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The industry likes to take risks – but everyone wants to avoid violating international sanctions. Especially retailers and banks.
Commodity trading involves large sums of money and many people involved. It is very complicated to ensure that no internationally applicable sanctions are violated, explains Patrick Eberhardt. The lawyer and partner at the Eversheds-Sutherland law firm in Geneva specializes in questions relating to sanctions.
Sellers – Dealers – Banks – Buyers
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Legende:
Keystone
In a commercial transaction – for example the sale and transport of a tanker load of crude oil – not only the seller and the buyer are involved. There are also the dealers who handle the business and the banks who pre-finance it. The seller wants the money for her oil immediately, but the buyer usually only pays after receipt – and months can pass in between. Because commodity traders conduct multiple transactions at the same time, they have credit lines running into the hundreds of billions, issued by various banks.
Both retailers and banks use its services. A breach of sanctions in the important trading center of Geneva would have national but also international consequences. “Because oil trading is carried out in dollars, there is a connection to the USA – and the US authorities would have the opportunity to intervene,” explains Eberhardt.
Sanctions are definitely avoided
Despite the high risks, tankers carrying Russian oil continue to evade Western sanctions. The dealers seem little known. Sanctions specialist Eberhardt does not assume that there are connections to the large raw materials companies.
“If a large trader were to commit such a breach in a single case, all of the group’s loans would become due immediately – a very big risk.” This means that if loans amounting to several billion dollars had to be repaid immediately, it could even bring global corporations to their knees.
China and India suspected
Eberhardt does not know who is behind the transactions with breached sanctions and who is financing them. The lawyer expresses caution. India and China are major buyers of Russian oil. And China in particular also has very liquid banks.
In addition, the transactions could also be carried out without banks and therefore without more precise controls: In this case, the Russian supplier would be paid directly by the recipient – and possibly not in dollars, but in Chinese yen or Indian rupees.
Seco and Finma are required
The raw materials companies and the banks that finance the legal transactions have large compliance departments. These are intended to ensure that companies comply with the law. And they employ lawyers like Patrick Eberhardt to avoid breaches of sanctions.
Enforcing the sanctions and punishing misconduct in the important raw materials trading center of Geneva is the task of the Swiss authorities: the State Secretariat for Economic Affairs (Seco) and the Financial Market Supervisory Authority (Finma) are responsible.
The Federal Prosecutor’s Office has already been involved
Switzerland has tightened its pace since the Russian attack on Ukraine began at the end of February 2022, says the Geneva raw materials lawyer. Initially, the Seco was understaffed. «That has changed. Now we are taking action against suspected sanctions violations.”
This means that if there is suspicion, the authorities can request information in writing. But you are also authorized to search office premises. Individual cases have already been handed over to the Federal Prosecutor’s Office.
Switzerland and Geneva, as important trading centers for the raw materials industry, are likely to be the focus of investigations into sanctions against Russia for the time being. This means that the services of sanctions lawyer Patrick Eberhardt will also remain in demand.