Switzerland/Paramount: block loopholes which swerve oil sanctions

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Switzerland has a history of tiptoeing advantageously between warring nations. It joined with the US, the EU and the UK in condemning Russia’s invasion of Ukraine. Its version of sanctions meanwhile appears to create useful leeway for international commodity traders such as Paramount Energy & Commodities.

Since early December, several countries including Switzerland have banned local companies from trading and shipping Russian oil at prices above $60 per barrel.

At least one Geneva-based crude trader, Paramount, continued to do so by indirect means, the FT reported in March. It created an offshore subsidiary in the United Arab Emirates for the purpose.

Paramount shifted its Russian oil trading to this subsidiary, whose location exempted it from the sanction. One important eastern Russian grade of crude, known as ESPO, has consistently traded above the $60 per barrel threshold.

Paramount says the UAE business is a totally separate entity that exploits no loophole.

It has emerged that the Swiss authorities are scrutinising the exemption for foreign subsidiaries even so. But the paucity of action to make sanctions effective suggest such probes are the exception rather than the rule.

US enforcers should examine current practices as closely as Swiss counterparts. During the seventies some Swiss-based commodity traders, famously shipped Iranian crude to apartheid South Africa in defiance of sanctions.

The quid pro quo for Ukraine as the ultimate beneficiary of western sanctions should be equally glaring scrutiny when the war ends

Ukraine is one of the world’s most corrupt European countries. It ranked 116th of 180 countries in Transparency International’s survey of perceptions in 2022.

Reconstruction could cost over $400bn, according to the World Bank. This must not become a payday for Ukrainian oligarchs, politicians and officials. Tough enforcement will be needed to deter misappropriation. Otherwise, big western investment institutions may withhold co-investments.