are not banks or pharmaceuticals but commodity traders. Most of the 900 companies that trade raw materials are based in Geneva, Zug or Lugano. According to a Swiss government report from 2018, the trade volume reaches almost $1 trillion ($903.8 billion).
It is one of the most important trading hubs for raw materials in the world. About a third of the oil that is traded globally is bought and sold in Geneva. Two-thirds of the trade in base metals such as zinc, copper and aluminum are conducted in Switzerland, as are two-thirds of the trade in grain.
Oliver Classen, media officer at the Swiss NGO Public Eye, says that "this sector accounts for a much larger part of the GDP in Switzerland than tourism or the machinery industry."
Gas and oil exports are the main source of income for Russian President Vladimir Putin. They account for 30 to 40% of the Russian budget. In 2021, Russian state corporations earned around $180 billion (€163 billion) from oil exports alone. This is money now being used to finance the war in Ukraine.
As long as politicians keep debating and Western countries do not impose sanctions on raw materials, Swiss commodity traders will continue making millions from Russian raw materials and help to fill Putin's war coffers.
80% of Russian raw materials are traded via Switzerland. Russian oil and gas flows largely thanks to deals signed on Swiss desks. Swiss commodity traders continued to turn a blind eye to what the Russian state was doing with this money.
Angela Mattli, joint managing director at Public Eye, said she deplored the fact that all of this was "quite legal within the framework of Swiss legislation, which had huge loopholes for commodity traders."
Raw materials are often traded directly between governments and via commodities exchanges. However, they can also be traded freely, and Swiss companies have specialized in direct sales. One important reason is that in Switzerland there is certainly enough of the most important raw material for the commodities trade — capital.
Depending on the current price of crude oil, a tanker load can cost $100 million — money that most companies do not have to hand. Certain instruments for handling such business have been developed in Switzerland. In raw materials transactions, letters of credits or L/Cs are often used. A bank will give a loan to a trader and as collateral receive a document making it the owner of the commodity. As soon as the buyer pays the bank, the document and thus ownership of the commodity are transferred to him/her. The system gives traders more credit lines without their creditworthiness having to be checked, and the bank has the value of the commodity as security.
This is an example of transit trade, where only the money flows through Switzerland. The raw materials usually do not touch Swiss soil but go directly from the country of origin to the recipient country. Thus, no details about the magnitude of the transaction land on the desk of the Swiss customs authority. The Swiss National Bank publishes certain details but no precise information about the flow of raw materials. What is clear is that everything is unclear.
"The whole commodities trade is under-recorded and underregulated," said Elisabeth Bürgi Bonanomi, a senior lecturer in law and sustainability at Bern University. "You have to dig around to collect data and not all information is available."
Who is buying what from whom at what price remains in the dark. The owners of unlisted commodity trading companies in Switzerland are mostly unknown. "There are quite a few companies that fly under the radar of the authorities and whose actual beneficiaries are not known because, for example, they are managed in opaque offshore holdings," said Classen. This makes for a good investment opportunity for Russian oligarchs.
The lack of regulation is very appealing to commodity traders — especially because many raw materials are mined in non-democratic countries. "Unlike the financial market, where there are rules for tackling money laundering and illegal or illegitimate financial flows, and a financial market supervisory authority, there is currently no such thing for commodity trading," financial and legal expert at Public Eye David Mühlemann explained.
Oliver Classen from Public Eye revealed that some commodity traders had become lenders to entire countries. Glencore, for example, had given over $1 billion to Chad as credit in return for access to the country's crude oil reserves.
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