Much of the world is refusing to buy Russian oil to express its strong disapproval of Moscow’s aggressive foreign policy. Even oil refineries in India and China are avoiding new contracts with Russia due to the instability in the payment system. Many shipowners are raising tanker rates or refusing to load Russian crude exports, while ship insurance companies introducing an additional premium rate. However, there is one country that continues to trade Russian oil which is offered at a record discount. Switzerland, which formally joined the sanctions imposed on Russia, has found a loophole to circumvent the restrictions. Using the letter of credit mechanism, Swiss banks have already earned several billion dollars. The scheme looks as follows: a Swiss bank gives a loan to a dealer, thus temporarily becoming the owner of the commodity. Then, as soon as the buyer pays the bank, the ownership is transferred to them. In fact, the commodity goes directly from the country of origin to the recipient country while Switzerland gets profit by acting as an intermediary. Notably, it is almost impossible to track such deals. The participants of these transactions usually remain unknown as most of the unlisted commodity trading companies in Switzerland are privately owned. As a result, the country that is far from the major global trade routes and without access to the sea has become one of the world’s most important hubs for trading raw materials. According to a government report, the trade volume in the commodities sector via Switzerland reached almost $1 trillion in 2018 alone. Now, as the sanctions against Russia are getting tougher, the flow of capital to Switzerland has notably increased.
