How do economic sanctions in Russia impact on the Swiss commodities trading industry ?

Abstract 0

The purpose of this research is to identify and assess how the economic sanctions imposed by the United States (“US”) and the European Union (“EU”) against Russia impacted the commodity trading sector globally and particularly in Switzerland. To quantify the issue through public opinion, a survey was conducted with natural expected results saying that sanctions do have a negative effect on Russia but no effect in Switzerland. Through interviews with professionals in the industry, the issue was then qualitatively assessed and compared and contrasted to certain academic papers. The results expected were only partially satisfied. The main conclusion is that economic measures against Russia partly changed the way companies are doing business with the country, and they are, essentially, included in the global transformation of the commodity trading industry. Against a backdrop of falling commodities prices, the inability of leading countries to stimulate their economies, a slowdown in emerging markets and a much stronger compliance pressures are some factors that have affected the commodity trading business in Switzerland. The sector was split into three categories and each one of them reacted differently. The banks and financial institutions reacted defensively, closing Russian client’s accounts or reducing their financial exposure. Compliance and Legal departments became an increasing stakeholder in the decision making process and due diligence, relating to Russian origin commodities, which has grown exponentially over the past three years. It resulted in a substantial burden for the small and medium sized traders. It is the group that suffered the most from the sanctions program. The unforeseen aspect was the creation of new business opportunities especially for the major trading companies. Each firm faced the macro situation according to their micro reality; indebtedness, change in the strategy, management of the reputational risk. As for Russia: “they produced, they produce and they will produce” quoted one European trader. The key to future success for companies is how fast they will adapt to new conditions and at what cost.

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