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Swiss consider using Russian assets for Ukraine reparations

Swiss lawmakers have narrowly backed moves towards allowing the use of frozen Russian state assets to fund war reparations in Ukraine.

Published: 8 March 2024 09:52 CET
Swiss consider using Russian assets for Ukraine reparations
Swiss President Viola Amherd (C-L) and Ukraine's President Volodymyr Zelensky (C-R) hold bilateral talks with their delegations in Kehrsatz near Bern, Switzerland, on January 15, 2024. (Photo by ALESSANDRO DELLA VALLE / POOL / AFP)

The issue has been hotly debated in Switzerland, where discretion in the key banking industry and the country’s tradition of neutrality are highly valued.

The upper house of parliament on Thursday voted by 21-19 in favour of a series of government-backed motions, with three abstentions. The lower house passed them last year.

They pave the way for the government to work on an international legal basis for using frozen aggressor-state assets to pay for reparations in attacked countries.

More than $8 billion in Russian central bank reserves and assets are held in Switzerland.

“The facts are very clear indeed,” Foreign Minister Ignazio Cassis told parliament’s upper house.

“Russia has seriously violated international law. It must therefore repair the damage caused.

“International discussions are under way regarding compensation mechanisms and Switzerland is participating with its knowledge, its skills and all its history in this area.”

Bern will now seek to establish the international legal basis needed for a reparations mechanism to be developed at the global level.

It would be aimed at allowing frozen funds from an aggressor’s central bank, or assets of its state-owned companies, to be legally transferred to an attacked state.

Lively debate

Thursday’s vote followed a lively debate in the upper chamber.

There was concern about whether Switzerland’s image on neutrality might be harmed, and whether Switzerland was doing enough when there was war in Europe.

Cassis argued that since Russia’s full-scale invasion of Ukraine in February 2022, Switzerland had supported the affected populations with around three billion Swiss francs ($3.4 billion).

The government also aims to spend around 1.5 billion Swiss francs on Ukraine and the region between 2025 and 2028. Switzerland also plans to host a peace conference later this year.

“We don’t have to blush when we talk about Ukraine on the international stage,” Cassis said, whether it was on the financial, diplomatic or humanitarian front.

Switzerland’s long-standing position is one of well-armed military neutrality.

It has refused to send arms to Kyiv or allow countries that hold Swiss-made weaponry to re-export it to Ukraine.

But it has matched the European Union’s economic sanctions on Russia.

The economic affairs ministry said in May last year that 7.4 billion Swiss francs of Russian central bank reserves and assets were being held in Switzerland.

Switzerland has also frozen 7.5 billion Swiss francs in Russian funds and assets owned or controlled by sanctioned persons, companies or entities, the ministry said at the time.

The country is a long-favoured destination for wealthy Russians and their assets.

The Swiss Bankers Association estimated that in March 2022, Russian clients held approximately 150 billion Swiss francs in banks in Switzerland.

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POLITICS

Vital Swiss role as US-Iran go-between, as tensions soar

Washington and Tehran have not had diplomatic relations for decades, but before Iran's attack on Israel they had direct communications through "the Swiss channel".

Published: 15 April 2024 23:19 CEST
Vital Swiss role as US-Iran go-between, as tensions soar

Switzerland represents US interests in Iran, and at times of soaring tensions its role as go- between takes on heightened importance.

The Swiss foreign ministry refused Monday to divulge what actions the country had taken in connection with Iran’s weekend attack on Israel.

But US and Iranian officials alluded to the important role Switzerland was playing as an intermediary.

As Washington engaged in whirlwind efforts prior to the attack to prepare for the expected violence, it sent “a series of direct communications through the Swiss channel”, a senior administration official told AFP.

Mohammad Bagheri, the Iranian armed forces’ chief of staff, was more explicit, telling state television that “we sent a message to America through the Swiss embassy that if it cooperates with Israel in their next potential actions, their bases will not be secure”.

 Maintaining relations 

Switzerland, renowned for its neutrality, has been representing US interests in Iran since Washington broke off relations with Tehran after the 1980 hostage crisis, a year after the Iranian revolution.

In its role as the so-called protecting power, Switzerland has for decades allowed the two feuding nations to maintain a minimum of diplomatic and consular relations.

The Swiss embassy in Tehran handles all consular affairs between the United States and Iran, including passport requests, altering civil status and consular protection for US citizens in Iran.

Under the protecting power mandate, Switzerland allows “states to maintain low-level relations and provide consular protection to nationals of the other state concerned”, the foreign ministry explains on its website.

“Switzerland can either offer to act as a go-between on its own initiative or can fulfil this function at the request of the parties concerned, provided that all those involved agree,” it added.

Switzerland has often had to play the go-between role.

The country has on several occasions in recent years mediated in prisoner exchanges between Iran and the United States.

Iran’s interests in the United States are meanwhile represented by Pakistan.

Switzerland also exercises a range of other protecting power mandates.

It represents Iran’s interests in Egypt and Canada.

And it represented Iran’s interests in Saudi Arabia for five years before the two countries resumed diplomatic relations last year.

Saudi has not yet formally terminated Switzerland’s protecting power mandate, so Bern still handles its consular services in Iran.

And until 2015, it represented US interests in Cuba and Cuban interests in the United States.

Switzerland first acted as a protecting power in the 19th century. It looked after the interests of the Kingdom of Bavaria and the Grand Duchy of Baden in France during the 1870-71 Franco- Prussian War.

During World War II, Switzerland’s neutral status paved the way for it to be the main protecting power, representing the interests of 35 states, including the major warring powers, with more than 200 individual mandates.

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