Despite the sanctions, Russian coal remains in Switzerland's blind spot

Zurich, Lausanne, 13. June 2022

Unnoticed by the public, Switzerland has over the last twenty years become a key hub for Russian coal. Three-quarters of Russia’s exports are now traded in and around Zug, as revealed by an exclusive Public Eye investigation. With companies such as SUEK, founded by oligarch Andrey Melnichenko, Zug's “Coal Valley” is home to Russia's biggest mining groups, which produce more than 225 million tonnes of coal per year. Despite an embargo on Russian coal in place since the end of April, the State Secretariat for Economic Affairs does not even know which companies are based in Switzerland or who owns them. The war in Ukraine shows that Switzerland must take the blinkers off and start regulating commodity trading.

As a rear base of the oligarchs and their fortunes, hub of Russian oil and grain trading, Switzerland has, for decades, maintained close ties with the regime of Vladimir Putin. The war in Ukraine has put these ties in the spotlight. But another strategic sector, known for its meteoric rises and dangerous liaisons with power, has so far remained in the shadows: coal. Since 27 April, however, the import, sale and provision of financial services around Russian coal are prohibited in Switzerland, transitional provisions will continue to apply until the end of August. The Swiss State Secretariat for Economic Affairs (SECO) is in charge of enforcing this embargo, which Switzerland has adopted from the European Union. However, the agency does not even have a list of companies active in this particularly opaque sector.

Public Eye has decided to investigate this blind spot in the Swiss commodity trading centre. We scoured the cantonal trade registers and used publicly available data to map the Swiss coal hub, which is made up of 240 companies, with Zug as its Russian axis. Known for its tax incentives, the city is home to 52 coal companies, of which at least 12 are directly controlled by Russian citizens. As we have discovered, the nine largest Russian coal extractors have settled in Zug or in the East of Switzerland since the beginning of the 2000s, and only one of them has since departed. Represented by a simple office or a tag on a letter box, these companies – whose portraits we have drawn – compete with Glencore on the coal market and trade around 75% of Russia’s coal exports – all from Swiss territory.

These companies are in the hands of oligarchs or wealthy Russian businessmen. Among them is the Siberian Coal Energy Company (SUEK), the largest producer in Russia, whose trading subsidiary has been domiciled in Zug since 2004. On the eve of the imposition of EU sanctions, Andrey Melnichenko made sure that his wife became beneficiary of the trust that holds SUEK, a legal scheme approved by SECO. On 10 June, Switzerland has decided to adopt the EU’s sixth sanctions package and has thus added Alexandra Melnichenko’s name to her husband’s on the blacklist.

While Switzerland is being criticised for its inefficient implementation of sanctions, the National Council (the lower chamber of the Swiss parliament) voted on 9 June to reject, by 103 votes against 80, a motion calling for the creation of a supervisory authority of the commodity sector. Such a sectoral authority would however, similar to Switzerland’s financial market supervisory authority FINMA, put in place greater transparency by granting licences to companies and verifying that requirements are fulfilled, in particular regarding the identification of beneficial ownership. If such a ROHMA, as imagined in 2014 by Public Eye existed, SECO would know which companies active in coal are established in Switzerland and by whom they are owned. This would also help to implement the oil embargo, which the Swiss Federal Council has adopted from the EU on 10 June.

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