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‘It has become very difficult to finance trading with Russia’

The war in Ukraine is having a major impact on Switzerland’s commodity trading sector. Many businesses are trying to cut their dependence on Russia, explains Florence Schurch, secretary-general of the Swiss Trading and Shipping Association (STSA).

Trading in natural resources is a key activity for the Swiss economy, especially in the Lake Geneva region, canton Zug, and the Lugano area in Ticino. According to the STSA, which represents firms in commodity trading and related services, the industry accounts for 35,000 jobs and 4% of gross domestic product.

Despite its traditionally low profile, the commodity trading sector regularly lands in the media spotlight, especially when it’s the target of direct democracy initiatives that seek to change sector practices through national votes.

Right now, though, it’s the war in Ukraine that has pushed the industry into the headlines. Three-quarters of the trade in Russian and Ukrainian wheat, oil and gas is believed to be managed through Switzerland, according to the newspaper Le Temps.

SWI swissinfo.ch spoke to Florence Schurch, secretary-general of the STSA, in Geneva.

SWI swissinfo.ch: With the Ukraine war going on, what challenges are your members facing?

Florence Schurch: At the outset, our members operating in Ukraine were busy ensuring the safety of their employees and assets in the country. Some ships got stuck in Mariupol, but fortunately all of the people involved were able to get out.

Some of our members have faced great difficulties due to the sanctions against Russia. It has become very difficult to fund or guarantee any trading with Russia, notably to honour existing contracts. As a result, many companies are changing their business model and no long want to be dependent on Russia at all. 

Florence Schurch

Born and raised in Geneva, Florence Schurch holds a Masters degree in political science from the University of Geneva and a Masters in security studies from Georgetown University in Washington.

After various jobs working with the federal police, the embassy of Switzerland in Washington, and the consulate-general of Switzerland in Frankfurt, Schurch did an 11-year stint as a lobbyist for canton Geneva, defending the interests of the canton at the federal level.

Schurch was appointed secretary-general of the Swiss Trading and Shipping Association (STSA) in February 2020.

SWI: Are there banks based in Switzerland that are still financing transactions with Russia?

F.S.: Every bank is free to adopt its own strategy – as long as it does not violate the current sanctions regime, of course. Yet most of the banks based in Switzerland are going far beyond what the sanctions require. There are cases where trading companies that are fully Swiss and compliant with sanctions have had their bank accounts frozen. That is having an effect on jobs in Switzerland.

SWI: What advantages does Switzerland offer your industry?

F.S.: Among the many advantages that Switzerland has, I would mention the large concentration of banks that specialise in financing commodities trading. An even more important element is the large supply of highly qualified people, thanks notably to the specialised training we have here. I am thinking for example of the Masters in Commodity Trading  at the University of Geneva or the courses on trade finance at the Higher Institute of Banking Training. Without these advantages many of the companies in our sector would have gone offshore a long time ago to reduce their operating costs and pay fewer taxes.

SWI: Which major players in the sector have arrived in Switzerland or left the country recently? Who are your main competitors in terms of location – Amsterdam, London or perhaps Singapore?

F.S.: The situation is stable in Switzerland. We have not seen much movement recently. On the other hand, it’s only natural that some cities will try to attract trading companies currently based in Switzerland. However, it’s not my role to promote our competitors.

SWI: Some Swiss players in commodity trading have been relocating non-essential functions to low-cost countries. Do you know how much of this is actually happening?  

F.S.: Relocating to low-cost countries is a widespread phenomenon and is not at all specific to Switzerland or to our industry. Nevertheless, I’ve been noticing a slowdown of this trend in our sector recently, due no doubt to the pandemic and the war in Ukraine.

SWI: Your industry is regularly the target of popular initiatives in Switzerland. The most recent one, the initiative on responsible business that sought to impose new standards on Swiss companies’ activities abroad, was narrowly defeated in November 2020. What impact do these initiatives have on the sector?

F.S.: These recurrent attacks are attacks on the economy as a whole. I’m thinking of the vote on responsible business, of course, but also the ones on fair food and the stamp duty for big companies. Even if they get nowhere in the end, these attacks destabilise the economy, and that is not at all good for Switzerland. Let’s not forget that businesses create jobs and make it possible to fund training and social programmes. 

SWI: Your sector is something of an oligopoly. For example, agricultural commodity trading is dominated by four global giants: ADM, Bunge, Cargill and Louis Dreyfus.

F.S.: I don’t think our sector really is an oligopoly even if the media tend to focus on a few large companies. In fact, the myriad smaller players – taken as a whole – have more weight than one big company. This is also the case in our association.

SWI: In 2019 the president of the STSA said that the people of Switzerland should be as proud of their commodity traders as they are of their cheesemakers. Has there been any progress on this front?

F.S.: There has been tremendous progress. In the past, traders did not see the need to communicate with the public for all sorts of reasons, especially the number of audits their employers have to undergo and the fact that their infrastructure (mines, silos, ships, and so on) is in other countries. Trading companies are much less well known to the general public than household names like Nespresso, Starbucks, BP or Shell.   

Fortunately, last year the board of our association adopted an active communication strategy. Our goal now is to dispel suspicions that might arise from a lack of communication. We do not want to just leave the field to our detractors. This more vigorous kind of communication is now being pursued, mainly by the STSA itself.

SWI: With regard to environmental, social and governance (ESG) criteria, would you say that the approach taken by Switzerland is ahead of the field or more “wait-and-see”?

F.S.: Swiss trading companies are well ahead of the field on this point, even though they are not getting the credit they deserve. Take the Rainforest Alliance, for example – an initiative that aims to protect forests and biodiversity. Trading companies active in the coffee business are very involved in this organisation. Yet other companies that are much better known are the ones likely to be communicating about the achievements of the Rainforest Alliance.

SWI: Your association holds frequent cocktail parties in Bern for federal members of parliament. Do Swiss politicians have a good enough understanding of your industry?

F.S.: Certainly! We have regular meetings with parliamentarians and even with members of the government. We still need to make a major effort in German-speaking Switzerland, in terms of both communication and contact with politicians.

SWI: The STSA has 180 members out of over 500 companies active in your sector in Switzerland. Some major players like Trafigura, MSC or Glencore do not belong to your association – or no longer do. Isn’t there a problem of legitimacy there?

F.S.: An association like the STSA is like a political party. There are people who go and people who stay. Overall, we are fairly stable, and I am not really worried about this point.

SWI: Like the banking world, the trading sector is a male-dominated field. Why is that?

F.S.: You are quite right, I regret to say. To tackle this problem, I’ve been doing all I can to bring forward women leaders and promote them as models. Fortunately, 25% of students in the Masters programme in commodity trading at the University of Geneva are now women. This percentage is still low, to be sure, but we have come a long way.

Sometimes, too, women are their own worst enemies: while trading firms are ready to hire them, the number of women applying is very low. More generally, Switzerland still lags behind in terms of the advancement of women in the working world. I am thinking of the the cost of childcare and the lack of crèches available.

Translated from French by Terence MacNamee