Why Switzerland Blocks Weapons for Ukraine and "Hides" Russian Money?

Tuesday, 23 May 2023

The Western world has generally rallied in support of Ukraine and has been providing increasingly powerful military assistance since the full-scale Russian invasion.

However, as is often the case, there are a few "special" countries, even among European states. One of them is Switzerland. It keeps blocking not only the supply of its own weapons to Ukraine but also the re-export of weapons to Ukraine.

Another problem is Switzerland's reluctance to take active measures to trace and seize Russian "dirty" money.

Sergiy Sydorenko, the editor of EuroPravda, discussed all of this with Oleksandr Volkov from the Ukrainian Society in Switzerland. You can read a summary of the discussion in the article Money Has No Smell." How neutral Switzerland helps and hinders assistance to Ukraine.

Switzerland not only refused to send its "Leopards," as requested by Ukraine, but also blocked the ammunition export for them, located in Germany. As a result, the German company Rheinmetall had to build new production facilities to supply the equipment sent to Ukraine with ammunition.

This policy, although indirectly, is related to Swiss neutrality.

However, the direct basis for the blockade is Switzerland's law on weapons and dual-use goods export, further tightened in November 2021.

According to the amended law, Switzerland cannot export or even allow the re-export of weapons produced in Switzerland if they are received by countries currently involved in armed conflict.

This applies not only to Ukraine but to any country in a state of war.

Germany, which had a similar principle, managed to bypass it. There was a Zeitenwende, a "turning point" in Germany where they understood the exceptional nature of the Russian war and have now become one of the largest suppliers of weapons to the Ukrainian Armed Forces.

Nothing similar has happened in Switzerland.

However, there was an exception when Swiss weapons reached Ukraine.

Currently, state-of-the-art Skynex anti-aircraft guns have appeared or are about to appear in Ukraine. These systems are based on the Oerlikon gun designed in Zurich, Switzerland. However, the production facilities for Skynex are located in northern Italy. The law does not prohibit the supply of weapons designed in Switzerland but manufactured in another country to Ukraine.

Justifying such strict restrictions on arms supplies sparks discussions even within Switzerland.

A bill called "Lex Ukraine," which would allow the re-export of weapons, has now been submitted to the parliament. However, citizens will immediately block its implementation if the parliament approves it. This is a feature of the Swiss system of government, where direct democracy governs.

Another problem is Switzerland's reluctance to take active measures to trace and seize Russian "dirty" money.

Switzerland has a fundamental approach that can be characterised by the phrase "money has no smell." Currently, Swiss citizens are further concerned about the state of the Swiss financial system due to the banking crisis that has begun. This intensifies the fear of capital outflows if the hunt for Russian assets begins.

Even without the current crisis, this principle remains embedded in Swiss culture. The notion is that they provide quality asset management services, and an integral part of it is Swiss banking secrecy.

As a result, Switzerland has currently seized €7.5 billion of Russian money, while independent estimates suggest that Swiss banks hold between €150 to €200 billion originating from Russia.

Despite the ban on exporting Swiss weapons, Swiss citizens have the right to assist the Ukrainian Armed Forces. They actively donate to the Ukrainian army and even more to humanitarian aid. In other words, it can be confidently said that Swiss society is on Ukraine's side.

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